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First Solar Hit Record-High Conversion Efficiency in 1Q16

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May. 3 2016, Published 7:07 a.m. ET

Conversion efficiency

Conversion efficiency is the efficiency of a solar module to convert a portion of the sun’s energy into electricity. The higher the conversion efficiency, the lower the amount of material required to make solar modules. In turn, this lowers the cost of sales.

First Solar (FSLR) has reported a consistent increase in fleet average conversion efficiency over the last few quarters. For 1Q16, the company reported a fleet average conversion efficiency of 16.2% compared to 16.1% in 4Q15 and 14.7% in 1Q15. However, its best line conversion efficiency has remained at 16.4% for the last three quarters. Unlike its peers SunPower (SPWR), Canadian Solar (CSIQ), Trina Solar (TSL), and SunEdison (SUNEQ), First Solar depends on its CdTe (cadmium telluride) technology to manufacture modules. On February 3, 2016, First Solar announced the development of a 22.1% efficient CdTe photovoltaic research cell.

For 1Q16, First Solar reported a 100% capacity utilization of its manufacturing facilities, which was equivalent to capacity utilization in 4Q15 but higher than the 87% capacity utilization in 1Q15.

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First Solar’s EBITDA

First Solar reported adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $223.6 million against analysts’ expectation of $148.4 million. The EBITDA margin for 1Q16 came in at 26.4% compared to 20.8% in 4Q15. The company reported negative EBITDA in 1Q15. The increase in EBITDA was mainly due to a decrease in cost of sales as a result of an increase in solar (TAN) module efficiency.

Adjusted net income

First Solar’s adjusted net income for 1Q16 came in at $170.5 million against analysts’ estimate of $98.8 million. The increase in adjusted net income was mainly due to a decrease in cost of sales and an increase in the company’s other income. First Solar’s other income for 1Q16 came in at $35.5 million compared to a loss of $1.3 million in 1Q15.

In the next part of the series, we’ll take a look at First Solar’s project pipeline and liquidity position.

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