While the India production plan depends on regulatory permits and favorable incentives, First Solar said along with fleet optimization plans, it would help expand the company’s nameplate capacity to 16 GW DC by 2024. While at both Ohio and Tamil Nadu fabs, the company plans to have a 3.0 GW DC capacity online by the end of 2023 and 2024, respectively, it will be expanded to 3.3 GW DC at both locations in 2025 with a capex of $.20 per W.
Management shared that elevated shipping rates ‘highlight the strategic thesis for domestic PV manufacturing’.
By 2024, First Solar aims to expand its nameplate installed manufacturing capacity to 16 GW, with the help of 3.3 GW each in Ohio and India. (Source: First Solar, Inc.)
Jeffrey Osborne of Cowen opined that the increased scrutiny around the Hoshine related module imports by the US Customs and Border Protection (CBP) is ‘leaving First Solar as a trusted, well capitalized domestic supplier that is not bound to give potential customers a headache around traceability challenges, especially now the CBP appears to be going all the way down to the raw silica mine’.
Q2/2021
During Q2/2021, First Solar reported net sales of $629 million, down from $642 million in Q2/2020, and from $803 million in Q1/2021 (see First Solar’s Q1/2021 Annual Revenues Up By Over 50%). It blamed this loss in revenue to the sake of Sun Streams 2, 4 and 5 projects in the previous quarter, partially offset by an increase in module segment revenue and revenue related to a settlement agreement for a legacy systems project.
It achieved $110 million operating income in the reporting quarter, up from $51 million a year back, and down from $252 million in the previous quarter. The company’s gross profit grew to 27.7% in Q2/2021.
First Solar confirmed that sales freight reduced module segment gross margin by 9 percentage points in Q2/2021 but 3 percentage points higher year on year. Shipments during the quarter added up to close to 1.8 GW, less than expected due to mainly because of vessel delays, constrained customer container availability and accommodating certain customer requests. Current logistics environment ‘presents risk to our 2021 shipment plan’, according to the management.
The manufacturer reported 9.0 GW of year-to-date (YTD) bookings, and 4.1 GW of net bookings since the previous earnings call.
Challenges
First Solar CEO Mark Widmar confirmed that the global shipping environment remains challenging due to port congestion, limited container availability, an increase in cancellation of shipments by logistic providers, scheduled reliability issues and other events. Shipping costs have continued to increase since last earnings call, according to him, and there are disruptions due to COVID-19 outbreaks and restrictions in China and Southeast Asia, which has impacted across the global logistics market.
“We have partially mitigated the effects of higher shipping cost per watt through improvements in our module efficiency, implementation of Series 6 Plus, expansion of our distribution network strategy in the United States and forward contracts,” said Widmar. “However, we have seen and expect to continue to see for the remainder of 2021 adverse impacts on our financial results. For context, spot rates for routes between Asia and the United States have increased 200% to 300% from Q2/2020 to Q2/2021.”
Guidance
First Solar slightly altered its net sales guidance for 2021, revising it upward to $2.875 billion to $3.1 billion (previously $2.85 billion to $3.025 billion), and bringing down gross margin to between $695 million to $760 million (previously $695 million to $775 million). Shipments are now targeted between 7.6 GW to 8.0 GW (previously 7.8 GW to 8.0 GW).
