Solar Frontier reports buoyant Q2 results and splits from Showa Shell

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Solar Frontier has announced its second quarter financial results, reporting a year-on-year improvement in ordinary profit and reduction in production costs, while parent company Showa Shell has approved a plan for the two entities to split.

Solar Frontier said that the profit and cost reduction figures were both in line with company plans, with Solar Frontier’s sales mainly focussed on the Japanese domestic market. A document issued by Showa Shell to explain the group results pointed out that the Japanese government has approved 65.7GW of solar PV facilities since July 2012 when feed-in tariffs (FiTs) were introduced, while only 9.4GW has been installed. Showa Shell said solar panel demand in Japan will remain strong “given the ratio of approvals to installations”.

According to Showa Shell, sales in its ‘oil business’ segment saw an increase of 9.2% when comparing January to June of 2013 with the equivalent period of this year, and its ‘energy solution business’ segment, of which Solar Frontier is the biggest constituent part, only enjoyed a 0.3% increase in sales.

However, operating income in the oil business segment fell by 86.3% in the two periods, while in contrast energy solutions enjoyed a rise in operating income of 130.9%. Nonetheless, Showa Shell maintained its profit forecast for both its oil and energy solution segments.

Solar Frontier’s module shipment volume grew both in comparing the first and second quarters of the year, as well as year-on-year. Again, Showa Shell attributed this to strong domestic demand.

As recently alluded to in a PV Tech interview by Solar Frontier’s then-vice president Atsuhiko Hirano – who was recently made the company’s president and chief executive officer – 90% of the Solar Frontier’s module sales were to the Japanese market. The company will continue with its selective targeting of international markets, the document released today said.

The company highlighted its successfully cost-reduction plan at one of its Japanese production facilities, Kunitomi. Overall, Showa Shell said Solar Frontier had reduced unit production cost by 10%, which it claims was in line with annual targets.

Solar Frontier is currently building its fourth module plant, a relatively small factory in Tohoku, Japan, that it plans to use as a blueprint for reducing costs and for placing manufacturing in geographical proximity to end markets.

The report also pointed out some recent highlights for Solar Frontier, including the production of a cell which has a record-high efficiency of 20.9%, the adoption of Solar Frontier’s CIS technology by homebuilding companies Sekisui Heim and Toyota Home, and also the establishment of a joint feasibility study on research and development and module plant construction with the State University of New York.

Atsuhiko Hirano had told PV Tech when interviewed in June that Solar Frontier was also keen to increase its downstream offering. According to the report issued with the financial results, Solar Frontier wants to expand the sources and scale of its power generation to 1GW in the “mid term”.

Also announced today was the approval by Showa Shell directors of a plan to split Solar Frontier from the parent company. The split is to be effective as of 1 October this year, subject to approval by shareholders at a meeting on 19 September.

Showa Shell said the split is intended to “speed up Solar Frontier's decision-making ability and improve its flexibility” as well as improving the thin-film company’s competitiveness.

Showa Shell will have around 160,000 shares of Solar Frontier common stock allotted to it. PV Tech reported the planned split in June, noting that Showa Shell had said at the time that consolidation of PV RnD activities into Solar Frontier could “enable a faster response to changing market dynamics”.

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