Solarworld headed towards Bankruptcy

Solarworld the German firm which used to be one of the largest solar panel producers in 2008 has become a shadow of its former self. While many of its peers have gone bankrupt (Q-Cells) or been bought over by Asian companies (REC), Solarworld continues in its merry ways of destroying value for its own shareholders and other companies as well. The company has been instrumental in setting up trade barriers between Europe/USA on one hand and China/Taiwan on the other. This has not helped the company much but increased prices for solar customers due to anti dumping duties. Just like leather and cloth industries migrated from the developed nations to developing ones, solar panel manufacturing has also migrated to low cost locations. However, Solarworld does not see the shift and has been obstinately hanging onto its solar cell and panel manufacturing operations in USA and Germany despite losing millions of dollars every quarter.

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The company continues to produce 350 MW of panels every quarter with negative EBITDA. Even in the scenario of rising / stable prices, it loses money. Despite having a small protected market, Solarworld has not made any money. The company was bailed out by rich Qatari investors a couple of years ago after it lost all of its net worth. Despite having no hope for the future, it continues to churn out a small amount of panels. Its marketshare has reduced to just 1.5% now from around 10% during the heydays of German solar manufacturing in 2008.

The company is on the verge of becoming bankrupt again during the current down cycyle in solar manufacturing. Due to the quarterly losses and inventory write-downs, SolarWorld reported cash and cash equivalents of €84 million at the end of the third quarter, compared to €148 million at the end of the previous quarter, a 43% decline.