Suntech Power Holdings Co Ltd posted a higher-than-expected second-quarter profit on Thursday but trimmed its full-year forecast for shipments and said prices on solar panels were still falling sharply, sending shares down 3 percent.
Suntech, which like other solar companies has been hurt by a dearth of financing for new projects, said prices for its solar panels fell 8 percent in the quarter and would likely drop another 15 percent to 20 percent in the current quarter.
Prices of solar panels have dropped dramatically this year because a lack of funding for renewable energy projects and a pullback in solar incentives in Spain have led to an oversupply of panels in the market.
Suntech, as China's top panel maker, enjoys a stronger position in the market than many of its peers, but Simmons and Co analyst Burt Chao said investors are concerned about whether it can keep selling panels at higher prices.
If Suntech currently enjoys a pricing premium over their Chinese competitors, a lot of people are wondering how long they can maintain that pricing premium given the significant downward pressure being placed in the market today, said Chao, who has a neutral rating on Suntech shares.
Suntech cut its forecast for cell shipments to about 600 megawatts, down from the previous range of 600 MW to 700 MW it had issued in May. That was the second time this year that Wuxi, China-based Suntech has pared its shipment forecast from the original figure of more than 800 MW.
Chao said Suntech likely can meet its shipment view but added that the worry is at what price they can ship those.
Suntech's results come as overall industry sentiment has dragged down following a string of dour earnings reports.
Earlier this week, Chinese rival Yingli Green Energy Holding Co Ltd posted a quarterly loss and cut its profit margin forecast while Solarfun Power Holdings Co Ltd posted a surprise quarterly profit but warned prices could fall further. Last week, Germany's Q-Cells said it would cut 500 jobs, about a fifth of its workforce.
Solar stocks have also struggled in the last few weeks.
Suntech shares were down 2.4 percent in afternoon trade on Thursday and have lost 13 percent of their value so far in August. Shares of Yingli and U.S. panel maker SunPower Corp are down about 17 percent so far this month. First Solar Inc's stock is down nearly 15 percent in the same period.
Suntech's second-quarter net income fell to $10 million, or 6 cents per American Depositary Share, from $52 million, or 31 cents per ADS, a year earlier.
Wall Street analysts on average had been expecting earnings of 3 cents per ADS, according to Reuters Estimates.
Helping that profit was a $17.5 million benefit from foreign exchange as the euro gained versus the U.S. dollar. Revenue fell by one-third in the quarter to $321 million, lagging the $334 million analysts had expected.
Still, Suntech's gross margin in the second quarter rose to 18.6 percent from 17.8 percent in the first quarter as the price of the silicon it uses to turn sunlight into electricity fell faster than the price of the manufactured cells.
Our silicon wafer prices will come down the same rate as the (average selling price), so we are confident that we can maintain the same margin in the third quarter, Chief Executive and Chairman Zhengrong Shi said on a conference call.
Also on Thursday, Britain's PV Crystalox Solar, which makes silicon wafers for companies such as Suntech, posted stronger-than-expected earnings and said it had seen some improvement in demand.
Last month, Suntech said it would develop 1.8 GW of solar projects in China, which also launched a long-awaited plan to offer subsidies for large solar power projects.
On Wednesday, Suntech said its Pluto photovoltaic cells had achieved an efficiency record for multicrystalline modules of 15.6 percent.
Suntech shares were off 2.8 percent, or 46 cents, at $15.94 on the New York Stock Exchange.
(Reporting by Matt Daily in New York and Laura Isensee and Nichola Groom in Los Angeles; Editing by Maureen Bavdek and Steve Orlofsky)