Renewable Energy Corporation‘s third quarter results were unsurprisingly awful. Solar-related manufacturing remains severely distressed, and REC’s module business remains fundamentally noncompetitive, in our view.
EBITDA margins in the company’s module business tumbled 20%, partially due to writing down inventories, but still firmly in negative territory even without these charges. This also marks the company’s fifth consecutive quarter of negative EBITDA margins, inclusive of charges.
It took years, but REC has finally capitulated and shut down its European manufacturing footprint. That leaves its brand new Singapore facility as the lone culprit in producing these brutal results. Management isn’t considering closing this facility yet, given that REC invested years of time and a lot of money to build its Singapore operations up to their current level, and surely don’t want to admit this was a huge mistake.
But a mistake it was. The reality remains that manufacturing undifferentiated solar modules in Singapore is not going to cut it when the leading Chinese solar companies benefit from far lower input costs at their domestic factories. REC can either close the Singapore facility now and spare its investors further pain, or continue its long-running tradition of ignoring the writing on the wall, and destroying shareholder value in the process.
About Renewable Energy Corporation
Norwegian-based Renewable Energy Corporation produces silicon and modules for the solar industry. Headquartered in Norway, the company’s manufacturing facilities are in the U.S. and Singapore. By revenues, Renewable is one the largest solar companies in Europe.
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