STR Holdings gaining traction with new and lower cost encapsulants

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Specialist encapsulant supplier STR Holdings continued to see sales slump in the first quarter of 2013, despite many module manufacturers raising production utilization rates on improved demand.

The company reported first quarter 2013 net sales of just US$11.2 million, down 64% year-over-year and 30% sequentially. STR had 2012 annual sales of US$95.3 million, down massively from US$232.4 million in 2011.

According to the STR, the year-over-year decline reflects approximately 57% lower material volumes and 15% lower ASPs. The company noted that material volume decreased approximately 26%, while ASP declined 5%.

Implied shipments for the first quarter of 2013 equated to 340MW, down from approximately 450MW in the fourth quarter of 2012 and down from 600MW in the third quarter of 2012.

STR has not only lost significant market share over the past few years as module manufacturers shifted to using lower cost Polyolefin (POE) encapsulant materials over traditionally used ethylene vinyl acetate (EVA) based encapsulants but lost its single largest customer, First Solar at the end of last year. Another major customer, bankrupt Suntech Wuxi, subsidiary of Suntech Power Holdings drastically cut purchases from STR in 2012.

Based on weaker sales, production utilization rates of around 20%, STR reported a negative first quarter gross margin of 6.3%, though significantly better that its fourth quarter 2012 gross margin of negative 37.5%, due to restructuring and job losses. 

Although the company is not providing quarterly or annual financial guidance due to its weak position and continued volatility within the sector, STR expects sales to decline further in 2013 from last year.

However, the first quarter could prove to have been the foundation for the future recovery of the company as management noted in a conference call to discuss results last week that new product roll-outs were gaining acceptance by customers, citing new customer wins in the quarter.

Robert Yorgensen, CEO and president said, “We've got 4 new customer wins in China and I think 1 or more in Europe, at least a customer or 2 converted to the new product. They may not be a new customer to the company, but they're new with that product. The ones in China are actually 4 new customers.”

Management noted that its next-generation EVA product offering was responsible for winning new Chinese customers. The company previously revealed that the new EVA formulations, created after increasing R&D expenditure from US$1.8 million in 2010 to US$4.4 million in 2012 at a newly created R&D centre, are claimed to offer improved UV light transmission, better volume resistivity and enhanced curing properties for lower cycle-times as well as PID resistance, which has become a key requirement for modules in the last 12-months.

Management noted that it recognized revenue for its new EVA product for the first time during the quarter, while another European-based customer had placed initial production scale quantities with the firm. The company also said that in April, trial production orders from 2 Chinese module manufacturers were signed, representing new accounts for STR, which were estimated to potentially account for US$10 million in future sales.  Sales from the 4 new Chinese customers were said to provide a sales opportunity of around US$18 million.

STR also said that it had accelerated the commercialization of its lower-cost POE encapsulant with production trial quantities starting to ship in the quarter.
 

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