MEMC Electronic Materials Q3 2010 Earnings Call Transcript

MEMC Electronic Materials (WFR)

Q3 2010 Earnings Call

November 01, 2010 5:30 pm ET

Executives

Timothy Oliver - Chief Financial Officer and Senior Vice President

Kurt Bruenning -

Ahmad Chatila - Chief Executive Officer, President and Director

Analysts

Atif Malik - Morgan Stanley

Stephen Chin - UBS Investment Bank

Nimal Vallipuram - Gilford Securities Inc.

Sanjay Shrestha - Lazard Capital Markets LLC

Vishal Shah - Barclays Capital

Krish Sankar - BofA Merrill Lynch

Edwin Mok - Needham & Company, LLC

Gary Hsueh - Oppenheimer & Co. Inc.

Timothy Arcuri - Citigroup Inc

Jesse Pichel - Jefferies & Company, Inc.

Satya Kumar - Crédit Suisse AG

Christopher Blansett - JP Morgan Chase & Co

Presentation

Operator

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Previous Statements by WFR
» MEMC Electronic Materials Q2 2010 Earnings Call Transcript
» MEMC Electronic Materials Q1 2010 Earnings Call Transcript
» MEMC Electronic Materials, Inc. Q4 2009 Earnings Call Transcript

Ladies and gentlemen, thank you for standing by. Welcome to the MEMC Third Quarter Earnings Conference Call. [Operator Instructions] I'd like to now turn the conference over to our host, Treasurer of MEMC, Mr. Kurt Bruenning. Please go ahead.

Kurt Bruenning

Good afternoon. Thank you for joining the MEMC Third Quarter 2010 Earnings Conference Call. With me today are Ahmad Chatila, President and Chief Executive Officer; and Tim Oliver, Chief Financial Officer;

Before we begin, please note that this call will include forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from management's current expectations. These risks are described in the earnings release published today and in our 2009 Form 10-K. As a supplement to this call, we have provided slides on our website that will provide more detail regarding the quarter. Please go to the Investors section of memc.com for the slides.

I will now turn the call over to Ahmad for his opening remarks, and then Tim will review the financial results. Ahmad?

Ahmad Chatila

Thanks, Kurt. Good afternoon, everyone. I'm pleased to report another quarter of continued sequential improvement in our performance. All of our divisions are making progress. The strategic and operational actions we have taken to reposition our company, change our risk profile, improve predictability and strengthen our business continue to show results. They are positioning us for improved long-term performance. In addition, the synergies that we expected between our three business units are materializing.

I expect we will see further gains in Q4 and in the first half of 2011, but we still have a long way to go.

Our performance in Q3 provides further evidence that our efforts are on track. First, we are repositioning MEMC for rapid growth and to control our own destiny; second, costs are being taken out of our system to drive better margins and higher earnings; and third, the customer remains our number one focus as we work to fuel their growth.

I'll provide a few comments on each business unit and Tim will provide financial details in his remarks. In our Semiconductor business, demands for our products were solid. We are seeing high selling prices and we're achieving productivity gains. Customer momentum is good, held by strategic actions that we began last year, which we are positioning to show us continued improvement to our results in 2011 and beyond.

But we're not satisfied with our current levels of productivity. In our Materials business, Solar Materials business, I'm pleased to report that supply-chain actions and higher selling prices are providing a catalyst for continued margin improvement. Selling prices are solid in the short to medium term, but we're taking actions to ensure that we are prepared for any sudden changes in end demand.

We are achieving lower costs on wafer tooling partnerships and higher polysilicon volumes. Our new solar wafer facility in Kuching, Malaysia is on track and we're sending samples from our product line.

We expect a meaningful financial impact in 2011 as the facility ramps commercial production. In addition, Solaicx, our business broadens our product offering into fast growing monocrystalline solar markets. We are currently investing in growing this business, which was added to MEMC at the right time.

These investments will result in some short-term headwinds for the numbers in this business, but I've no doubt that this acquisition will provide real value to shareholders in the medium to longterm. The Solaicx technology is truly unique and value-added, and product demand is very strong. The acquisition will be accretive to earnings in 2011.

The SunEdison business cut the second half of the year off to a strong start and is executing on a strong second half ramp. SunEdison added 10 megawatts of new products to its portfolio to energy producing assets. We've been adding about 40 megawatts a month to the pipeline, which now stands at over one gigawatt, but we continue to be disciplined in our approach to growing the business and lowering risks. And our working capital in this business to a large extent is being financed through an efficient supply chain, not the MEMC balance sheet.

During the quarter, SunEdison announced several international and domestic solar projects. And that momentum and good news carried in the beginning of the current quarter. In early October, we announced the sale of 70-megawatt Rovigo solar power plant in Northeast Italy. When completed, later this year, this plant is expected to be the largest operating solar power plant in Europe. And while it is a large project, it's only the beginning of the major expansion to come at SunEdison.

As I mentioned a moment ago, our divisions are working very well together. A few examples of the synergies include research and development in the Semiconductor business, the supporting solar materials with differentiated product offerings, polysilicon can be allocated between the businesses for efficiency and costs are amortized across larger volumes. Solar Materials is utilizing industry relationship to help SunEdison procure margins more cost effectively and they are now working with cell and module companies on novel product ideas for SunEdison's use. And finally, SunEdison is accelerating Solar Materials customer penetration and market position.

In closing, I'm pleased that we have reported another quarter of steady progress. While we have a long way to go before I'll be satisfied with the absolute level of results, our strategic initiatives are beginning to bear fruit and will show results in 2011 and beyond.

With those opening comments, I'll turn the call over to Tim. Tim?

Timothy Oliver

Thanks, Ahmad, and thanks to all of you for joining us this afternoon. My comments today will reference the charts provided on our website, which both summarize the data provided in the press release and its attachments and provide additional analysis. Since Kurt has already reviewed the cautionary Safe Harbor language, I'll move right to Page 3 entitled Q3 Summary GAAP Results for MEMC.

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