Falling wafer prices are killing the panel makers, but companies like CSKH are in the "sweet spot"
NEW YORK (Reuters) Fri Aug 19, 2011 - Rosy earnings from Chinese solar panel maker Yingli Green Energy on Friday stood in stark contrast to the dismal reports from its rivals, and the company said market signs pointed to a rebound in the second half of the year.
The solar industry has been battered in 2011 by steep declines in the prices for the modules that turn sunlight into electricity, shrinking profit margins and pushing some of the largest players into the red.
The MAC Solar companies index has slumped more than 31 percent so far this year, more than three times the drop in the S&P 500.
Yingli, however, managed to beat Wall Street forecasts with its second-quarter earnings issued on Friday as it shipments jumped nearly 37 percent from the first quarter, and it stuck with its forecast that it would sell more than 1,700 megawatts of solar panels this year.
That helped lift Yingli's share price more than 3 percent, gaining back a bit of the selloff that has wiped off more than 40 percent of its value this year.
"The stock has probably found a pretty nice bottom right here," said Mark Bachman, analyst with Avian Securities LLC.
"They were the first company so far this earnings period to come out and say things are looking better. We anticipate a year-end gold rush."
Global demand for solar panels sank in the first half as governments in the top two markets, Germany and Italy, pared their subsidies that make the technology competitive with fossil fuels such as coal and natural gas.
Those subsidy cuts came even as the major producers ramped up their production, causing a glut in panel supplies that swelled inventories across the industry, driving prices lower.
That price pressure drove Evergreen Solar, once an industry darling, into bankruptcy earlier this week after it struggled to keep pace with its Chinese rivals.
To be sure, those Chinese companies have suffered as well. JA Solar Holdings Co Ltd said its solar module sales prices fell 20 percent in from the first quarter, pushing it to a net loss in the second quarter.
China Sunergy Co reported a worse-than-expected loss on Friday, and chopped its 2011 shipment forecast.
On Monday, all eyes will turn to Suntech Power Holdings, the world's biggest solar company by production capacity, Its shares slumped more than 5 percent on Friday to challenge their lifetime lows.
LDK Solar, which makes the silicon wafers that are used to build solar panels, cut its revenue and margin forecasts after the market close on Thursday, and said it would write down the value of its inventories.
"The wafer market could face a prolonged downturn due to industry oversupply," said Wells Fargo analyst Sam Dubinsky, who cuts his 2011 profit forecast for LDK by about two-thirds.
Still, those low wafer prices help most of the module makers, since the wafers typically make up more than half their costs.
BETTING ON BRIGHTER SUMMER
Yingli, which said its net income nearly doubled to $58.1 million, or 36 cents per American Depositary Share (ADS) from a year ago, topped Wall Street forecasts and said it has seen strong interest from customers since June.
"We saw the sign of demand recovery triggered by the drop of module price," Chief Executive and Chairman Liansheng Miao said in a statement.
Its revenue of $680.6 million easily topped the $616 million that analysts had expected.
The turmoil from the first six months of the year may give way to a rebound in the second half, companies have said. Italian buyers have returned now that uncertainty about the subsidies has abated, and sales to new markets, such as the United States, China and other Asian countries are growing steadily.
And Germany, which bought only 1,000 MW of modules through May versus 1,700 in the same period of 2010, is expected to return heavily to the market now that panel prices have sunk.
"We have already signed several contracts for products for delivery from August through to the fourth quarter of the German end market," JA Solar Chief Executive Peng Fang told analysts on Thursday.
Yingli's American Depositary Receipts in New York rose 3 percent to $5.80, while LDK tumbled more than 17 percent to $5.43. The MAC Global Solar energy index fell 3.4 percent.
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