UPDATE: REC Shares Slump As It Plans To Increase Equity Issue
05 Juni 2009 - 12:29PM
Dow Jones News
Shares in integrated solar company REC Group (REC.OS) plunged
Friday after it said its markets continue to weaken, so the group's
solar production will remain below capacity into the third quarter
of 2009.
The Oslo-listed company also said it will book a NOK300 million
charge in the second quarter on costs associated with repair work
for malfunctioning junction boxes in its solar modules.
Combined, the news prompted REC to raise its planned equity
issue to NOK4.5 billion ($713.1 million), NOK500 million more than
previously stated. The subscription period has been postponed by
around three weeks to between June 29 to July 13.
At 1013 GMT, REC shares traded down NOK5.10 or 7.8% to NOK60.70
as analysts bemoaned the lack of market improvement and surprising
extent of the repairs-related write-down.
REC said the weak demand for solar products "has reduced the
demand and prices for solar modules, which in turn has started to
affect the supply and demand balances and prices further up the
value chain". It has already reduced production and made short-term
layoffs in its wafer and solar units.
One Oslo-based analyst, who asked not to be named, said the
junction box problem was known, but he was surprised at the size.
He added that the company's statements on markets "are not
particularly rosy".
REC said its new integrated solar project in Singapore continues
to trend toward a lower capital expenditure compared with initial
investment projections due to a less heated construction
market.
The Oslo analyst welcomed that news, saying of NOK13 billion
planned capital expenditure on the huge project, 15% was already
set aside for contingencies. "They're on track to spend less than
85% of that original capex, so it will end up at NOK10-11 billion,
which is very good."
He noted the saving will, in time, help offset the negative
impact of REC's NOK500 million increase in equity.
REC said longer-term fundamentals in the poly-voltaic industry
remain "intact, with return on investments in solar systems
reaching record high levels."
Economic stimulus packages, especially in the U.S., are expected
to positively impact the PV market, REC said, adding that "it will
take some time before the policies implemented materialize as
increased demand."
Company Web site: www.recgroup.com
-By Elizabeth Adams, Dow Jones Newswires; +44 (0) 207 842 9386;
elizabeth.adams@dowjones.com