SunPower saw its second-quarter revenues increase sequentially, but net losses grew significantly and margins shrank. A slower-than-expected Italian market recovery as well as a combination of pretax charges and writedowns contributed to the disappointing quarter. But the company believes it will achieve improved results during the second half of the year.
The vertically integrated solar firm posted quarterly sales of $592.3 million (63% of which came from North America), up from $451.4 million recorded in the previous quarter and $384.2 million in Q2 2010. The GAAP net loss sunk to $147.9 million from $2.1 million in the first quarter, due to $48.5 million in pretax charges and $32.5 million in writedowns. The resulting GAAP margin dropped to 3.3% from Q1’s 19.6%.
Manufacturing output amounted to 205MW in the second quarter, up from 184MW in Q1 2011. An average of 5.8 grams of silicon was used per watt of PV produced during the period.
Production capacity at SunPower’s own fabs and the joint-venture facility with AUO is expected to reach 1GW by year’s end, with manufacturing costs on track to reach $1.48/W, or $1.08/W adjusted for efficiency. The company said during the conference call that its step-reduction efforts have been pulled in by six months, resulting in a 15% decrease in production costs by the end of 2012.
The company maintained its previously stated annual revenue guidance of $2.8 billion to $2.95 billion. Gross margins are anticipated to reach the mid- to high teens for the year.
Recognized shipped megawatts of modules should end up between 900 and 950MW, up slightly from the previous forecast, with at least half expected to come from the US utility and residential/commercial markets.
Capital expenditures for 2011 will range between $130 million to $150 million, according to the updated guidance, with contributions to the joint venture with AUO amounting to between $100 million and $150 million.
During the conference call, it was also revealed that the recently announced Mexicali, Mexico, module manufacturing plant will start production on T5 solar roof tiles soon, with modules rolling off the line at the factory by year’s end. As part of a move to vertically integrate moduling for the North American market, the ramp-up of the new facility will coincide with a ramp-down of SunPower’s contract with Jabil, which makes panels for the company elsewhere in Mexico.
The company also said that as a result of receiving the final Federal Environmental Assessment with a finding of “no significant impact” and completing a comprehensive settlement agreement with national environmental groups, the 250MW California Valley Solar Ranch project has been greenlighted to begin construction during the third quarter. The site is among 4GW currently said to be in SunPower’s pipeline in the Americas.
Tom Werner, SunPower president and CEO, made the following statements in conjunction with the earnings announcement.
“In the 2011 second quarter, revenue grew by more than 30% sequentially as demand for our high efficiency systems remained strong. However, mix changes related to market conditions in Germany and Italy impacted our margins. We expect improved results in the second half of the year due to strong visibility in our North American utility and power plants (UPP) and commercial businesses, both of which are fully allocated through the end of the year.
“Also, as a result of reallocating 85MW from our UPP international business to our residential and commercial business, we plan to increase both our dealer count and proportion of SunPower product sold by our dealers. Our 2011 panel cost reduction roadmap remains on track, and we are accelerating our cell manufacturing step reduction initiative which will further reduce our capital cost per watt.
“Since successfully closing our strategic investment by Total at the end of the second quarter, we have been working closely with them to improve our balance sheet. Today we signed a new $771 million letter of credit facility using Total's $1 billion credit support agreement, giving us access to approximately $200 million of previously restricted cash to support our growth. In addition, we have identified synergies between the companies that will allow us to leverage our investments in project development and other areas.
“As a result of the abrupt changes in the Italian market, we have restructured and realigned the company to address the preference for small-scale solar systems in Europe,” Werner continued. “Our industry-leading, high-efficiency technology is ideally suited for roofs and parking structures, and we are well positioned to profitably grow share in key markets this year.”
“During the second quarter, we continued to focus on effectively managing our working capital needs and improving liquidity,” added CFO Dennis Arriola. “We significantly improved inventory turns and reduced inventory by 15% from the first quarter. With strong demand, continued focus on working capital management through our demand driven supply chain and global expense control initiatives, we are on track to meet our second-half profitability goals.”