First Solar, the biggest U.S. solar company, posted adjusted earnings of 87 cents a share in the second quarter as production increased 39%, the company said on Wednesday. First Solar’s new strategy has started yielding results after incoming CEO Mark Widmar shifted his focus to selling panels instead of developing vast power plants. On July 1, Widmar, who served as the chief financial officer starting in 2011, replaced Jim Hughes as CEO.

First Solar, Inc. FSLR
Photo Credit: Russ Ferriday, Flickr

Change of strategy working for First Solar

First Solar develops some of the biggest solar farms in the world. In recent years, the Arizona-based solar giant has focused its attention on building vast power plants and then selling them to utilities. The solar company expects to see more of its growth coming from selling solar panels to other companies as the demand for clean energy increases, the solar firm said. In a conference call on Wednesday, Widmar said they are getting more and more business from customers they have not worked with before.

First Solar produced 785 megawatts of panels, up from 563 megawatts, and sales in the quarter rose to $934.4 million from $896.2 million a year earlier. Also the CEO told investors that 20% of sales in the quarter came from sales of panels. Widmar anticipates that this share will increase in future quarters.

Competition from Chinese players

According to Pavel Molchanov, an analyst at Raymond James Financial, the company could face competition from other panel makers, especially in China, which are looking to increase their shipments to other regions as installation declines in the world’s biggest solar market.

He told Bloomberg on Wednesday, “Just as First Solar is becoming more of a manufacturer and less of a developer, prices are falling off a cliff.”

Since the solar company announced its shift to sell panels to other developers on April 27, the average panel prices have fallen 11% — more than they dropped in all of last year. On Wednesday, the spot price was 47 cents a watt, whereas last year, the spot price was 55 cents a watt.

First Solar’s Series 5 panel will be the key driver for its shipments. The solar company will deliver the Series 5 panel, which was introduced earlier this year, mainly to customers, and will install its Series 4 product at its own solar farms. Next year, the Arizona-based company expects to produce about 1 gigawatt of the new product.

On Wednesday, First Solar closed up 3.1% at $49.24. Year to date, the stock is down more than 26%, while in the last year, it is up more than 11%.