North Coast Solar Stocks

October 28, 2009

FSLR: Sees Q4 Margin Erosion

Filed under: FSLR — Tags: , , , , , — Jason @ 7:43 pm

By Tiernan Ray
barrons.com

During a conference call with analysts this evening, management of solar energy technology vendor First Solar (FSLR) talked folks through the revenue miss in the third quarter that pushed shares down over 15% this evening.

The dip in revenue from $525 million in Q2 to $480 million in Q3, below analysts’ estimates, was because of a single order that were “not able to be recognized” — in other words, implying cash collected but not able to be recorded on the income statement within the quarter. The company did not make clear when that revenue will be recognized.

In addition to the revenue miss, analysts will be pouring over the gross margin implications. The company said that a rebate program initiated last quarter to goose solar investment knocked down gross profit. Indeed, gross profit as a percentage of sales fell from 57% in the second quarter to 50.9% last quarter.

That’s going lower in the current quarter, management said, to a range of 41% to 44%. The company said it saw a big uptake of the rebates and purchases qualifying for the rebates, and that the rebate policy would continue in Germany as the pricing of silicon-based solar panel technology was “much more competitive” at present than in past. About the only good news on rebates and margins was that the company does not expect to extend its rebate plan outside of Germany.

As for recent speculation about whether Germany will reduce subsidies for solar technology purchases, company management said it’s “difficult to handicap where that is going to come out.”

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