* Posts surprise Q1 adj profit; revenue falls 39 pct
* Gross margin improves on lower raw-material cost
* Sees shipping 60 MW to 65 MW of modules in Q2
* Backs 2009 shipment view
* Shares up 9 percent (Recasts; adds details, analyst comment, background; updates share price)
By Adveith Nair
BANGALORE, May 28 (Reuters) - Chinese solar-products maker Trina Solar Ltd TSL.N posted a surprise quarterly profit before items, as gross margins increased helped by a fall in raw-material costs, sending its shares up as much as 9 percent.
Gross margin for the first quarter was 17.2 percent, exceeding Trina’s previous outlook of 15 percent to 17 percent, helped by lower average silicon-purchase prices.
The company had reported margins of 9.6 percent in the fourth quarter of 2008.
“The real driver behind the results was better-than-expected gross margin,” Ardour Capital analyst Adam Krop told Reuters.
Krop said he was comfortable with the company’s second-quarter gross-margin outlook of 18 percent to 20 percent.
Trina gets 40 percent of its polysilicon from the spot market and has long-term contracts with “reliable” companies like South Korea’s DC Chemical Co Ltd (010060.KS) and Germany’s Wacker Chemie AG (WCHG.DE) for the remaining 60 percent, Krop said.
Polysilicon is a key raw material for the company, which makes photovoltaic solar products that turn sunlight into electricity.
“Not only are they benefiting from lower polysilicon spot prices ($70 per kilogram), they can also go back to their suppliers and renegotiate their contracts,” Krop said.
While rising margins brought some cheer to investors, falling average selling prices (ASP) continued to be a dampener for the company, as is the case with other solar-products makers.
Trina, like other solar companies, has been hit by the sharp decline in prices for solar products as the credit crisis has choked off funding for new products even as companies have been putting a glut of new supplies on the market.
“Their ASP decline was much more than I expected. I was looking for about a 14 percent dip; they came in down about 22 percent sequentially,” Krop said.
In a conference call with analysts, Arturo Herrero, vice president of sales and marketing, said he expects prices to come down 12 percent to 15 percent sequentially.
Analyst Krop, who expected a 5 percent sequential decline in the second quarter, said given the oversupply situation in the market due to the credit crunch, the company was looking at a bigger decline in prices.
For the first quarter, Trina posted a net loss of $10.6 million, or 42 cents per American Depositary Share (ADS), compared with a profit of $12.9 million, or 51 cents per ADS, a year ago.
Excluding items, it earned 2 cents per ADS, while analysts on average were expecting a loss of 5 cents a share, according to Reuters Estimates.
Revenue fell 39 percent to $132.1 million. Analysts had forecast revenue of $145.1 million.
Solar module shipments in the quarter were 48.8 megawatts (MW), and the company expects to ship 60 MW to 65 MW in the second quarter.
Trina also backed its total photovoltaic module shipment outlook of 350 MW to 400 MW for 2009.
Trina Solar shares were up 7 percent at $24.15 in afternoon trade Thursday on the New York Stock Exchange. They had touched a high of $24.63 earlier in the session. (Additional reporting by Hezron Selvi in Bangalore, Editing by Dinesh Nair, Vinu Pilakkott)