Dark ages continue for PV Crystalox

Cash conservation remains the name of the game at solar power systems component maker PV Crystalox Solar, dashing the hopes of those shareholders hoping the company would distribute some of its cash pile.

At the end of June the company was sitting on €122.4m of cash, up from €22.6m at the end of 2011, after a customer paid off the company to end a long term contract.

There had been hopes that the company would return some or all of this cash to shareholders, possibly as part of a long term plan to wind down the company, which is bleeding money in an exceedingly tough market for its products which are, in solar power terms, dark ages technology.

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Instead, the company seems intent on sitting out what it regards as an "irrational" market.

"Looking forward, the intensely competitive market conditions are not expected to improve in the short term and so we continue with our cash conservation strategy. The board will make the necessary decisions during the remainder of the year to serve the best interests of shareholders," said Iain Dorrity, Chief Executive Officer, in the company's interim results statement.

Revenues in the first half of 2012 slumped to €32.63m from €129.59m the year before, largely as a result of the group's refusal to sell at daft prices which, in the company's view, are the result of Chinese manufacturers causing massive over-supply in the industry.

Spot wafer prices, which fell by 70% during the twelve months from April 2011, have continued to fall albeit at a slower rate and continue to remain below industry production costs, the company noted.

The group continues to operate at around 20% to 25% of its wafer production capacity levels and to focus on sales to long-term contract customers where it is possible to negotiate prices at a premium to prices in the spot market.

Unfortunately, it has not been able to reach agreement on acceptable wafer prices and volumes with all its long-term contract customers. Consequently, shipment volumes during the first half of the year were 61MW (megawatts), in line with the range of 55-70MW indicated in the May 19th trading statement, but below the group's earlier expectation of 80-100MW and significantly less than the 204MW achieved in the same period last year.

Full year shipment volumes are expected to be in the range of 100-120MW. The group's average selling prices are expected to be maintained significantly above spot levels.

With much of its production capacity sitting idle, the group has decided to write down the carrying value of its polysilicon plant at Bitterfeld by €44.7m, which has been treated as an exceptional charge. It has also written down the value of its inventory by €14.22m and increased the onerous contract provision in respect of contracts with external suppliers of polysilicon by €37.1m.

So, even with the €98.7m received from customers for settlements or amendments to contracts, the company still made a loss. Loss before tax was €11.91m, versus a profit in the first half of last year of £24.34m.

In line with the company's cash conservation strategy, it has not declared an interim dividend.

Interim Chairman John Sleeman was given the gig full time at a board meeting on August 14th, succeeding Maarten Henderson, who stepped down in May.

The shares slumped to 7.85p in the morning session from 8.3p overnight.

JH