SunPower to cut jobs, posts quarterly loss

SunPower, one of the United States’ leading non-residential solar installers, has dropped a massive bombshell as it revealed a massive reduction in its 2016 guidance and announced a 15% cut to its workforce, resulting in 1,200 jobs being shunted out the front door.

The maker of solar panels and systems said aggressive pricing by new market entrants has hurt near-term economic returns.

SunPower said its power plant business was hit after USA lawmakers late a year ago extend federal tax credits, which boost residential and commercial solar installations, beyond 2016. Before the extension, the industry was concerned about the potential 2016 expiration of tax credits.

“The extension of the investment tax credit, as well as the bonus depreciation credit, while beneficial to the long-term health of the industry, has reduced the urgency to complete new solar projects by the end of 2016, with many customers adopting a longer-term timeline for project completion”, he explains.

The news hit the company’s shares hard, dropping from $14.78 to $10.41 before trading even opened, a drop of almost 30% – and with the day almost over (as I write), the company’s shares haven’t stabilized, hovering around $10.40.

The company will close its panel-assembly facility in the Philippines and transfer the equipment to low-priced facilities in Mexico.

Despite having what its executives call a “solid” second quarter, USA -based SunPower has announced plans to streamline its operations and close a panel assembly facility in the Philippines.

The company expects the realignment and job cuts to result in restructuring charges of $30 million to $45 million, mostly in the current quarter. Finally, the continued market disruption in the YieldCo environment has impacted our assumptions related to monetizing deferred profits. They became popular in recent years, partly due to their high dividends, but the vehicles have come under scrutiny following the contentious relationship of solar company SunEdison Inc. and its two yieldcos.

While favorable compared to the $85.4 million/$0.62 net loss/loss per share reported in the first quarter, it was a different story a year earlier with a net income of $6.5 million and $0.4 per share. Loss excluding items was 22 cents a share, compared with earnings excluding items of 18 cents a share a year earlier.

Analysts on average had expected a loss of 24 cents per share and revenue of $345.08, according to Thomson Reuters I/B/E/S. Gross margin declined to 9.8% from 18.6%, while revenue increased to Dollars 420.5 million from USD 381 million. The company said it met its financial targets for the quarter and saw strong demand for its Helix and SunPower Equinox products.

SunPower also revised its 2016 guidance.

This has been updated down to an expected revenue in the range of $3.0 billion to $3.2 billion, and deployment in the range of 1.45 GW to 1.65 GW. It was unsurprising news, considering the impressive Q4’15 and full year-2015 figures the company reported in February, which resulted in an immediate 12% jump to the company’s share price.