August 18, 2009 / 12:48 PM / in 9 years

UPDATE 2-Solarfun shares fall as pricing concerns weigh

* Posts surprise Q2 profit; rev down 37 pct

* Sees average selling prices falling to $2/watt by yr end

* Sees Q3 shipments exceeding 100 MW, Q4 at about 80 MW

* Shares fall as much as 9 percent (Recasts; adds details, analyst comments, updates share movement)

By Adveith Nair

BANGALORE, Aug 18 (Reuters) - Chinese photovoltaic cell maker Solarfun Power Holdings Co Ltd SOLF.O posted a surprise quarterly profit, but warned that average selling prices could fall further, sending its shares down as much as 9 percent.

The credit crisis and a pullback in incentives in Spain have led to a global glut of solar panels, driving down prices and eroding most solar companies’ profits.

Average selling prices for the latest second quarter fell 4 percent sequentially to $2.66 per watt as market prices of PV products dipped. Prices could decline to $2.00 per watt or below by the end of 2009, the company said.

“Investors are a bit spooked. Average selling prices at $2 per watt are very low compared to levels they have been at in the past,” Simmons & Co analyst Burt Chao said.

While a fall in prices might be bad for component companies, customers benefit as the lower prices bring progress towards so-called “grid parity”, the point at which renewables cost the same as fossil fuel-based forms of power generation.

Chao also said there may be some concerns regarding the health of the agreement between Q-Cells and Solarfun given the recent developments at Q-Cells.

In August last year, Solarfun had signed a supply agreement with Q-Cells International, a unit of Germany’s Q-Cells AG QCEG.DE. [ID:nN27423948]

Earlier this month, Q-Cells, one of the world’s largest maker of solar cells, said it would slash nearly a fifth of its workforce, as it reported a first-half loss hit by the price slump. [ID:nLC338754]

“Q-Cells has had difficulties in the last couple of quarters. They are going through a major restructuring right now, and they happen to be a major customer for the company. Investors are a bit shaken on that as well,” Chao said.

Excluding items, Solarfun posted a second-quarter profit of 8 cents per American Depositary Share, as shipments rose. Analysts expected a loss of 3 cents a share, before items, according to Reuters Estimates. [ID:nWNBB6807]

Solarfun shares were trading down 54 cents at $5.78 Tuesday afternoon on Nasdaq. They had touched a low of $5.75 earlier.

Excluding Tuesday’s fall, the stock has so far almost tripled from a March year-low, but is still off 70 percent from an August 2008 year-high. (Additional reporting by Arup Roychoudhury in Bangalore; Editing by Anil D’Silva, Pradeep Kurup)

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