ReneSola Margins Down, Sees Rebound

JIASHAN, China (TheStreet) -- ReneSola(SOL) beat the Street on revenues and narrowed its loss more than expected in the fourth quarter, but its gross margins and operating margins declined from third-quarter levels.

Continuing depression in the prices of wafers and a high-cost inventory of raw materials contributed to a gross margin level of 2.7% in the fourth quarter, versus 3.4% and 5.1% in the previous two quarters.

Operating margins in the fourth quarter were down 11.4%, versus declines of 5.5% and 4.8% in the previous two quarters of 2009.

Shares of Renesola were down between 3% and 4% in the pre-market session. Solar investors have been sour on sector shares that have underperformed on margins in this fourth quarter earnings season.

ReneSola is predicting gross margins of 16% to 18% in the first quarter of 2010 and 17% to 20% for the full year 2010, with stabilizing polysilicon prices and increased wafer spot pricing.

Charles Bai, ReneSola's CFO, said, "During the fourth quarter of 2009 ... we worked through the remainder of our high-cost raw materials and expect first quarter 2010 polysilicon cost to be below US$60 per kilogram. We also reduced our average wafer processing cost significantly to approximately US$0.34 per watt. With anticipated further cost reductions in each segment of our business and continuing strong demand for our products and services, we expect to return to profitability in the first quarter of 2010."

ReneSola expects to ship 215 megawatts (MW) to 230 MW in the first quarter.

For the full year, ReneSola expects shipments of 900 MW to 950 MW.

Average sales price of solar wafers will decline by 10% to 15% in the second half of the year, according to ReneSola's estimate, though many analysts expect the price declines in solar to be closer to 20% on average.