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REC reports 17% drop in earnings

The REC Group says the solar market weakened significantly in the second quarter of 2011.

By Isabella Kaminski

Norwegian solar energy producer Renewable Energy Corporation ASA (REC) has reported a 17% drop in revenue to NOK3,391 million (£380m) in Q2 2011 compared to the previous quarter.

According to REC, the drop in revenue was mainly explained by the steep decline in average selling prices for wafers and modules, partly offset by increased sales volumes of polysilicon. Average selling prices for wafers and modules were down 21% and 14% respectively, while polysilicon prices were down 3% from the previous quarter.

REC says that late clarification of the subsidy scheme in Italy and slow demand growth in Germany combined with continued strong supply growth led to a very weak solar market in the second quarter of 2011. The market imbalance led to inventory build-up throughout the industry and strong price pressure.

The weak market also led to the decision to temporarily shut down REC's cell and wafer production in Norway in the third quarter. In addition to the announced shutdown of the cell plant in Narvik and the oldest wafer plants at Herøya, the multi-wafer plant in Glomfjord is to be temporarily shut down in the third quarter.

Earnings before interest, taxes, depreciation, and amortization (EBITDA) was NOK871m in the Q2 2011, down from NOK1,449m in the previous quarter. According to REC, EBITDA was negatively affected by lower average selling prices and inventory writedowns of NOK115m, partly offset by cost reductions across the value chain in the quarter.

However REC reported strong improvements in operations. Total Siemens and granular polysilicon production were 4,872 MT in Q2 2011, an increase of 71% from the second quarter 2010, and up 11% from the previous quarter. Production of solar and electronic grade polysilicon was 4,333 MT in the quarter, up 9% from the previous quarter.

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