Tuesday, March 1, 2011

Evergreen Solar Inc. (NASDAQ: ESLR): Q4 Earnings Preview 2010

Evergreen Solar Inc. (NASDAQ: ESLR) is scheduled to release its fourth quarter after the closing bell on Wednesday, March 9, 2011. Analysts, on average, expect the company to post a loss of 77 cents a share on revenue of $98.63 million. In the year ago quarter, the company posted a loss of $2.88 per share on revenue of $74.55 million.

Evergreen Solar, Inc. engages in the development, manufacture, and marketing of solar power products primarily in the United States and Europe. It utilizes its proprietary String Ribbon technology process to produce multi-crystalline silicon wafers by growing thin strips of multi-crystalline silicon that are then cut into wafers. The technology significantly reduces the amount of silicon used in a solar panel. 

The firm has lost $54 million through the first nine months of 2010. The company has had warnings from Nasdaq over delisting, painful debt restructuring plans and numerous successive money losing quarters. 

In the preceding third-quarter, loss was $27.2 million, or 13 cents per share, compared to a loss of $82.7 million, or 40 cents per share, in the prior-year quarter. Revenue increased to $86.5 million from $77.7 million. Analysts, on average, expected the company to post a loss of 11 cents per share on revenue of $87.48 million.

The company recently announced that it had amended a key part of its recapitalization plan. The firm said that it lowered the conversion price on new 4 percent convertible subordinated additional cash notes due 2020, which the company is seeking to exchange for 4 percent senior convertible notes due 2013. The initial conversion price of the new notes has been cut from $6 to $4.35 per share, Evergreen said. The company also extended the deadline for the exchange offers from Jan. 31 to Feb. 9. The offers are a central component of Evergreen’s plan to substantially reduce its debt and interest expenses. 

The company faces significant headwinds due to start-up costs, capital expenditures and subsidy cuts in Germany, the world's largest market. The company generates bulk of its revenue from key European markets like Germany and Spain.

Also, Evergreen Solar has faced intense competition in the market for solar power products, particularly from Chinese manufacturers. The company is working to outsource its panel assembly operation from Devens, Mass., to China as a way to cut costs, and expects a new company-owned plant in China to be fully operational making solar wafers by the end of the year. The company said that it would close its Devens, Massachusetts factory and cut 800 jobs to preserve cash as its products face stiff competition from cheaper Chinese rivals. The facility, which began producing solar panels in 2008, will shut down by the end of the first quarter. The company said that it is "no longer economically feasible" to operate the manufacturing facility in a "high-cost market in a period of rapidly declining prices."

Evergreen will record non-cash charges in the fourth and first quarters of $340 million to write off the building and its equipment. It is also reviewing $150 million of prepayments associated with silicon contracts to determine whether additional charges are required.

Evergreen Chief Executive Michael El-Hillow recently said that increases in solar panel production in low-cost regions such as China combined with reductions in government subsidies in key European markets would pressure prices throughout this year. Evergreen's average selling prices dropped 10 percent in December. "The United States will continue to be at a disadvantage from a manufacturing standpoint," El-Hillow said in a statement.

On the bright side, the company is likely to benefit from geographically diversified contractual backlog, improving operating efficiencies, ongoing expansion programs and shifting a part of its manufacturing process to China. 

During the quarter in review, the company implemented the previously approved 1-for-6 reverse stock split.

Full Disclosure: None.
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