Revenues from Solar Leasing Programs Leads SunPower into Stable Earnings League

published: 2013-08-16 18:05 | editor: | category: Analysis

SunPower’s recent 2Q13 financial results showed stellar performance. Although the company’s GAAP earnings dropped slightly from US$ 635.4 million from 1Q to US$ 576.5 million, the company’s gross profit exceeded previous financial forecasts having nearly doubled from 9.3% to 18.7%. Building on this growing momentum the company turned around losses from 1Q during 2Q, as net income soared from negative US$ 54.7 million to US$ 19.6 million. EnergyTrend lists three major factors contributing to this quarter’s outstanding performance revealed by SunPower during the 2Q13 Results Conference Call :

1. Revenues from solar leasing

On schedule constructions of power stations and projects contributed to the company’s outstanding financial performance during 2Q. Revenues from the California Solar Valley Ranch (CSVR) and Solar Star alone amounted to US$ 190 million and accounted for 33% of total revenues. It is anticipated Solar Star will be increasing solar power plant installations in 2H13, and has recently completed installation of a 250 megawatts (MW) solar power plant for its CVSR project. The CVSR installations are expected to be completed by the end of this year. Even though SunPower recently completed full panel installation at CVSR, they will continue to post significant GAAP results over the next few quarters, but was more weighted in 2014.

2. Production capacity at its full due to rising market demand

The market trend shifted from large-scale solar power plants to more diversified markets, SunPower has grasped onto the trend. SunPower has gradually increased its presence in the diversified market. Due to its advantages in geographic location, the company operations are focused in the U.S., and revenues from the region accounted for  64% of total revenue. 

SunPower’s high efficiency modules meet Japan markets product demands. Module shipments to Japan in 2Q13 exceeded expectations, and have about 10% residential roof-top market share in the country. The company is starting to ship products to Japanese large-scale solar power plants, and is continuing its search for related cooperation opportunities. The company has become more visible in Japan’s large-scale solar power plant and diversified markets. Overall SunPower’s revenue from the Pacific-Asia region rose in 2Q to 18%.

Observations of the European market in 2Q showed demands and ASP were gradually increasing. SunPower continued to pour investments and resources into operating projects, and expects to profit from the European market this year.

3. Lowered costs

The company’s utilization in 2Q reached 100%. In addition, not only  has the cost of cell and module reduction rates surpassed expectations, so has costs for  Balance-of-System (BOS).This resulted in more obvious effects from 2Q cost reduction plans and raised gross margin.

From financial ratios it can be observed, SunPower’s cash conversion cycle is better than other companies in the industry, and maintained healthy liquidity. However, the company’s current liability has soared at a much faster rate than current assets causing a gradual current ratio decline over the last few quarters. Debt-to-asset ratio has also been climbing upwards. As sales improve, the company needs to keep an eye on fiscal health and overall fiscal structure.

SunPower is expected to maintain its excellent performance in 2H13, the company raised its 3Q gross profit and net revenue outlook. In the future, SunPower revenues generated from large-scale solar power plants will continue to provide a stable source of revenue. In addition, the company is expected to generate considerable income, due to its high efficiency products that meet the roof-top market’s efficiency requirements and a hot Japanese market. Moreover, the U.S. rising residential roof-top markets and solar leasing operations are also anticipated to increase revenues.  By integrating the above factors, it can be concluded that SunPower has emerged from losses and entered the league of solar manufacturers with stable profits. 

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