Why PV Crystalox Solar PLC has Slumped Today

Although we don’t believe in timing the market or panicking over every stock fluctuation, understanding how a business is performing, competing and changing is vital to sensible investment.

solarWhat: The share price of PV Crystalox Solar (LSE: PVCS) — a leading supplier of photovaltaic (PV) silicon wafers — is currently down 12%, following release of its interim results for the first half of 2014. The company reported a first half loss of €6.9m, compared with the profit of €1.3m that it made in H1 2013.

Net cash fell to €35.4m by 30 June 2014, down from €39.2m on 31 December 2013.  However, Crystalox says that €8.7m will be received in September 2014, following court approval of a settlement with a customer with whom  it had a long-term agreement to supply wafers at prices that are now considerably above current market level. Two other customers with whom Crystalox had similar agreements have entered insolvency, but claims had been registered with the respective administrators.

So What: The loss was attributed to “the continuing challenging PV market conditions“, and the company also said that there was oversupply, due to weaker demand in China during the first half. Crystalox also commented that the resumption of international trade disputes had resulted in prices being driven below industry production cost, with wafer prices falling back to mid-2013 levels.

What Now: Despite the poor results, CEO Iain Dorrity said that shipment volumes had actually increased — group shipments reached 99MW during H1 2014, up 18% on the same period last year — and that there were “strengthened customer relationships” in both Taiwan and Europe. 

However, the company says that it remains cautious and, given the unfavourable market pricings it will be maintaining its cash conservation strategy and will restricting production levels to around 30% of operating capacity.

Despite this morning’s slump, Crystalox’s share price is still up 21% since the start of 2014, compared with a flat FTSE All-Share.  But that will be little consolation for longer-term shareholders — over the past five years Crystalox’s share price has collapsed by over 90%, whereas the All-Share index is up 45% over the same period.

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Jon Wallis has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.