Investor eye on panel firms

LOS ANGELES/FRANKFURT: Investors are looking for signs of a recovery in solar panel demand when manufacturers report earnings in the coming weeks, though panel prices are still falling fast and earnings may not see a meaningful improvement until 2010.

US solar players including First Solar Inc are scheduled to report quarterly earnings this week, with Chinese and German companies' results also in the offing.

Recently, companies including SunPower and Yingli Green Energy Holding Co Ltd have said the solar market turned a corner in the second quarter.

However, the world's top solar cell maker, Germany's Q-Cells, injected fresh nervousness into the market recently when it withdrew its 2009 outlook - which it had previously cut three times.

Demand for solar panels has suffered this year due to a lack of available financing for renewable energy projects and a pullback in government subsidies in Spain and Germany. That demand slide has led to a global glut of solar panels that has sent prices tumbling and hampered manufacturers' profits.

Second-quarter results from solar companies are expected to be significantly better than the previous quarter, when many reported hefty losses. Analysts are more interested, however, in the manufacturers' outlooks for the remainder of the year.

"What will be most important will be management commentary on demand and average selling prices," Simmons & Co analyst Burt Chao said in an interview. "I would expect Q3 demand to improve. And if they talk that down, that would be very negative for the stocks."

Many companies have said they expect improved financing conditions and funds from the US economic stimulus to boost demand in the second half of this year, yet financing remains tight and government programs have been slow to roll out.

In addition, prices on solar panels are still falling.

"Many solar companies set expectations for improving demand in the second half of this year," said Gabelli & Co analyst Hendi Susanto. "We believe higher-than-expected price declines will likely overshadow improving volumes."

Earlier this week, Bank of America/Merrill Lynch analyst Steven Milunovich downgraded the solar sector to "underweight", citing the risk that demand will not recover as much as expected. He added that this year's rally in alternative energy stocks may be over for the time being as second-quarter results "should be disappointing".

Reuters

(China Daily 07/27/2009 page11)