Canadian solar module manufacturer Day4 Energy saw its first-quarter revenues slide 74% from the previous period and drop 68% compared to last year, as the company endured the challenging macroeconomic and PV market conditions. Slow demand and mounting inventories forced Day4 to temporarily shut down its Burnaby, BC, manufacturing site, while the company continued the external production ramp with Jabil, its contract manufacturing partner.
First-quarter revenues of $4.3 million decreased by $12.3 million from the prior-quarter revenues and by $9.2 million for the same period in 2008. A gross loss of 11% for the first quarter compared to a loss of 45% in 4Q2008 and a gross margin of 2% for the same period in 2008. Adjusted gross losses before inventory writedown were 4% and 13% for 1Q2009 and 4Q2008, respectively.
After reducing production to minimal levels at its Burnaby facility earlier this year, Day4 says it decided to halt production at that site to avoid buildup of additional inventory and manage its cash position. As recently as the end of 3Q2008, the factory near Vancouver was running at 82% of its 47-MW installed capacity, according to Day4. The company says that should demand pick up through the third quarter, as expected, it will be able to move its current inventory while the Jabil facility completes its ramp and becomes fully operational.
Day4 emphasizes that its priority, in addition to depleting current inventory, will be to continue with the production ramp at Jabil to take advantage of the lower cost, more efficient production, and closer proximity to its primary market. Some production will be maintained at the Burnaby facility as a pilot plant for further technology development, with production capacity there used to meet demand and serve the North American market in the future.
“The first quarter of 2009 was perhaps one of the most challenging quarters in the history of the solar sector,” stated George Rubin (pictured above), president of Day4 Energy. “In response to these grim market conditions, significant decline in sales and associated deterioration in operating margin, management has continued defensive actions initiated in the fourth quarter with a demand-driven manufacturing approach. We have taken further steps to reduce our operating expenses and purchase commitments as well as protecting cash and working capital to the greatest extent possible.”
“At the same time there are some positive aspects to the tough times we are experiencing,” he continued. “Severe economic conditions have dramatically accelerated material cost reduction across the value chain. While this rapid average selling price deterioration clearly poses significant challenges to manufacturers in the near term, in the medium to long term this development is exactly what the industry needs to move closer to achieving grid parity.
“Further, the fundamental rebalancing of margin and power along the value chain continuum are important drivers for the long-term health and viability of the industry. Finally, in the short term, the rapid price declines should have driven up returns for capital investments in PV projects to a higher level and should offer a tremendous opportunity for those willing to invest in projects, particularly in countries such as Germany, Italy, and ultimately North American locations with strong subsidy programs.
“We are working cooperatively with our channel partners and cell suppliers to manage through these times. From the beginning our approach has been a collaborative model, and we are pleased that the relationships we have cultivated with our suppliers and partners are enabling us to weather this storm together,” Rubin concluded.
Day4 also announced that directors Thomas Longworth and Mark Galvin will not stand for re-election at the company’s upcoming annual meeting, and that John Stonier has been appointed as VP of strategic planning/treasurer.