(Bloomberg) -- 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 percent of the overall workforce, or 1,200 employees, in the process. The shares slid 30 percent to $10.36 in after-hours trading on Tuesday in New York.
“We wanted to re-position supply closer to the end market,” Chief Executive Officer 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 percent to 11.5 percent and a net loss of $125 million to $175 million. In May, it had forecast a gross margin of 13 percent to 15 percent 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.”
2017 Estimate
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, but these changes materialized in the last few months,” Werner said.
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 to $420.5 million from $381 million.
To contact the reporter on this story: Brian Eckhouse in New York at beckhouse@bloomberg.net. To contact the editors responsible for this story: Reed Landberg at landberg@bloomberg.net, Stephen Cunningham, Dan Stets
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