SunPower Corporation (NASDAQ: SPWR) has improved on its previous results, as the U.S.-based solar panel manufacturer reported an adjusted profit and better margins in the second quarter. However, due to its negative forecast for the third quarter, the company’s shares dropped by more than 10% to $4.20. Revenues also increased slightly by 0.6% to $596M. Production stood at 257MW, a 10.7% decrease from the 288MW produced in the previous quarter, but a 25% increase from 205MW in Q2 2011. This would be the second piece of news regarding adjusted profits coming in two days, as MEMC Electronic Materials, Inc. (NYSE: WFR) also recorded an adjusted profit for the second quarter yesterday.
SunPower reported a net loss of $84.2M, increasing from $74.5M in the previous quarter, but a significant decrease from the loss of $147.9M in Q2 2011. The non-GAAP net income, which surprised Wall Street analysts, stood at $9.8M or $0.08 per share. Interestingly, debt increased by $141M, but cash increased only by $28M. The company has revealed that it is implementing its cost-cutting program as panel prices continues to fall globally.
Gross margins have improved from 9.2% in the previous quarter to the current 12.3%. However, SunPower expects the margins to drop to 8%-10% for the third quarter, which could translate as loss per share of between $0.25 and $0.10. Even the non-GAAP expectations are not very bright, with 10%-12% gross margin and loss per share of $0.20-$0.05. The decrease in forecast is attributed to falling demand in Europe and delays in some projects. The company’s manufacturing costs, adjusted by efficiency, are expected to hit $0.75 by year’s end on the lowest-cost modules, while blended costs per watt are $1.10, possibly double that of the most efficient Chinese lines in the same timeline.
The business is expanding its foothold in the U.S. residential solar market, which contributed about 69% of the total revenues. The U.S. government’s tariffs on its Chinese rivals such as Suntech Power Holdings Co., Ltd. (ADR) (NYSE: STP) and Yingli Green Energy Hold. Co. Ltd. (ADR) (NYSE: YGE) would further help the business in achieving its objectives. The firm has announced that it has captured a 33% share in California’s residential PV sector, thus making it a leader in the biggest U.S. PV market. "In the North American residential segment, we increased our leading market share, doubling the number of signed leases in the second quarter compared to the first quarter," said the company president and CEO Tom Werner. SunPower also expects to improve on its sales in Japan in the third quarter and aims to earn 10% revenue from there, using an extension of the deal with Toshiba. Like First Solar, Inc. (NASDAQ: FSLR), Sunpower is operating almost exclusively in available territory in the US, with only a few sizeable competitors, like Japanese Kyocera or Sharp, while the Chinese have been suppressed to retreat or burden with cost of levies. Both companies were neutral on levies, and when speaking about the petition remained supportive of open, free trade markets. In the aftermath, the U.S. Administration banned only one real cost competition, setting up both US enterprises to lead domestically.
Commenting on the results, Werner said, “Our second quarter 2012 results reflect the success of our diversified end market strategy and good execution on both our technology and cost roadmaps, all enabling us to exceed our margin and earnings targets for the quarter." France-based energy giant Total S.A.(EPA: FP) owns about 66% of SunPower. On 8th August, it revealed that it has signed a $325M financing agreement with Citigroup and Credit Suisse for residential solar lease projects. The business is pushing its “solar lease model,” although it admits that the project is heavily capital intensive.
