Solar wafer maker PV Crystalox Solar produced a resilient performance in the first half of the year in the face of weakening demand, order deferrals and a flood of supply from rivals in the Far East, and the second-half outlook hardly engenders confidence.
Admittedly, PV Crystalox is one of the stronger businesses in its sector and better placed to withstand such a sustained lull in its markets than many rivals. It has a well established, low cost production capacity and has completed most of its planned capital expenditure. On top of this, it is highly cash-generative and ended the first half with a healthy-looking balance sheet.
But management admits that prices are unlikely to recover in the short term and recovery in demand, driven by government incentives, is unlikely to resolve the imbalance between supply and demand before 2010 at best. Internal cost cutting and low cost raw material contracts should help the company protect its margins to a certain extent, but don't expect any significant growth this side of 2010. Global solar installations are forecast to be down by up to 30 per cent this year and PV Crystalox is expecting to ship 210MW-230MW equivalent worth of wafers this year, compared with 230MW in 2008.
More analysis of company results
PV CRYSTALOX SOLAR (PVCS) | ||||
|---|---|---|---|---|
| ORD PRICE: | 85.5p | MARKET VALUE: | £356m | |
| TOUCH: | 85.4-85.8p | 12-MONTH HIGH: | 194p | LOW: 69p |
| DIVIDEND YIELD: | 6.0% | PE RATIO: | 5 | |
| NET ASSET VALUE: | 63c | NET CASH: | €77.5m | |
| Half-year to 30 Jun | Turnover (€m) | Pre-tax profit (€m) | Earnings per share (€¢) | Dividend per share (€¢) |
|---|---|---|---|---|
| 2008 | 126 | 52.8 | 9.0 | 2.0 |
| 2009 | 122 | 22.2 | 4.0 | 2.0 |
| % change | -4 | -58 | -56 | - |
Ex-div: 30 Sep Payment: 21 Oct £1:$1.16 | ||||
Broker Piper Jaffray expects full-year pre-tax profits to fall from €147m to €68m, giving EPS of 11.2¢ (25.2¢ in 2008), rising to €72m and 11.9¢, respectively, in 2010.
