First Solar Inc. (NASDAQ: FSLR) on April 17 said it is restructuring its operations in response to deteriorating market conditions in Europe and to reduce costs and align its organization with sustainable market opportunities.
Arizona-based First Solar will close its manufacturing operations in Frankfurt, Germany, in the fourth quarter of 2012. Additionally, First Solar said it will indefinitely idle four production lines at its manufacturing center in Kulim, Malaysia, on May 1, 2012.
Combined with other personnel reductions in Europe and the U.S., these actions will reduce First Solar’s global workforce by approximately 2,000 positions, about 30 percent of the total.
The restructuring initiatives are expected to reduce First Solar’s costs by $30-60 million this year and $100-120 million annually going forward. In addition, the company’s average manufacturing cost is expected to improve to $0.70-$0.72 per watt in 2012 as a result of the changes, below prior expectations of $0.74 per watt. In 2013, First Solar estimates average module manufacturing costs will range from $0.60 to $0.64 per watt.
To achieve these cost savings, First Solar said it will record restructuring and other related charges of $245-370 million, of which $80-120 million are cash expenditures, consisting of:
- $150-250 million in asset impairment, primarily related to the Frankfurt (Oder) plants
- $50-70 million in severance
- $30 million for repayment of a government grant related to the Frankfurt (Oder) operations
- $15-$20 million for other charges which represents valuation allowances for deferred tax assets in Europe and costs associated with the repayment of the German debt
First Solar expects to incur these charges primarily during the first quarter of 2012 and the rest over the course of this year. In addition, First Solar has voluntarily paid down approximately $145 million of debt ahead of schedule in 2012, which represents repayment in full for outstanding amounts under the company’s German loan agreement.
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