Regional sales diversification helps Conergy’s sales but pricing pressure hits profits

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Mixed results were seen by Conergy for the first quarter as international sales took the sting out of very weak demand in Germany. Conergy reported sales of €163.3 million in the first quarter 2011, up 8.6% compared to the same quarter in the previous year. However, sales were down significantly from the fourth-quarter 2010, when sales reached €248.5 million.

“Despite the generally restrained start to the year in the sector, we still managed to increase our sales – particularly abroad,” commented Dr. Sebastian Biedenkopf, CFO of Conergy AG. “Our early entry into the international markets has helped us to weather the difficult market conditions in Germany.”

International sales increased by 63.2% to €122.1 million in the quarter with sales outside Germany now at 74.8% of total sales.

However, Conergy’s management cited significant pricing pressure in a weak German market, which resulted in lower factory utilization and culminating in a loss of €20.7 million for the quarter.

Management noted that the German market remained very weak due to the FiT cuts at the beginning of the year and prices having to fall before the market picked up again. Sales in Germany were €41.2 million in the first quarter, down 45.2% compared to the same quarter a year ago.

Sales in Europe were €80 million in the first quarter but were characterised by weak wholesale and B2B segments, while EPC activities in Europe were said to be on the low level.

Positive business developments within the region were cited to have come from Spain and Greece in the quarter.

Coming from a small base, sales in North America were € 15.3 million, up 65% compared to the same period a year ago. Conergy noted that the first projects using its PowerPlus modules in the region were under construction and that the Canadian market remained attractive, especially since the company launched its ‘Conergy ON’ value module this month to address local content requirements.

In Europe, Coneregy management said that it would launch of new residential system solutions and storage solutions at Intersolar in June as well as focus more effort on its own components and new systems for better margins in the future. To counter the expected decline in sales in Germany in 2011, Conergy said it would be building stronger presence in emerging markets such as the UK, Benelux, and Slovakia.

As with the expected changes in the UK FiT, the residential market will be a key focus for Conergy.

As part of its international sales drive, Conergy noted that sales in the Asia-Pacific region grew by around 6% to €26.8 million in the first quarter. The company pointed to strong B2B business activity in Australia and strong EPC and B2B pipeline in India and South-East Asian markets. New promising markets Conergy expects to enter this year include Malaysia, Philippines, and the Middle East.

The weakness in key European markets and the strong pricing pressure already seen this year have meant that Conergy’s management are becoming increasingly cautious over previously guided sales surpassing the €1.0 billion level for the first time this year. The company expects sales to continue climbing to more than €1.0 billion in 2011, but only if general conditions (except in Germany) remained largely unchanged.

The significantly reduced gross profit in the first quarter of 2011 has meant that management believe it is now more difficult to reach the earnings target for 2011.

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