MEMC Electronic Materials Inc.
) reported first-quarter 2013 adjusted loss per share of 16
cents, which was wider than the Zacks Consensus Estimate of a
loss of 14 cents per share.
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The adjusted figure excludes the impact of direct sales and
lease-back from the Solar Energy segment as well as some tax
benefits, and restructuring and impairment charges.
On a GAAP basis, MEMC reported first-quarter revenues of $443.6
million, down 14.6% from $519.2 million in the year-earlier
quarter. Reported revenues came much above the Zacks Consensus
Estimate of $409.0 million. Lower solar sales volume and weak
semiconductor pricing led to the revenue decrease. Pricing was
mostly affected by industry-wide slowdown.
Including direct sales from the Solar Energy segment and
lease-back transactions, non-GAAP revenues came in at $431.3
million, which decreased 17.7% from the year-ago quarter.
Segment wise, revenues from Semiconductor Materials grew 6.4%
year over year to $229.8 million and was 51.8% of total revenue.
The improvement was mainly due to higher volume offset by weaker
pricing, yen headwinds and unfavorable product mix.
The Solar Energy segment (which now includes Solar Materials)
accounted for 48.2% of total revenue. The segment generated
revenues of $213.8 million, down 29.5% year over year. The
decrease was driven by lower project sales and weaker solar wafer
pricing and volume.
During the quarter, most of the projects were under engineering,
planning and construction (EPC) only contract due to lower
development spending. This has led to lower revenues from solar
The Solar Energy segment sold 45 megawatts (MW) of solar energy
systems on a non-GAAP basis and 43 MW on a GAAP basis. This
compares with 49 MW and 47 MW sold, respectively in the year-ago
period. Projects interconnected during the first quarter
represented 41 MW in 27 projects. MEMC also reported that
construction of 104 MW of systems is underway. The project
pipeline was 2.7 gigawatt (GW), up 0.1 GW compared with the prior
quarter and down 0.2 GW from the year-ago period. Project backlog
increased 98 MW sequentially to 925 MW.
Reported gross profit was $49.7 million, down 0.8% from the
year-ago quarter. Gross margin was 11.2% compared with 9.6% in
the year-ago quarter. Margin expansion was mostly due to cost
control measures, partially offset by lower pricing.
Operating loss was $33.5 million compared with a loss of $54.2
million in the year-earlier quarter. Operating margin was (7.6%)
compared with (10.4%) in the year-ago quarter.
Total operating expenses decreased 20.2% from the year-ago
quarter with marketing and administration expenses falling 15.5%
and research and development expenses decreasing 13.4%.
Reported net loss was $89.4 million or 40 cents per share
compared with net loss of $98.6 million or 43 cents in the
prior-year quarter. Adjusted loss per share was 16 cents versus
29 cents in the year-ago quarter.
Balance Sheet & Cash Flow
MEMC ended the quarter with cash, cash equivalents and restricted
cash of $476.2 million, down from $645.0 million in the previous
quarter. Cash declined mainly due to deployment for solar project
construction and delay in collections. Long-term debt was $763.4
million, slightly up from $758.7 million in the previous quarter.
MEMC used $118.6 million cash in operations as against cash
generated from operations of $19.4 million in the preceding
quarter. Capital expenditure was $30.8 million, down from $38.1
million in the previous quarter.
MEMC expects an upturn in the order pattern in its Semiconductor
Materials segment in the coming quarter. Preferring to be
cautiously optimistic, management believes that initial volume
growth will take place with modest support from ASP growth in the
second half of 2013.
For the second quarter of 2013, MEMC expects Semiconductor
Materials revenues in the range of $235.0-$245.0 million and
solar energy systems sales volume in the range of 29 MW to 54 MW.
Average project pricing would range between $3.40/watt and
$3.55/watt. Capital spending is expected between $30.0 million
and $40.0 million.
For fiscal 2013, Semiconductor Materials revenues are expected
between $960.0 million and $1.0 billion. Solar energy systems
sales volume is expected in the range of 430 MW to 500 MW.
Average project pricing would range between $3.10/watt and
$3.40/watt. Capital spending is expected between $120.0 million
and $140.0 million.
The company also mentioned that it is optimistic about gaining
operating leverage from ongoing cost reduction measures.
Moreover, it aims to reduce solar materials pricing with the help
of economical and flexible sourcing strategy. Together, these
potential benefits would help MEMC deliver stronger results in
2013, management believes.
MEMC posted a disappointing first quarter with a
wider-than-expected loss. Revenues, too, failed to encourage us
as it decreased on a year-over-year basis. Solar systems sales
were also lower than expected. However, a sign of recovery in the
semiconductor sector helped MEMC to provide a decent sequential
guidance. Continuous expense control will continue to support
Though the Solar segment has not performed well in the last two
quarters, we believe there is immense potential given a strong
backlog and a large project pipeline. We also consider MEMC's
recent tie-up with Brazil's Petrobras, to build one of the
largest solar photovoltaic power plants, encouraging. This
venture will help MEMC to tap the Brazilian solar market and
Currently, MEMC has a Zacks Rank #3 (Hold). Investors may also
consider other technology stocks that are performing well.
Integrated Device Technology Inc.
Silicon Image Inc.
Spreadtrum Communications Inc.
) all have a Zacks Rank #1 (Strong Buy) and are worth buying.