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FirstSolar and SunEdison’s Cost Performance in 1H15

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FirstSolar (FSLR)

While FirstSolar (FSLR) exhibited impressive cost performance in 2Q15, its 1H15 cost performance was marred by poor 1Q15 performance.

The company’s cost of sales came in at $1162.0 million (85.1% of sales) in 1H15 compared to $1165.1 million (78.0% of sales) in 1H14. These costs translate to gross profit of $203 million (14.9% of sales) in 1H15 compared to $329.4 million (22.0% of sales) in 1H14. The drop in gross profit margins was a result of the higher concentration of low-margin systems sold.

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R&D expenses came in at $64.2 million (4.7% of sales) in 1H15 compared to $71.4 million (4.8% of sales) in 1H14. SG&A expenses came in at $138.6 million (10.1% of sales) in 1H15 compared to $116.3 million (7.8% of sales) in 1H14 as expenses related to 8point3 Energy (CAFD) and geographical expansion added up.

SunEdison (SUNE)

SunEdison (SUNE) reported a gross profit of $137 million (17.6% of sales) in 1H15 compared to $43 million (5.6% of sales) in 1H14. The increase in gross profit margins was on account of a change in the company’s business model, as we explained in Part 7.

However, other operating costs escalated. SG&A expenses more than doubled to $457 million (59% of sales) in 1H15 compared to $201 million (26% of sales) in 1H14. Just like in 2Q15, increased employee expenses, operating expenses related to acquisitions, and expenses related to TerraForm Global’s (GLBL) formation and initial public offering were the main drivers behind the increase in the segment’s costs. SunEdison’s interest expenses increased by almost 90% to $302 million in 1H15 from $160 million in 1H14 on higher debt levels. SunEdison and FirstSolar are S&P 500 (SPY) index constituents.

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