Canadian Solar Inc posted a much higher second-quarter profit on Wednesday but fell well short of Wall Street forecasts, as shipments of its photovoltaic solar modules missed the company's goal and costs rose, sending its shares lower.
Steep declines in the prices of the renewable energy systems pressured margins at Canadian Solar, which has been one of the fastest-growing companies in the solar sector in recent years.
Still, subsidy cuts in Europe and an oversupply of panels has sent prices into a tailspin and squeezed margins across the nascent industry, prompting several key manufacturers such as Suntech Power Holdings Co Ltd, SunPower Corp and Trina Solar Ltd to pare their profit forecasts.
Shares of Canadian Solar have slumped more than 40 percent this year, compared with a 23 percent decline in the broader MAC Global Solar Energy Index.
Canadian Solar shares fell 6.4 percent to $7.37 on Nasdaq in afternoon trading.
The company, which is headquartered in Ontario but has most of its operations in China, said second-quarter net income rose to $7.1 million, or 16 cents a share, from $3.2 million, or 7 cents a share, a year ago.
That fell far short of the 28 cents per share analysts had forecast, according to Thomson Reuters I/B/E/S.
Net revenue rose 47 percent to $481.8 million, beating the $449.8 million that analysts had expected.
Higher costs hurt the company, with selling expenses rising by more than a third from the first quarter and 42 percent from a year earlier on higher freight and export expenses, rising salaries and increased advertising and insurance expenditures.
Wells Fargo analyst Sam Dubinsky cut his forecast for Canadian Solar's earnings and said the tough solar market and questions about the company's ability to cut costs remained worrisome.
"Valuation is not expensive on an absolute basis, but is at the high end of a very depressed peer group," Dubinsky said in a note to investors.
