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Sunways: Third quarter also affected by deterioration of prices and weak demand | Europe

Sunways: Third quarter also affected by deterioration of prices and weak demand

The situation in the European photovoltaics markets continues to be strained. The recovery in demand expected by many experts failed to occur in the third quarter. These factors also had an impact on the sales and earnings development of Sunways. Compared to the successful prior year quarter, consolidated sales declined by ? 35.0 million
to ? 23.3 million (Q3/2010: ? 58.3 million). Although the weak demand in the German core market was partially offset by sales generated in the other European markets, the continuously massive pressure on selling prices for photovoltaic components due to worldwide excess capacities as well as write􀀑downs on inventories and provisions for impending losses in the aggregate amount of ? 6.3 million resulted in a negative operating result (EBIT) of ? 11.8 million (Q3/2010: ? 4.0 million).
Earnings development in the first nine months of the fiscal year 2011 was mainly due to the price related decrease in gross margins. In particular, realizable selling prices dropped by more than 30 percent in the solar module segment. In addition, the ongoing public debate over future subsidies for solar energy as well as the exacerbating debt crisis in various European countries led to a continuous, palpable buying restraint on the part of private consumers and investors in Germany and abroad .
In the third quarter 2011, Sunways generated sales in other European countries in the amount of ? 9.9 million (Q3/2010: ?16.8 million). Thus the percentage share of total consolidated sales attributable to non domestic European operations increased from 28.8 percent to 42.5 percent. The most important sales markets outside Germany were again Italy and France, in particular with respect to solar modules. The sales revenues of Sunways in France more than tripled from the prior year quarter to ? 2.0 million (Q2/2010: ? 0.6 million), interalia due to the distribution cooperation with Wattsol S.A.R.L.
In all, international sales so far generated in 2011 increased to ? 42.3 million (9M/2010: ? 36.9 million) which corresponds to a 14.6 percent rise against the prior year. In the opinion of Sunways, this development proves that the Company?s internationalization strategy and the expansion of its distribution activities in Southern Europe are successful.
In the third quarter, Sunways recorded a sales volume of 11.4 megawatts peak in the solar module segment and generated corresponding sales of ? 14.0 million (Q3/2010: 11,3 megawatts peak, ? 19.6 million) while selling prices were reduced drastically. Due to the dramatic deterioration of prices for solar modules , sales and earnings in this segment continued to decline in the first nine months of the current fiscal year although the sales volume reported for that period increased by 19.8 percent against the prior year period and production costs were reduced markedly. In the solar inverter segment, the sales volume of 38.9 megawatts peaks fell significantly behind the relevant figure for prior year quarter of 68.0 megawatts peak. Sales revenues declined overproportionately to ? 7.3 million (Q3/2010: ? 16.9 million).
The megawatt capacity sold in the solar cell segment also decreased markedly and sales revenues dropped to ? 12.1
million (Q3/2010: ? 27.9 million). Short time work has been introduced at the Arnstadt plant in early September to adjust production capacities to the current demand. Due to the rapid decline in prices for solar cells and solar modules, the module production cooperation with LDK Solar started in late 2010 had a negative impact on the operating result of the solar module segment as realizable selling prices no longer covered cost prices upon return of the solar modules. In 2011, Sunways supplied the vast majority of its solar cells to LDK Solar for the production of Sunways solar modules and thus accepted an extended value added period for cost reduction reasons.
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Posted by Gloria Llopis | 2011-11-14