Listed solar tracker companies bearing the brunt of the costs, showing little sign of slowing down
Array Technologies’ first quarter 2021 results, released last week, are illustrative not only for the company, but also for the solar tracker market in general.
Publishing a shortfall is usually not conducive to appeasing shareholders or analysts, but withdrawing full-year guidance due to soaring costs and volatile and unpredictable market conditions is enough to trigger serious disappointments. and serious questions.
The problem, as Jim Fusaro, CEO of Array revealed, is the cost of the hot-rolled coil steel used in Array’s products, which has reached “unprecedented” levels over the past year. last year and continued to increase further in the later period. reporting period.
Indeed, a review of historical data on hot-rolled steel coil futures in the US Midwest illustrates the problem in question. As of April 1, 2020, market data shows the short ton price to be around US $ 515. As of March 31, 2021, it had reached US $ 1,348 per short ton, an increase of about 156%. The bad news for tracker makers and other users of hot-rolled coil steel is that in the seven weeks since April 1, 2021, the price has – as Fusaro told analysts last week – jumped a further 11%, rising to US $ 1,496 per person yesterday. short ton. The graph below illustrates the magnitude of the material price increases since last April.
Module makers will more than likely have some sympathy with tracker suppliers given that the price of polysilicon has seen a similar rise over the past year. Meanwhile, Fusaro also noted that the cost of logistics has also skyrocketed in recent months, a complaint shared by solar module makers also.
Put simply, not only are large-scale solar components much more expensive to produce than they were a year ago, but it is also more expensive to get them to where they are supposed to be. Manufacturers have already expressed the need to pass at least some of these cost increases on to customers, which inevitably leads to setbacks and delays.
But manufacturers will also have a cost to bear, perhaps especially in their market assessment.
Array Technologies’ stock price fell sharply following the release of its results last week. Having closed on Tuesday May 11 at US $ 24.95, it closed the next day at US $ 13.46 per share, a decrease of 46%. The most recent collapse added to what turned out to be a tumultuous year for Array shareholders. On January 22, 2021, the company’s shares were worth more than US $ 51 – they are now valued at around 70% lower, the first decline triggered by a secondary stock offering earlier this year that valued the shares at $ 28. US, diluting the number of shares in the process.
Other tracker makers have also been hit hard – not by Array’s first quarter failure or decision to withdraw the 2021 forecast of course, but by the fears spread around material costs. FTC Solar, which only entered the market in late April after a disappointing IPO, fell 25% to US $ 8.76 immediately after Array’s results. Flex, which owns Nextracker, fell about 8%, but has since fallen somewhat. It remains to be seen whether Flex continues its plan to list Nextracker given this nervousness, coupled with the first signs of a cooling in investor appetite for certain green stocks.
Soltec, the Spanish tracker maker which also has a project development arm, fell 10% to € 6.84, but the company’s own results, which showed a 53% drop in revenue from the first quarter year over year, reflected a wider malaise across the company. .
If Fusaro’s sentiments, expressed to analysts following last week’s results, seem true, there will be little respite for tracker makers throughout the year. Fusaro expects steel and logistics prices to remain high at least through the current quarter and not normalize until much later in the year. While measures to mitigate increases – passing on costs, negotiating longer-term contracts – may help, of course they will not have such an effect as to allow the company to re-integrate or offer advice.
Array Technologies’ expectation is that while the pressures will be bad for the company, they will be even worse for its competitors. “Above all, we believe that our competitors are experiencing the same cost increases that we are experiencing and, in some cases, much more significantly because their small size gives them less purchasing power from suppliers.
“We believe that the short-term pressure created by the current environment may allow us to accelerate our market share gains, as some of our competitors may not be able to meet customer commitments given their inability to procure raw materials at a competitive price. or not at all, ”he said.
All eyes will therefore fall on the next round of follow-up company results. If the costs of materials and logistics continue to rise, or even simply stabilize at their current levels, the tracker market could be poised for a significant upheaval.