REC Solar remains profitable in Q1

REC Solar today reported its second quarterly results as a standalone company, and its second straight quarter of profitability, further vindicating the former REC Group’s decision to split its Solar and Silicon divisions last year.

Singapore-based REC Solar did, however, note that its module production costs rose slightly in the first quarter due in part to a factory fire in March – giving the incident a more serious overtone than previously suggested.

REC Solar chalked up an $11m profit on revenues of $175.4m for the quarter. That compares to a $10.8m profit on revenues of $182.4m during the final quarter of 2013 – the company’s first in the wake of its split with US-based REC Silicon.

Oslo-listed shares of REC Solar rose more than 4% on Friday on the earnings. Despite a period of weakness over the last two months, the shares remain far above the level at which they were listed last October, leaving the company with a market valuation of NKr3.5bn ($580m) – more than China’s Yingli, the world’s largest module maker.

REC Solar’s reputation for high-quality modules has given the company an advantage in the booming Japanese market, and it has also benefited from the minimum import price Europe has imposed on Chinese modules – making quality more of a factory in buying decisions.

As it had previously signaled, REC Solar today confirmed that it will expand its module capacity in Singapore by 300MW – to 1.3GW – by late 2015.

Doing so will “facilitate the introduction of new technologies and broaden our product offering to our client base”, explains chief executive Oyvind Hasaas. “This is an important step for us to strengthen our position in the high-end market segment.”

Things are not uniformly rosy for the company, however.

Hasaas, for one, resigned last month, and will leave REC Solar at the end of June. Ole Enger – the company’s chairman, and the former chief executive of the REC Group – will take on “increased responsibility” while the company looks for a replacement.

The company also acknowledged that its solar panel cash costs rose $0.03/W during the quarter, to $0.67/W. It blames the increase on its lower overall production volumes – the result of debottlenecking processes at its existing lines – and the March fire, which resulted in two of its eight cell lines being taken off line for six weeks.

As a result, REC Solar expects to produce just 734MW of cells this year, compared to 940MW of modules, making up the difference via external sourcing.

The company says it still intends to meet its previous guidance of lowering its panel cash costs by 8-12% this year, although its performance will likely come in at the lower range of that forecast.