After years of continually falling prices in the solar industry, we are starting to see costs heading in the wrong direction. Luckily, that has yet to prevent another great financial quarter for major manufacturers.
JA Solar
Solarfun also put up strong numbers as revenue jumped to $326.7 million and adjusted profit was $0.69 per ADS. Both numbers crushed Wall Street's expectations, but the stock suffered a big loss yesterday because of a planned $67.8 million share offering.
What hurt Solarfun was a negative $30 million cash flow from operations. The company added $68.9 million in accounts receivable and $43.6 million in advances to suppliers in the quarter. Without these changes, shareholders likely wouldn't need to be diluted with another offering.
JA Solar also saw receivables increase, but advances from customers were up nearly sixfold, and with $309.4 million in cash on hand, a dilutive offering shouldn't be a concern yet.
While demand has stayed strong and both companies are making more product than anyone anticipated, we saw an increase in module costs from Solarfun, which breaks out final module costs. The $0.04 increase to $1.16 per watt using internal wafers follows a $0.01 increase in cost per watt at First Solar
We have seen a dramatic fall in the cost of solar panels over the past few years, and we appear to be hitting a wall. It was bound to happen eventually, but the pressure is now on manufacturers to find new ways to lower costs. We'll find out in the next few weeks if Yingli Green Energy
I don't mean to throw water on what was a phenomenal quarter from both JA Solar and Solarfun, but there were some red flags. Investors should keep their eyes on accounts receivable and cost per watt in coming quarters to see if what happened this quarter is more than a trend.
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