PV Crystalox Solar PLC announces its interim results for the six months ended 30 June 2017.
- Wafer shipments were 69MW (H1 2016: 59MW)
- Net cash of €27.9 million only marginally changed since 31 December 2016
- ICC arbitration decision expected by end September 2017
- Revenues €12.6m (H1 2016: €34.7m)
- Loss before taxes (EBT) €(5.4)m (H1 2016: Profit of €4.7m)
- Net cash €27.9m (31 December 2016: €28.8m)
- Inventories €7.4m (31 December 2016: €11.2m)
Iain Dorrity, Chief Executive Officer, commented:
"The Board remains mindful of the need to protect shareholder value and will await the judgement of the arbitral tribunal on the Group's dispute with a customer who failed to purchase wafers in line with its contractual obligations before completing its strategic review."
In the first half of 2017 Group Revenues of €12.6 million were 64% lower than in the same period in 2016 (€34.7million) despite a 17% increase in wafer shipments. This decrease was mainly due to trading lower volumes of polysilicon than in H1 2016, when the Group was able to sell a significant portion of the raw material inventory it held at 31 December 2015 and to achieve a positive gross margin on trading additional quantities of polysilicon.
The Group's gross loss for the period was €0.3 million (H1 2016: gross profit of €6.2 million). This loss was principally due an inventory write down of €1.4 million. During H1 2016 the higher margin was due to sales of excess polysilicon inventory at prices above the 2015 year-end valuation as a result of a temporary rebound in polysilicon spot prices during Q2 2016 and stronger wafer sales prices during the period.
The write down in inventory of €1.4 million follows a review of the net realisable value of the individual items. A slight change to the standard size of wafers has negatively impacted the recoverable value of finished product inventory. Many of our wafers in inventory are of the 156mm size rather than the new 156.75mm size. As a result of the decision to close manufacturing operations in the UK some of our raw material stock has been written down to its estimated recoverable value rather than its cost.
The Group's loss before taxes was €5.4 million (H1 2016: profit of €4.7 million). This loss was mainly driven by the decrease in gross profit, a smaller currency gain than in 2016, an impairment charge of €0.5 million, a decrease in other income and an increase in other expenses.
Other income of €1.2 million was €0.6 million lower than the €1.8 million recognised in H1 2016. This income is mainly as a result of settlements relating to long-term contracts where customers had entered insolvency with more income received in H1 2016 than in H1 2017. Other expenses were €0.4 million higher in the first six months of 2017 mainly due to higher fees in relation to arbitration proceedings when the hearing was held in March 2017.
The Group's net cash position at the end of the period was €27.9 million, which was €0.9 million lower than the net position of €28.8 million at the start of the year. The Group's loss after adjustment for non cash movements was €3.3 million whilst the cash generated from releases in working capital was €3.1 million. In addition to this €0.2 million outflow there was a negative impact of €0.7 million due to the retranslation of cash and cash equivalents.
On 13 July 2017 the Group announced the closure of its manufacturing operations at Crystalox Limited in the United Kingdom. Management are still in the process of calculating the closure costs in relation to this announcement and as a result they have not been reflected in the Interim results.
A review of the recoverable value of certain items in property, plant and equipment in the UK was carried out and resulted in an impairment charge of €0.5 million.
The principal risks and uncertainties affecting the business activities of the Group were identified under the heading "Risk management and principal risks" in the Strategic Report on pages 10 to 11 of the 2016 Annual Report, a copy of which is available on the Group's website, www.pvcrystalox.com. In the view of the Board, the key risks and uncertainties for the remaining six months of the financial year continue to be those set out in the 2016 Annual Report.
Global PV installations are expected to exceed 80GW in 2017 according to GTM Research. This represents only modest growth of 4% over 2016 installations rather the annual double digit growth seen in previous years. China remains the key driver with installations in H1 alone reaching 24.4GW as advised in a recent report from CIPA. Cumulative installed capacity in China is now only 3GW below the 105GW target set for 2020 under the 13th five year plan.
Currently the USA levies antidumping and countervailing duties against PV cells and modules imported from China and Taiwan but now imports are faced with potentially much higher tariffs. Following a complaint filed in April under Section 201 of the Trade Act of 1974 by Suniva, a Georgia based manufacturer that went into bankruptcy the US International Trade Commission ("ITC") launched a new enquiry into imports of PV cells and modules. Suniva has argued that it and other US manufacturers have suffered serious injury because of a surge in imports, and is seeking a tariff of $0.40/W on cells and a minimum price of $0.78/W for foreign modules, which would roughly double their cost in the US. The Suniva petition goes beyond the existing antidumping and countervailing duty orders because the requested safeguards are not limited to imports from specific countries. The remedies under Section 201, if granted, would be global in scope and would affect all solar cells and modules imported into the United States, regardless of origin. The scope of the petition is limited to crystalline silicon cells and modules and it expressly excludes competing thin film products.
The ITC is scheduled to give a decision on 22 September and will propose remedies to President Donald Trump by 13 November if it concludes that solar imports have been a "substantial cause of serious injury" to US manufacturing. The President then has until 12 January next year to decide how to respond.
Current market conditions continue to be particularly severe for multicrystalline silicon products with massive over-capacity in China depressing prices for both cells and wafers. Higher efficiency monocrystalline silicon cells are gaining market share and are expected to become the dominant technology by 2019. This trend is exacerbating the pressure on multicrystalline silicon pricing and indeed the PV manufacturing industry outside China faces an existential crisis.
The Board remains mindful of the need to protect shareholder value and will await the judgement of the arbitral tribunal on the Group's dispute with a customer who failed to purchase wafers in line with its contractual obligations before completing its strategic review.