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Q-Cells warns on solar cell sales and pricing

By Chris BryantBerlin, July 15 2009
Source: Financial

Q-Cells, the world’s biggest manufacturer of solar cells, yesterday blamed tough market conditions for its decision to scrap its full-year sales outlook and warned it would post a big loss in the second quarter. The update shocked investors, leaving the stock more than 14 per cent lower at €11.32 at the close after the German company revealed that an anticipated seasonal upturn in demand had not materialised. Competition from Asian producers has caused an over-supply of solar components, while financing for big projects remains in short supply.

Anton Milner, Q-Cells’ British-born chief executive, told analysts that the pricing situation would remain “challenging” for the industry but held out the prospect of an improvement in volumes in the second half of the year. Q-Cells swung to a preliminary €62m ($86.5m) loss before interest and tax in the second quarter. Revenues are set to fall 36.9 per cent to €142m from the first quarter, making this the fourth cut in revenue outlook since December.

The company said it was no longer willing to make a full-year revenue forecast. It had most recently forecast 2009 sales of between €1.3bn and €1.6bn. Q-Cells burnt through €127m in cash during the quarter but took comfort in a cash reserve of about €520m, supported by the issuing of a convertible bond and the sale of a stake in REC, a Norwegian solar company. It said it saw no need for another financing round next year.

Responding to developments, Q-Cells said it would intensify an existing cost-cutting programme and further reduce its capital investment programme, coupled with other capacity, cash-flow and financing optimisation measures.

Many of the Q-Cells’ German employees are already working a shorter working-week owing to the slump in demand and build-up in inventories. The impact of treacherous market conditions on solar companies has varied according to their position in the supply chain. Q-Cells’ core business is the production of silicon-wafer solar cells, the building-blocks of photovoltaic solar modules.

Module manufacturers are demanding lower cell prices, putting a squeeze on Q-Cells’ margins as the company has not been able to fully re-negotiate the terms of its contracts with wafer suppliers. However, falling prices are expected to provide a boon for solar system integrators and installers as consumers rush to exploit the higher returns they can make by generating solar energy and feeding it into the grid.

The sector is expected to see a pick-up in demand next year as the US becomes a more important market for solar products.