Despite reporting its highest quarterly revenue figures for 2012, SunPower continued its loss making ways. SunPower has reported losses in nine consecutive quarters.
The company reported fourth quarter 2012 GAAP revenue of US$679 million, up 8.5% from US$648.9 million in the prior quarter.
GAAP net loss was US$144.8 million, up from US$48.5 million in the third quarter of 2012. Operating loss in the fourth quarter was US$112.3 million, up from US$74 million in the prior quarter.
GAAP operating loss for 2012 was US$287.7 million, down from US$534.1 million in 2011.
SunPower reported a gross margin of 6.9%, down almost 50% from 12.4% in the third quarter of 2012. The company said that a US$82.3 million gross margin adjustment was made that was related to the timing of revenue recognition from utility power plant projects and construction activities.
Regional sales narrow
Sales on a geographical basis narrowed sharply in the fourth quarter. The company reported 80% of sales were generated in North America, up from 63% in the first quarter of 2012.
EMEA accounted for 11% of sales, down from 14% in the prior quarter but down from 27% in the first quarter of 2012. Management noted in a conference call to discuss fourth quarter results that it had largely stopped PV project development work in Europe. However, ‘select’ projects in France were ongoing with some projects with development partners on a turnkey EPC basis were possible in Southern Europe.
Sales in the APAC region accounted for 9% of sales in the fourth quarter, down from 10% in the prior quarter. APAC sales on a percentage basis remained relatively flat throughout the year. However, the said that it had record shipments to Japan in the quarter.
Management said that it expected further market growth in Japan in 2013 with support from its business relationship with Toshiba.
The company continues to rely heavily on its North American-based utility-scale PV project business to support sales of its modules. The company reiterated that four announced California projects, CVSR, AVSP, Quinto and Henrietta would account for over 1GW of SunPower’s module production over the next four years and generate over US$3.5 billion in revenue during this period.
Management noted that it had more than 400MW in RFO bids in North America that it expected to submit over the next six months.
Job losses and restructuring
SunPower incurred US$39.6 million in restructuring charges related to its previously announced restructuring plan that had included the loss of approximately 900 jobs in the fourth quarter. SunPower ended 2012 with 5,002 employees, down from 5,953 in the third quarter of 2012.
The company had more than doubled the charges expected in a revised announcement, guiding restructuring charges totalling between US$33.0 million and US$40.0 million in the quarter, therefore coming in just under the high-end of the revised figure.
The company also took charges of US$2.8 million related to its ‘manufacturing step reduction program,’ was well as a US$14.1 million non-recurring impairment charge for idle manufacturing equipment. The company had previously advised that manufacturing utilization rates would be in the 60% range in the fourth quarter.
As part of the restructuring plan, production was reduced to support the need for reducing high inventory levels. The company reduced cell production in the fourth quarter to 153MW, down 32% from 227MW in the third quarter.
Total cell production in 2012 stood at 925MW.
Management reiterated that its Maxeon Gen 3 technology was in volume production. The technology uses a new copper-based interconnect between the backside of the wafer and the backsheet, intended to lower production costs and boost conversion efficiencies via lower resistance and better conductivity. The technology also enables the use of thinner wafers, reducing breakage rates.
The introduction of the Gen 3 technology into volume production meant that the company was able to reduce its polysilicon consumption per watt. SunPower used 4.2 grams per watt of polysilicon in the fourth quarter of 2012, down from 4.5 grams per watt in the first quarter of 2012.
Thomas Werner, Chairman, Chief Executive Officer and President of SunPower said in a conference call to discuss fourth quarter results: “We're using a lot less polysilicon per watt. We've had some great success in our manufacturing engineering group on that front, which is a combination of thinner wafers, higher efficiency and better yields. So we've been able to innovate quite successfully. We're starting to ramp our Gen 3 technology, and that is a more effective, cost-effective technology. So that's a driver as well. Fab 3, our joint venture with AUO, is performing excellently. And they've driven a number of our operating metrics really favorably. So that has had a big impact. We've also been able to innovate in our module designs. We've designed some new custom materials in our module that allow us to get more energy output that are unique to SunPower. And we've been able to do that, while reducing the cost. So those are the primary drivers. We have benefited as well, however, from a more cost-effective supply chain, that being the drivers, of course, glass, aluminium, silicon, where we have long-term partners.”
Management also noted that due to manufacturing cost reduction plans the blended cost per watt was claimed to have declined by more than 25% in 2012, resulting in its cost per watt falling faster than its ASP decline.
SunPower said that it expected first quarter 2013 GAAP revenue to be within a wide-range of between US$450 million and US$525 million. Gross margin was expected to be in the range of 3-7% and a loss per diluted share of US$0.85 to US$0.60.
Capital expenditures in the first quarter are expected to be in the range of US$30 million to US$40 million yet the company only expects to spend in the region of US$80 million for the full-year, primarily related to R&D and operations.
However, management said that 2013 revenue expectations would only be inline with revenue levels reached in the last few years. Module shipments however would be higher, though figures were not provided by management. Higher module shipments but relatively flat revenue suggests continued ASP declines are expected.
The company will also ramp capacity to meet the needs of AVSP project in the second half of the year. Revenue recognition overall would also be weighted to the second-half of the year.