SunPower field supervisor Oscar Madrigal demonstrates a panelwashing robot Ethan Miller, Getty Images

SunPower field supervisor Oscar Madrigal demonstrates a panel-washing robot on a row of solar panels at the 102-acre, 15-megawatt Solar Array II Generating Station at Nellis Air Force Base in Las Vegas.

SunPower Plunges After Solar Manufacturer Scraps Profit Goal

Analysts were blindsided by the financial report, which includes a net loss of as much as $175 million this year and the laying off of 1,200 employees.

SunPower Corp. slumped after the second-biggest U.S. solar manufacturer scrapped a target to at least break even this year, in part because of challenging conditions in its power-plant business.

The company cited the extension of a federal investment tax credit that has reduced the urgency to complete new projects by the end of the year, as well as aggressive pricing by industry newcomers. It will close a Philippine panel assembly facility and transfer the equipment to Mexico, cutting 15% of the overall workforce, about 1,200 employees, in the process. The shares slid 30% to $10.36 in after-hours trading on Tuesday in New York.

“We wanted to re-position supply closer to the end market,” CEO Tom Werner said in an interview after the company posted second-quarter earnings. “We’re in transition. We’ve been through this before.”

Besides cutting its workforce, SunPower plans to take restructuring charges of $30 million to $45 million, a substantial portion of which will be incurred in the third quarter, it said in a statement.

It now sees a 2016 gross margin of 9.5% to 11.5% and a net loss of $125 million to $175 million. In May, it had forecast a gross margin of 13% to 15% and net income of break-even to as much as $50 million.

“The magnitude of the guide down was surprising,” said Michael Morosi, an analyst at Avondale Partners LLC by e-mail. “It is increasingly apparent that margins are coming in on the low end.”

For 2017, SunPower expects to report a net loss of $100 million to $200 million. It also estimates earnings before interest, taxes, depreciation and amortization of $300 million to $400 million. Ben Kallo, an analyst at Robert W. Baird & Co, told company executives on a conference call that he was “blindsided” by the update.

“I understand the concern,” Werner said, “but these changes materialized in the last few months.”

The second-quarter net loss was $70 million, or 51 cents a share. That compared with a profit of $6.5 million, or 4 cents, a year earlier. Excluding some items, SunPower’s loss of 22 cents compared with the 24-cent average loss of 16 analysts’ estimates compiled by Bloomberg. Sales rose to $420.5 million from $381 million.

By Brian Eckhouse

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