Renewable Energy Corporation ASA’s (OSE: REC) fourth quarter revenue slid a further five percent sequentially to 2.87 billion NOK. EBITDA slumped much worse to 178 million. This is due to weak solar market, aggressive polysilicon pricing to keep volumes up and capacity cuts in Norway. REC also made 2.5 billion impairment on Singapore operations during the quarter. EPS from total operations was around 2.5 NOK per share in the minus.
REC says that the steep module price decline means that end-users are now getting favourable returns on PV systems investments. Overcapacity is still gripping the market. There was some recovery towards the end of Q4. Wafer sales contract termination damages contributed 690 million into Q4 income.
REC is among the largest producers of polysilicon and wafers for solar applications and is rapidly growing in solar cells and modules manufacturing. Polysilicon spot prices were fown 59% in 2011 and multi wafer and module spot prices backpedalled 40% and 69% respectively. Full year EPS for 2011 was over -10 NOK. Revenues were 13.4 billion with EBITDA at 2.9 billion.
REC feels that the prices are now bottoming out as capacity is being cut across the industry. The company aims to partake in the expected industry consolidation. It will continue to aggressively vie for market share in silane as that is the area where REC has leading market and cost position.
REC expects demand shift from Europe to Asia and the US in 2012. Focus will be on cash-flow and restructuring of operations in Norway. The group is targeting 30% cost reduction in 2012. This should show in improved margins from H2 2012 onward. The stock has responded with an 8% pop.
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