First Solar’s 2014 gross margins fall due to increased costs



Cost of sales

Despite higher volumes, First Solar’s (FSLR) cost of sales for its Components segment dropped 7% to $1.01 billion in fiscal 2014 from $1.09 billion in fiscal 2013. The drop was driven by manufacturing cost reductions. On the other hand, the Systems segment saw an uptick in costs, with cost of sales rising 14% to $1.56 billion in fiscal 2014 from $1.36 billion in fiscal 2013. Costs in the Systems segment were driven by a higher proportion of the high-cost segment and increased business activity. Overall, the company’s cost of sales was up 5% to $2.56 billion in fiscal 2014 compared to $2.45 billion in fiscal 2013.

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Gross profit

First Solar’s gross profit margins dropped to 24.4% in fiscal 2014 compared to 26.1% in fiscal 2013 due to increased costs in the Systems segment, as we’ve discussed. On absolute terms, gross profit came in at $827.1 million in fiscal 2014 compared to $862.8 million in fiscal 2013.

Adjusted EBITDA

Adjusted earnings before interest, taxes, depreciation, and amortization (or EBITDA) came in at $669.3 million, 19.7% of sales, in fiscal 2014. This result was marginally lower than the $689.8 million, 20.8% of sales, in fiscal 2013. The gross profit margin contracted.

SunPower Energy’s (SPWR) adjusted EBITDA margin increased sharply to 14.2% in fiscal 2014 from 8.5% in fiscal 2013. SunEdison’s (SUNE) EBITDA losses widened to 1.9% in fiscal 2014 from 0.5% in fiscal 2013. SolarCity Corporation (SCTY), a smaller peer focusing on residential solar power (TAN), took EBITDA losses almost equivalent to its sales of $255 million.


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