Satcon sets restructuring path that sheds 35% of workforce: folding Solstice product line

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PV inverter supplier, Satcon Technology is realigning its business operations and significantly cutting operating expenses to reach breakeven mid-year. The company said it would focus on the commercial and utility solar markets concentrating particularly on North America, China, India and Thailand, as well as other emerging markets in the Asia-Pacific region. Europe and Canada business efforts are being scaled back, which includes the closure of its manufacturing facility in Ontario, Canada and an overall headcount reduction of 140 worldwide, or approximately 35%. Satcon will also stop production of its Solstice product line due to challenges in production cost reductions needed to be cost competitive.

“The worldwide solar market conditions in 2011 demonstrated the dynamic nature of this maturing industry,” commented Steve Rhoades, Satcon’s president and chief executive officer. “The compounding effects of reduced panel costs and market demand shifts toward North America and Asia have forced the entire industry to adjust as we enter the next phase of development. Decreasing prices, however, present significant opportunity for Satcon, where the demand for our large-scale inverter solutions nearly doubled in North America and Asia year-over-year. The measures we have announced today will help to ensure that Satcon achieves the financial strength required to profitably maintain our leadership position as the standard for large scale inverter systems as solar power generation becomes a more affordable and stronger investment worldwide.”

Satcon management said in a conference that the closure of its Canadian manufacturing facility was due to an insufficient market growth to support a dedicated facility. It intends to meet local content rules for customers via a sub-contract arrangement that should be completed and announced in about a month.

Weaker-than-expected demand for its PV inverters in Europe in 2011, compared to the previous year, has resulted in restructuring its office and warehouse infrastructure in Europe, which is now not expected to be a market or product development focus for Satcon in the future.

Satcon’s Steve Rhoades also noted in the call that although it’s Solstice distributed energy management system had been in high-demand and had been a technical success, it would be stopping production as the company concluded that it could not offer the product at a cost competitive price, close to rival offerings. Costs were said to be too high to deliver to customers profitably.

Charges of approximately US$2.8 million to US$3.0 million have been attributed to the factory closure, with the majority of the charges expected to occur in the fourth quarter of 2011, with the remainder taking place in the first quarter of 2012. The company expects ongoing savings of approximately US$15 million to US$17 million annually after the cost cutting program has been implemented.

In addition to the restructuring charges, the company is currently analyzing its inventory and certain non-cancellable supplier-held inventory, which is expected to result in charges during the fourth quarter of 2011 of approximately US$20 million to US$26 million, with the majority of the charges as non-cash items. Though the company said it was currently trading at just below its previous guidance for the fourth quarter of 2011, the charges were not anticipated and therefore not included in guidance. Management noted that pricing had actually stabilized in recent weeks.

“These spending reductions, coupled with our accelerated cost reduction programs, significantly lower our breakeven level during the first half of 2012,” added Aaron Gomolak, Satcon’s chief financial officer.
 

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