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SunPower Reports Topsy-Turvy First Quarter Earnings

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Despite its recent acquisition of embattled solar manufacturer SolarWorld Americas, SunPower this week reported mixed results in its first quarter financial results, in which it succeeding in narrowing its net loss and beating earnings expectations, but could not promise much in the way of strong guidance.

It’s been a rough few months for American solar manufacturer SunPower, with the company’s recent share price looking like an homage to the Swiss Alps. In SunPower’s fourth quarter and full year 2017 financial results published in February, the company announced revenues down 35% year-over-year and first quarter and full year 2018 revenues well below expectations , which it blamed, in part, on the impact of the imposition of a 30% tariff on all imported solar cells and modules in the US.

A week later SunPower announced that it would lay off an estimated 250 employees and incur restructuring costs of anywhere between $20 million and $30 million. The aim of the restructuring, as explained to the SEC, was to reduce operating expenses and overhead, while also focusing on improving the company’s profitability in the wake of the newly-announced US solar tariff.

On the flipside, however, GTM Research published figures in late March that revealed SunPower is the leading US commercial solar provider, supplying 231.2 megawatts (MW) of capacity in 2017, beating out Tesla which had 156 MW.

And, in a move which seemed to blow expectations apart, SunPower announced in the middle of April that it would acquire 100% of SolarWorld Americas — a company which was one of the two involved in the Section 201 trade case which led to the aforementioned 30% solar tariff. In a way, this was completely unexpected, but looked at from another point of view, it makes perfect sense, and follows in the wake of several other companies making moves to build up or create manufacturing capacity in the United States, thus circumventing any need for imposing a tariff on their products — especially for a company which relies on products made primarily in the Philippines and Mexico.

“We are thrilled to announce this agreement to acquire SolarWorld Americas, one of the most respected manufacturers of high-quality solar panels for more than 40 years,” said Tom Werner, SunPower CEO and chairman of the board, at the time. “The time is right for SunPower to invest in U.S. manufacturing, and SolarWorld Americas provides a great platform for us to implement our advanced P-Series solar panel manufacturing technology right here in our home market. P-Series technology was invented and perfected in Silicon Valley, and will now be built in SolarWorld Americas’ factory, helping to reshape solar manufacturing in America.”

Given the topsy-turvy nature of SunPower’s 2018 so far, then, it is not a complete surprise that its earnings for the first quarter of 2018 reflect some of that fluctuation and instability.

SunPower reported revenue (on a GAAP basis) of $391.9 million for the first quarter, well down on the $651.1 million reported in the fourth quarter of 2018, but up 19% on the $329.1 million taken in during the first quarter of 2017. The company’s gross margin stepped out of the red at 2.6%, compared to negative 2.1% in the fourth quarter and negative 13.9% in the same quarter a year ago.

Maybe most importantly, SunPower reported a much lower net loss than previously and against analyst expectations — a loss of $116 million for the first quarter, compared to a loss of $527.7 million in the fourth quarter and a loss of $219.7 million year-over-year.

“Our solid execution, ability to meet project deadlines and commitment to controlling costs enabled us to exceed our forecasts across all of our business segments,” said Tom Werner. 

“Our strong first quarter performance was driven by solid execution in all markets while prudently managing expenses,” added Chuck Boynton, SunPower chief financial officer. “Financially, our efforts remain focused on improving cash flow, managing our working capital and executing on our restructuring initiatives.  With our asset monetization plans on track and continued cost control, we are well positioned to retire our $300 million convert in June as well as having the resources to fund our growth plans this year.”

However, investors were still not hugely impressed, with the company’s share price falling slightly due to the light guidance provided for the second quarter. Specifically, SunPower provided guidance of revenue between $360 million and $410 million, a gross margin between 2.5% and 4.5%, and a net loss of between $125 million to $100 million.

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