March 7, 2012 / 11:56 AM / 6 years ago

Bleak margins dim Canadian Solar outlook

(Reuters) - Canadian Solar Inc (CSIQ.O) posted a wider-than-expected quarterly loss and forecast sequentially lower shipments and margins for the current quarter, as a gradual improvement in demand is yet to offset plummeting prices.

Some of the largest players in the solar industry sank into red last year as the prices halved for the modules that turn sunlight into electricity, but demand has been picking up in the largest market, Germany.

Canadian Solar shares were down 10 percent at $2.95 on Wednesday on the Nasdaq. They have lost about three-quarters of their value in the last one year, compared with a 66 percent decline in the broader MAC Global Solar Energy Index .SUNIDX.

For the first quarter, the company forecast margins of 5 percent to 8 percent, down from 8.7 percent in the last quarter.

Canadian Solar, which is based in Ontario but has most of its operations in China, expects first-quarter shipments of 340 megawatt (MW) to 350 MW, down from 436 MW in the fourth quarter.

“Their numbers would not stack up where they would be in a position to make up profit for the full year or exiting the year,” Auriga USA LLC analyst Hari Chandra Polavarapu said.

The company also forecast full-year shipments of about 1,800 MW to 2,000 MW, higher than 1,323 MW it shipped last year.

“You can get all the shipments but if you are sacrificing margins, what does it tell you?” Polavarapu said.

Canadian Solar’s selling costs rose 49 percent and general and administrative expenses nearly doubled in the quarter.

Canaccord Genuity analysts said Canadian Solar will gain market share, but only at the expense of significant selling price erosion as it eyes less lucrative emerging markets.

The company’s Asian revenue almost doubled In the fourth quarter, while market share in Europe dipped.


On a conference call, Chief Financial Officer Michael Potter told analysts that Canadian Solar was starting construction on the TransCanada Corp (TRP.TO) power project in early second quarter, but revenue was expected to flow in only from the fourth quarter.

Last December, TransCanada agreed to buy 86 MW of solar power projects from a Canadian Solar unit for $470 million.

“We expect to complete 3 to 4 own projects in Canada this year and several in the United States as well,” Potter said.

Canadian Solar plans to expand its engineering, procurement and construction (EPC) and solar systems kits business to account for more than 25 percent of 2012 revenue, up from 11 percent in 2011.

Reporting by Vaishnavi Bala and Swetha Gopinath in Bangalore; Editing by Sriraj Kalluvila and Don Sebastian

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