First Solar looks to China and US to offset German gloom

Solar PV manufacturer First Solar last week posted fourth quarter financial results showing higher-than-expected profits, but still saw its shares fall over seven per cent on Friday after profit margins narrowed and its outlook for 2010 left investors underwhelmed.

The company reiterated its existing forecast for 2010 net sales of $2.7bn (£1.75bn) to $2.9bn and earnings per share of $6.05 to $6.85.

However, its Nasdaq-listed shares had rallied in the days prior to the earnings announcement amid hopes the company would upgrade its outlook for 2010. The share price subsequently fell 7.1 per cent to $117.28 in afternoon trading as a number of brokerages cut their target price.

First Solar's net income for the fourth quarter exceeded expectations, slipping only slightly year-on-year to $141.6m, but gross margin for the period fell to 41.5 per cent from 50.9 per cent in the third quarter.

The company expects around half of its production volume to be sold in the German market this year, but has been hit by the fall in value of the Euro and ongoing uncertainty over the German government's plans to scale back its feed-in tariff scheme.

However, the company said that any slowdown in the german market later this year was likely to be offset slightly by a strengthening Italian market, while it is also pursuing plans to diversify its European customer base by developing its business in North America and China, adding that 1.4GW of capacity is already contracted in North America.

"We believe that some of the challenges that may exist in Germany we have more than offset by the pipeline," said Robert Gillette, chief executive of First Solar.

The company also announced it reduced its manufacturing costs by a penny to 84 cents per watt during the fourth quarter.