LOS ANGELES/NEW YORK, Dec 16 (Reuters) – First Solar Inc (FSLR.O) forecast on Wednesday higher-than-expected 2010 sales and said it plans to boost solar module production capacity in Malaysia, sending its shares up 3.3 percent.
Still, supply of photovoltaic solar modules that convert sunlight to electricity will exceed demand, Chief Executive Robert Gillette told analysts, which will keep the industry under pressure.
First Solar, one of the world's largest solar module makers, has the lowest production costs in the industry and its views are likely to influence sentiment across the renewable energy sector.
The forecast from the industry bellwether showed "cautious optimism that the fundamental demand has stabilized in the first half (of 2010) … Certainly they feel like the longer term warrants them building additional capacity," said RBC Capital Markets analyst Stuart Bush in an interview.
For 2010, the company forecast sales of $2.7 billion to $2.9 billion, topping analysts' average view of $2.4 billion, according to Thomson Reuters I/B/E/S.
First Solar estimated earnings between $6.05 to $6.85 per share in 2010, compared with analysts' average forecast of $6.55.
The company plans to spend $365 million to add eight more production lines at its existing operations in Malaysia, which together would boost its capacity by 424 megawatts
"This is critical to our success," Gillette said.
With the expected addition of a factory in France, the Tempe, Arizona-based company will lift its production capacity to about 1.8 gigawatts in 2012, enough panels to equal the power output of an average nuclear power plant.
"The company has a history of showing that they don't build speculative capacity," Bush said.
"Clearly they see a strong enough project financing market and a strong enough drive from utilities needing to meet state (renewable energy) goals," Bush said, calling the plans bullish.
In 2009, First Solar made and shipped more than 1 gigawatt of its thin-film cadmium telluride solar panels, which are cheaper to make but less efficient than silicon-based panels made by competitors such as Suntech Power Holdings (STP.N) and SunPower Corp (SPWRA.O).
The solar industry — which had posted average annual growth rates of nearly 50 percent since 2000 through 2008 — has been hit hard by the global economic downturn this year and is banking on a strong rebound in 2010.
First Solar — a longtime darling of Wall Street and the first U.S. solar power company to join the flagship S&P 500 stock index .SPX — has seen its shares fall about 0.9 percent since the start of the year, while the S&P 500 has gained 23 percent.
Gillette said that he expects 2010 to be stronger than 2009, with global market demand reaching 7.5 gigawatts, and overall demand growing by 35 percent per year through 2012.
"2010 is going to be stronger, we think, than 2009. There are some question marks around what happens with the (supports) in Germany and other areas," he said, referring to expected cuts to industry supports in the world's largest market.
Gillette said the expected cuts to solar supports in Germany may take place at mid-year, which should trigger strong demand there in the first half of the year ahead of any change.
The company has a pipeline of more than 1.5 GW in projects, which will require financing and possible institutional capital, the company said.
First Solar shares rose 3.6 percent to $141.60 in post-market trading.
