REC strengthens global development to reduce cost, the loss in 1Q13 declines significantly

published: 2013-07-05 9:55 | editor: | category: Analysis
The market demand for PV modules increased during off-peak season compared with that in 1Q13 and 4Q12. But because PV market demand still grew slowly and the overcapacity situation remained unsolved, Europe’s largest PV silicon wafer manufacturer, REC Group, announced the bankruptcy of its subsidiary company, REC Wafer, in the second half year  2012. They have also closed down the temporary capacity for polysilicon and modules in 1Q13, which caused the output and sales revenue to decline in 1Q13. 
 
REC’s module output in 1Q13 declined by 11% compared with that in 4Q12, reaching 170MW. The amount of module shipment declined by 4% compared to that in 1Q12. While module sales price slightly decreased, polysilicon price dropped down  9%. With both price and sales dropping, REC’s profit in 1Q13 decreased by 24% in contrast to previous quarter, reaching 1,278 million NOK. Moreover, the gross margin decreased by 34% to 471 million NOK and the net profit turned out to be -209 million NOK.
 
REC’s current ratio was 3.58 and quick ratio was 2.61 in 1Q13. The debt risk in the short run was relatively low in contrast to other enterprises. REC  performance’s rather stable in the financial crisis. The company’s asset-liability ratio was only 49%, which showed that REC’s financial condition’s relatively complete. Yet, what’s more important is that there will be debt of 310 million NOK due for REC in 2014.
 
In 1Q13, REC tried to lower the PV module production cost. The module cost was 53 eurocents/watt in 1Q13. It’s estimated that the cost will drop to 45 eurocents/watt in 4Q13. The following are the reasons why the loss has decreased in 1Q13 – cost reduction, stable price, and reduction in inventory writedowns. It’s also been the best performance since 2Q12. 
 
Anti-dumping and countervailing trade wrestling reflects on sales performance
 
Due to the slow growth in Europe, Asia market has caught up at the end. REC’s amount of module shipment to Asia has increased from 3% in 1Q12 to 41% in 1Q13. Module shipped to Japan even accounted for 25% in the overall shipment quantity. On the other hand, module shipped to Europe has decreased from 90% in 1Q12 to 46% in 1Q13.
 
2013Q1 REC Solar panel shipments:
 
Source: REC
 
The CEO and chairman of REC, Ole Enger, indicated that although the recent price remained stable, market condition’s not good enough. While REC trying to stabilize the global market position in 1Q13, they continued to improve business ability and focused on technology development in order to reduce cost. 
 
REC’s polysilicon output is estimated to be 20,000 tons and the module output will be about 800MW in 2013. Europe will announce the final decision of the anti-dumping investigation on August 6th. If Europe decides to impose heavy tariff toward China’s PV products by then, it will be a shock to Chinese companies’ profit. Being a local European company, REC can increase the module shipment in Europe by its brand advantage. Besides, China is likely to impose anti-dumping tariff on polysilicon as a response to Europe’s anti-dumping policy. REC’s products happened to be the products – polysilicon and module that will be affected by the tariff, thus REC’s future sales will mostly depend on the trade war result between China and Europe. 
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