May 10, 2012 / 10:39 AM / in 6 years

Canadian Solar may cut jobs to save margins

(Reuters) - Solar products maker Canadian Solar Inc (CSIQ.O) may follow bigger rivals First Solar Inc (FSLR.O) and LDK Solar Co Ltd LDK.N in cutting jobs to lower costs to offset a sharp fall in selling prices.

Canadian Solar shares, which have fallen about 67 percent in the past year, rose 9 percent to $3.50 in morning trading on the Nasdaq.

Solar companies are shuttering some production, laying off people and renegotiating raw material supply contracts to arrest a steep decline in margins, caused by an oversupply and falling government subsidies.

“We will reduce non-essential headcount where possible,” Chief Financial Officer Michael Potter said on a conference call on Thursday. “We continue to re-examine our operating expenses every day.”

From 2009, the number of full-time employees at Canadian Solar grew 28 percent to 9,087 as of last year. The period saw rapid development of solar plants in Asia, particularly China.

“They may not start lopping off heads but will certainly try to constrain costs on the sourcing side,” Avian Securities LLC analysts Mark Bachman said.

First Solar is cutting 30 percent of its workforce. LDK Solar Co Ltd LDK.N has slashed more than 5,000 jobs this year, while MEMC Electronics Materials Inc WFR.N laid off more than 1,300 employees in December.

As a slight pick-up in demand is yet to offset falling prices, all of them are targeting costs.

Canadian Solar, which makes solar wafers, cells and panels, is looking to bring down manufacturing costs to 50 to 60 cents per watt by the end of this year, from 85 cents in the fourth quarter, Chief Executive Shawn Qu said on the call.


Net loss attributable to Canadian Solar was 49 cents per share, while analysts on average had expected 52 cents per share, according to Thomson Reuters I/B/E/S.

Canadian Solar, based in Guelph, Ontario, said gross margins are expected to increase to 8 percent to 10 percent in the second quarter from 7.7 percent in the first.

Shipments are expected to rise to 430 megawatts (MW) to 450 MW from 343 MW.

The company, which last month said it will buy the majority stake in 16 power projects, expects to generate more than 25 percent of its revenue from solar power plants and the system solutions unit this year.

Reporting by Swetha Gopinath and Durba Ghosh in Bangalore; Editing by Maju Samuel

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