MEMC Posts Wider-Than-Expected Loss - Analyst Blog
May 13 2013 - 5:00AM
Zacks
MEMC Electronic Materials
Inc. (WFR) reported first-quarter 2013 adjusted loss per
share of 16 cents, which was wider than the Zacks Consensus
Estimate of a loss of 14 cents per share.
The adjusted figure excludes the impact of direct sales and
lease-back from the Solar Energy segment as well as some tax
benefits, and restructuring and impairment charges.
Revenues
On a GAAP basis, MEMC reported first-quarter revenues of $443.6
million, down 14.6% from $519.2 million in the year-earlier
quarter. Reported revenues came much above the Zacks Consensus
Estimate of $409.0 million. Lower solar sales volume and weak
semiconductor pricing led to the revenue decrease. Pricing was
mostly affected by industry-wide slowdown.
Including direct sales from the Solar Energy segment and lease-back
transactions, non-GAAP revenues came in at $431.3 million, which
decreased 17.7% from the year-ago quarter.
Segment wise, revenues from Semiconductor Materials grew 6.4% year
over year to $229.8 million and was 51.8% of total revenue. The
improvement was mainly due to higher volume offset by weaker
pricing, yen headwinds and unfavorable product mix.
The Solar Energy segment (which now includes Solar Materials)
accounted for 48.2% of total revenue. The segment generated
revenues of $213.8 million, down 29.5% year over year. The decrease
was driven by lower project sales and weaker solar wafer pricing
and volume.
During the quarter, most of the projects were under engineering,
planning and construction (EPC) only contract due to lower
development spending. This has led to lower revenues from solar
project sales.
The Solar Energy segment sold 45 megawatts (MW) of solar energy
systems on a non-GAAP basis and 43 MW on a GAAP basis. This
compares with 49 MW and 47 MW sold, respectively in the year-ago
period. Projects interconnected during the first quarter
represented 41 MW in 27 projects. MEMC also reported that
construction of 104 MW of systems is underway. The project pipeline
was 2.7 gigawatt (GW), up 0.1 GW compared with the prior quarter
and down 0.2 GW from the year-ago period. Project backlog increased
98 MW sequentially to 925 MW.
Operating Results
Reported gross profit was $49.7 million, down 0.8% from the
year-ago quarter. Gross margin was 11.2% compared with 9.6% in the
year-ago quarter. Margin expansion was mostly due to cost control
measures, partially offset by lower pricing.
Operating loss was $33.5 million compared with a loss of $54.2
million in the year-earlier quarter. Operating margin was (7.6%)
compared with (10.4%) in the year-ago quarter.
Total operating expenses decreased 20.2% from the year-ago quarter
with marketing and administration expenses falling 15.5% and
research and development expenses decreasing 13.4%.
Reported net loss was $89.4 million or 40 cents per share compared
with net loss of $98.6 million or 43 cents in the prior-year
quarter. Adjusted loss per share was 16 cents versus 29 cents in
the year-ago quarter.
Balance Sheet & Cash Flow
MEMC ended the quarter with cash, cash equivalents and restricted
cash of $476.2 million, down from $645.0 million in the previous
quarter. Cash declined mainly due to deployment for solar project
construction and delay in collections. Long-term debt was $763.4
million, slightly up from $758.7 million in the previous
quarter.
MEMC used $118.6 million cash in operations as against cash
generated from operations of $19.4 million in the preceding
quarter. Capital expenditure was $30.8 million, down from $38.1
million in the previous quarter.
Guidance
MEMC expects an upturn in the order pattern in its Semiconductor
Materials segment in the coming quarter. Preferring to be
cautiously optimistic, management believes that initial volume
growth will take place with modest support from ASP growth in the
second half of 2013.
For the second quarter of 2013, MEMC expects Semiconductor
Materials revenues in the range of $235.0–$245.0 million and solar
energy systems sales volume in the range of 29 MW to 54 MW.
Average project pricing would range between $3.40/watt and
$3.55/watt. Capital spending is expected between $30.0 million and
$40.0 million.
For fiscal 2013, Semiconductor Materials revenues are expected
between $960.0 million and $1.0 billion. Solar energy systems sales
volume is expected in the range of 430 MW to 500 MW.
Average project pricing would range between $3.10/watt and
$3.40/watt. Capital spending is expected between $120.0 million and
$140.0 million.
The company also mentioned that it is optimistic about gaining
operating leverage from ongoing cost reduction measures. Moreover,
it aims to reduce solar materials pricing with the help of
economical and flexible sourcing strategy. Together, these
potential benefits would help MEMC deliver stronger results in
2013, management believes.
Conclusion
MEMC posted a disappointing first quarter with a
wider-than-expected loss. Revenues, too, failed to encourage us as
it decreased on a year-over-year basis. Solar systems sales were
also lower than expected. However, a sign of recovery in the
semiconductor sector helped MEMC to provide a decent sequential
guidance. Continuous expense control will continue to support
results.
Though the Solar segment has not performed well in the last two
quarters, we believe there is immense potential given a strong
backlog and a large project pipeline. We also consider MEMC’s
recent tie-up with Brazil’s Petrobras, to build one of the largest
solar photovoltaic power plants, encouraging. This venture will
help MEMC to tap the Brazilian solar market and expand
geographically.
Currently, MEMC has a Zacks Rank #3 (Hold). Investors may also
consider other technology stocks that are performing well.
Integrated Device Technology Inc. (IDTI),
Silicon Image Inc. (SIMG) and Spreadtrum
Communications Inc. (SPRD) all have a Zacks Rank #1
(Strong Buy) and are worth buying.
INTEGR DEVICE (IDTI): Free Stock Analysis Report
SILICON IMAGE (SIMG): Free Stock Analysis Report
SPREADTRUM-ADR (SPRD): Free Stock Analysis Report
MEMC ELEC MATRL (WFR): Free Stock Analysis Report
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