Shares in solar cell maker E-Ton Solar Tech Co (益通) fell sharply yesterday after the company reported a massive net loss for the first half of this year, dealers said.
Trading in the over-the-counter (OTC) market listed E-Ton fell 6.94 percent to NT$45.6 billion (US$1.42 billion) with 772,000 shares changing hands, while the OTC index closed down 0.83 percent at 137.84 points.
E-Ton posted NT$3.01 billion in net losses in the first half of this year after a NT$2.34 billion net loss last year.
“The company has incurred net losses for the sixth consecutive quarter, largely reflecting its unprofitable subsidiary in the United States, GIH,” TLG Asset Management (台壽保投信) analyst Arch Shih (施博元) said yesterday.
E-Ton acquired US-based ADEMA Technologies in 2007 and combined the newly acquired business with one of its units — Gloria Solar Ltd — to form Gloria Solar International Holding Inc (GIH), which produces upstream solar products, including monocrystalline ingots and photovoltaic modules.
Shih said E-Ton had previously wanted to extend into the business of solar cell material production as part of a broader strategy for vertical business integration through the acquisition of ADEMA.
“ADEMA had a lot of unprofitable intangible assets, however and E-Ton has had to incorporate the losses,” Shih said.
“A global financial crisis in 2008 made the situation even worse. E-Ton needed more provisions to cover the losses. That’s why the market was stunned by its massive losses reported for the first half of the year,” Shih said.
MasterLink Securities analyst Tom Tang said that it had proved harder than expected for E-Ton, which was smaller than ADEMA in terms of capitalization, to run the acquired assets.
“It was like a funny scenario with a small child driving a big car,” Tang said.
In the first half of this year, E-Ton’s gross margin stood at only 6.48 percent, much lower than the average of about 14 percent in the solar cell industry.
Among E-Ton’s rivals, Motech Industries Inc (茂迪) reported a gross margin of 16.69 percent and Solartech Energy Corp (昇陽光電) registered 17.44 percent for its gross margin.
“The weak gross margin reflected E-Ton’s low production capacity utilization on falling orders after a major management reshuffle last year had an impact on the company’s operations,” Shih said.
The reshuffle came after several senior executives chose to resign following a boardroom disagreement over E-Ton’s management of the US subsidiary, Shih said.
“The stock is very likely to fall further amid uncertainty over its outlook,” Shih said. “Keep a distance from it, please.”
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