Struggling REC Reports Falling Revenues in Q3 Results

The company’s revenues have witnessed a 24% year-on-year and 36% sequential drop to $263M

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The Norwegian solar firm Renewable Energy Corporation (STO:RECO) has released its third quarter financials. The company’s revenues have witnessed a 24% year-on-year and 36% sequential drop to $263M, while it suffered a loss from continuing operations of $78M, a loss per share of $0.04, down from a profit of $41M in the previous quarter and an improvement from the massive loss of $646M in the same quarter last year. The company has also revealed that it is looking for a merger as the struggling global solar industry moves toward consolidation.

The EBITDA from total operations was $663M, which includes a loss of $174,000 from REC Silicon, a loss of $30.3M from REC Solar and a profit of $27.8M from REC Wafer, which filed for bankruptcy in August 2012. However, REC Wafer’s Singapore plant is still operational and is now a part of REC Solar. Total revenues from continuing operations for the first three quarters of 2012 fell by 25% from last year to $950M. In Q3, the average module spot prices have fallen by 13% sequentially and 38% year-on-year, while average polysilicon spot prices are down 14% sequentially and 60% year-on-year.

REC Silicon’s revenues slumped by 25% from the previous quarter and by 50% from the year-ago quarter to $120M. The significant fall in REC Silicon is attributed to the continuous decline in average selling prices, as well as planned shutdown of facilities. The unit’s polysilicon sale decreased by 18% from Q2 2012 and improved by 8.8% from Q3 2011 to 4,809 MT, while Silane gas sales decreased by 21% sequentially and year-on-year to 358 MT. On the other hand, REC Solar’s module shipments fell by 21.7% from the previous quarter, but increased by 20% from the same quarter last year to 169MW. Despite the higher shipments, REC Solar ended up decreasing its revenues by 24% sequentially and 36.2% from the same quarter last year to $151M. The unit’s EBITDA slumped to a negative $30.3M, down from a positive $0.34M in the previous quarter. The significant blow to EBITDA was partly associated with inventory write-downs of $21.76M.

The business is also planning to halt the production of blocks and ingots at its Singapore facility, while blocks will be purchased from third parties as it aims to reduce its costs from $0.81/watt to $0.64/watt.

The company has identified that the demand for solar products within Europe is falling, but is increasing in the rest of the world. However, the problems associated with overcapacity still persist; therefore, the future will remain challenging. For the fourth quarter, REC expects to improve its polysilicon production by 14.5% sequentially, which will take to Q4 guidance to 5,500MT, which translates into the total 2012 guidance of 21,500MT. However, the module production is expected to fall by 13.6% to 190MW in Q4, which takes the year-end guidance to 745MW.