Energy solutions provider Hanwha SolarOne (Nasdaq: HSOL) could not escape the slowdown that has been affecting the solar industry lately, and swung to a quarterly loss. The worse-than-expected earnings results led to a more than 2% drop in its shares.

Let’s take a look at what lies in store for the stock as the year progresses.

A look at the quarter
The solar industry is witnessing a difficult period this year as subsidy cuts in major markets such as Germany and Italy have pulled down the average selling prices of solar products. The impact of this slowdown was visible on the company’s top line as revenue for the quarter could manage only a marginal increase, to $277.1 million from around $271 million a year ago. However, it declined by an alarming 18% on a sequential-quarter basis.

The shrinking of the top line along with an increase in costs pushed the company toward an operating loss of $5 million in the quarter from an operating income of $42.1 million in the year-ago period. Hanwha’s R&D expenses shot up by a whopping 88% to $23.9 million as a result of high stock compensation expenses paid to employees.

Industry downturn
Hanwha’s earnings, however, were in line with most of its industry peers. Weakness in demand has weighed on all players in the industry, with most of them reporting dismal numbers this earnings season. The decline in prices forced Evergreen Solar (Nasdaq: ESLR), once considered to be a pioneer in cost efficiency, to file for bankruptcy. Bigger players such as First Solar (Nasdaq: FSLR) and SunPower (Nasdaq: SPWRA) also reported discouraging results in the quarter.

With no signs of immediate revival, Hanwha needs to make its cost structure more competitive if it is to perform well in such circumstances. Also, the company needs to accelerate its sales more aggressively to prevent inventories from piling up: Inventories have jumped a staggering 50% since last year.

The way ahead
It seems the weakness is here to stay as declining prices continue to hurt the industry. Established players such as JA Solar (Nasdaq: JASO), Trina Solar (NYSE: TSL), and MEMC Electronic Materials (NYSE: WFR) don’t see the rot stopping anytime soon. Under such conditions, the possibility of a turnaround seems difficult, and Hanwha doesn’t provide much insight into its sales expansion and cost consolidation. Such steps are necessary to provide a cushion in the wake of falling prices.

The Foolish bottom line
The stock has lost an astounding 55% of its value this year, and the trends in the industry don’t provide any relief, either. It looks like a rocky road is ahead for the rest of the year, but you can add Hanwha to My Watchlist and keep track of the latest developments with the stock.