STR Holdings reports solar sales increased 73.4% to US$259.2 million in 2010

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PV module encapsulants supplier, STR Holdings posted 2010 sales to the solar sector of US$259.2 million, an increase of 73.4%, compared to sales of US$149.5 million in 2009. Management noted that the increase in sales was due to increased market share gains with its current Tier 1 Chinese customers as well starting to supply a large Asian module manufacturer in the year.

“We are delighted to report yet another strong quarter for our Solar segment to finish off a remarkable 2010,” commented Dennis L. Jilot, Chairman, President and Chief Executive Officer. “Our continued growth in the fourth quarter was primarily driven by sales to customers in Asia. Growing 176% from the fourth quarter of 2009, this region now accounts for 43% of our Solar revenue compared to 22% a year ago. We have recently made our first shipment to another world class Chinese solar manufacturer in 2011 and are currently working through contract negotiations. Additionally, we have increased existing share in 2011 with our current tier 1 Chinese customers as well as with another large Asian module manufacturer.”

However, Auriga USA financial analyst, Mark Bachman said in a research note to clients before STR released results that he was concerned about the lack of market share gains, especially in China.

“We continue to wait for explicit announcements from STRI about new customers, but we are confident no such announcement is pending for any module manufacturer of size. We recently visited and toured most of the largest module manufacturers throughout China (both incumbents and newcomers), and we found no instances of market share gains by STRI,” wrote Bachman.

The Auriga analyst also noted encapsulants were now at the top of the list of BOM targets for cost reduction by Asian PV module manufacturers, which would impact future margins for STR. Bachman warned that STR’s incumbent base of European customers were either dwindling as a percentage of module supply, or are now outsourcing to Asia, reducing its traditional revenue streams, going forward.

However, despite concerns, STR Holdings reported solar net sales for the quarter ended December 31, 2010 of US$69.1 million, up 37.3%, compared to the same quarter in 2009. On a quarterly sequential basis, net sales rose only 1.2%.

Solar segment gross profit for the fourth quarter of 2010 increased 26.6% to US$27.9 million, compared with $22.0 million a year ago.

The company noted that the margin increased was due to improved manufacturing performance achieved at its Malaysia plant, as well as continued productivity gains at other facilities, despite increased raw material costs.

“We maintained our Solar gross margins sequentially in the fourth quarter by maintaining price and through our continued emphasis on improving our manufacturing processes,” said Robert S. Yorgensen, President of STR Solar. “Looking forward, we'll continue to work very hard to control our internal costs, improve our manufacturing efficiency and optimize our supply chain. Additionally, in order to partially offset increasing commodity prices, we have implemented a resin surcharge policy effective April 1st.”
STR noted that its STR Solar Division closed on its purchase of a 275,000 square foot facility in East Windsor, Connecticut, which would enable the consolidation of all Connecticut operations and provide floor space for up to 5.5 GW of capacity to support anticipated growth in the North American market.

The Malaysia plant expansion was nearly complete and would commence production by the end of the third quarter of 2011. The company said it planned to install an additional 1.2GW of new production equipment by the end of the fourth quarter of 2011.

By the end of 2011, STR said it would have a global encapsulant material capacity of approximately 11GW.

Current quarter solar sales are expected to be in the range US$66 – $70 million.

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