Solargiga issues profit warning

The decision to remove its cell manufacturing capacity has prompted hefty impairment losses which, together with a Covid-19-related slump in demand, will wipe out the gains offered by new solar ingot, wafer and module production lines.

The curious business model employed by almost-vertically-integrated Chinese PV manufacturer Solargiga will lead to a significant first-half loss, the company has warned.

The Hong Kong-listed business issued a profit warning on Thursday which stated the impairment cost of stripping out obsolete solar cell manufacturing capacity would drive losses 65-75% greater than those recorded during the same period of last year.

Solargiga said its cell capacity was insufficient to meet economies of scale so it refocused its business to the manufacture of solar ingots, wafers and modules, with the business selling wafers to third-party cell manufacturers and then repurchasing wafers to assemble into modules.

The business stated its new ingot, wafer and module production capacity, which had been “substantially put into operation” during the first half of the year, would ensure the unaudited six-month figures would show operational revenue up 38-43% on the figure posted in 1H last year with gross profit margin up 100-125% by the same comparison.

However, Solargiga said the effect of Covid-19 on demand, and the rise in production costs caused by the spread of the coronavirus had conspired to reduce shipment levels below those expected for the six-month window.

Solargiga is due to publish the unaudited first-half figures at a board meeting on August 28.

Covid-19

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