More Bleeding in Solar Sector (JASO, YGE)

Energy

Published: August 29, 2012 8:57 am

Solar cell and module makers JA Solar Holdings Co. Ltd. (NASDAQ: JASO) and Yingli Green Energy Holding Co. Ltd. (NYSE: YGE) reported second-quarter earnings this morning and both fell short of consensus estimates.

JA Solar reported a loss of $0.37 per ADS on revenue of $284.4 million. Analysts were expecting a loss of $0.14 on $292.7 million. In the same period last year the company posted a loss of $0.22 per ADS on revenue of $413 million.

Yingli reported a net loss of $0.58 per share on revenue of $488.5 million. The consensus estimates called for a loss of $0.33 on $489.4 million. In the second quarter of 2011 the company posted per-share earnings of $0.36 on revenue of $680.6 million.

Both companies were able to post positive gross margins, something that had eluded many of the Chinese solar makers in the second quarter. The chairman and CEO of Yingli summed up the problems:

In addition to the challenges from feed-in-tariff adjustments, excessive module supply and the ongoing anti-dumping and countervailing investigations in the U.S., the anticipated anti-dumping investigation in the EU has brought more pressure and uncertainties to the solar industry.

Yingli lowered its module shipment target to 2,100 to 2,200 megawatts for the 2012 fiscal year, up about 31% to 37% from a previous target that forecast an increase of more than 50%.

JA Solar also lowered its full-year shipment forecast from 1,800 to 2,000 megawatts to 1,500 to 1,800 megawatts. For the third quarter the company expects shipments to be 350 to 370 megawatts.

Whether either of these companies will survive a coming shakeout in the solar sector is questionable. A pickup in Chinese solar installations is helping for now, but the industry — at least in China — is bound to consolidate. It is just a question of when and at what cost.

Shares of JA Solar are down 11.2% in premarket trading this morning at $0.95, in a 52-week range of $0.89 to $3.79. The consensus target price for the stock is $1.36.

Shares of Yingli are down 2.6% at $1.90, in a 52-week range of $1.50 to $6.57. The consensus target price for the stock is $3.12.

Paul Ausick

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