America’s leading manufacturer of solar panels, First Solar, has followed its already lackluster third quarter earnings report posted earlier this month with further bad news, announcing plans to cut 1,600 jobs, and revising its full-year 2016 guidance only a fortnight after it had already done so.
The drastic news comes as First Solar announces its intention to phase out its Series 4 solar panels, scrap plans for its Series 5, and accelerate the production of its Series 6 solar panels for the second half of 2018.
This will see the company’s existing production facilities converted to Series 6 production during the course of 2017 and early 2018, at the same time as Series 4 is phased out. First Solar believes it will be able to deliver approximately 3 GW worth of Series 6 solar panels in 2019.
“The acceleration of the Series 6 roadmap is an important development for First Solar,” said Mark Widmar, CEO of First Solar.
“Following the completion of an internal review process to evaluate the best competitive response to address the current challenging market conditions, we have developed plans that will enable us to more quickly begin production of our Series 6 module. Although the decision to accelerate our Series 6 roadmap requires a restructuring of our current operations, we expect the transition to Series 6 will enable us to maximize the intrinsic cost advantage of CdTe thin-film technology versus crystalline silicon. Recent steep module pricing declines require us to evaluate all components of our cost structure and streamline our business model to best position the Company for long-term success.”
That “restructuring” will see 27% of the company’s workforce, or around 1,600 employees, lose their jobs worldwide, including 450 jobs at the company’s Ohio plant. First Solar explained in the conference call with investors and industry analysts that around 200 employees would stay on to make the Series 4 panels during the phase-out process, while the company’s remaining employees will work on research development, customer support, and other areas.
All of this is set to see the company incur serious restructuring and asset impairment charges of between $500 to $700 million, including a cash impact of between $70 to $100 million. First Solar expects these charges to primarily affect 2016 finances, and will look like:
- $475 to $585 million, including asset impairments related to Series 4, Series 5 and stored manufacturing equipment, and charges for cancellation of open purchase orders. The cash impact is anticipated to range from $50 to $70 million.
- Up to $80 million for a non-cash impairment of goodwill
- $10 to $15 million in cash severance charges, expected primarily in 2016
- $15 to $20 million of other charges, expected primarily in 2017
As such, First Solar has again modified its guidance for the full-year 2016. In its third quarter earnings report, the company revised guidance net sales for the year down from an original expectation of between $3.8 billion and $4 billion, down to between $2.8 billion and $2.9 billion. Expenses and operating income were also both modified, but only slightly, and earnings per share were revised from an expected $3.65 to $3.90 down to $3.75 to $3.90.
The decision to accelerate Series 6 will further modify the company’s Operating Expenses and Income, and Earnings per Share:
Guidance for Operating Expenses were originally revised from $485 to $520 million down to between $480 to $500 million; the latest revision to guidance now has Operating Expenses at between $965 million to $1,160 million. Operating Income was revised down from between $205 to $250 million down to $235 to $255 million; this has dropped further, and the company is now guiding a loss of between $445 million to $210 million. Earnings per share were revised from around $3.75 to $3.90 per share, down to a loss of between $4.00 to $2.00 per share.