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08 Feb | PV Crystalox Solar – I’m In

Now it’s no news to anyone who has followed us on our little journey that we’ve a penchant for a highly speculative buy. Add a green energy aspect to the mix and it’s like a waving a pizza, at mid-70’s Elvis (too soon?).

So, when PV Crystalox Solar plunged to below 10 pence a share late last year, we placed it on the radar.

When it fell below five pence it was like adding another layer of cheese, there seemed no way I couldn’t take a little speculative slice (well three actually: at 4.4, then 5.15 and 5.4 pence to be exact).


Chart courtesy of SharePrice.co.uk


Now I didn’t dive in here willy nilly – God (and Elvis) forbid! We’ve been in and out of a healthy PV Crystalox Solar in the past, having bought in and sold out in 2010 — when it was trading in the 50 pence range. So we’d done our homework. We just needed to get current. And for current we looked no further than the latest news out of PVCS, it’s Interim Management Statement.

When an Interim Management Statement is brought forward and begins, “In light of the ongoing difficult market conditions in the solar industry” (and the company in question is in the solar industry) you quickly get the feeling that lean times are ahead.

In what was a statement awash with negatives, I’ll pick out a handful of low-lights:

The anticipated recovery in PV end-market demand stimulated by lower module prices has been weaker than expected in the second half of 2011.

Since our interim results statement wafer prices on the spot market have decreased by more than 20%, meaning that the overall decline since April is greater than 50%.

…customers have reduced production in response to the weak market conditions and accordingly the Group now expects full year shipment volumes to be in the range 360-390MW…….below the 400-450MW indicated at the time of our interim results on 18 August 2011.

Okay, that’s a cocktail of negatives, and the market dealt with the them as expected; halving the share price.

But at least we’re dealing with a board that’s willing to quickly make the tough decisions to minimise any unnecessary outflow of cash in the short term. To ensure PV Crystalox Solar lives to trade another day:

In light of these market conditions the Board has resolved to take appropriate actions to manage the business through these difficult times and to conserve the Group’s cash. In the short term the Group intends to reduce production output at its UK ingot and German wafer operations. The Board also intends to suspend production temporarily at its polysilicon facility in Bitterfeld, Germany. Regrettably these actions will lead to significant job losses in the UK and short time working in Germany. In addition the Group will continue to have discussions with its suppliers in order to reduce costs and will continue to seek further methods of achieving greater efficiencies within the Group’s operations.

Harsh measures and although the board believes that: “the medium-term outlook for solar installations remains positive“, there’s still China out there who’s doing what PVCS does but in China — with all the cost advantages that are inherent with production in that neck of the woods.

So why invest?

Now I know there’s a hell of long road back for PV Crystalox Solar and time will tell if it’s even navigable. So let’s be honest here, the price is a fairly big factor. (the day after I bought, PVCS shot up over 20%, not even a pence, a drop in the ocean a few years back) but when you buy in at exceptionally low prices even small increases can result in big paper profits.

Anything that’s traded at a multiple of 40 times where it’s currently at, has limited debt and a comparatively healthy cash position (albeit, probably diminishing by the day) in my opinion (and this my amateur opinion and in no way should be construed as investment advice), is worth a punt.

Oh, and I love the green energy aspect, always have.

Cue harp music punctuated by dolphin noises and Sumatran birdsong: and part of me longs to believe that one day all energy will be green and that there’ll be room for lots of players in the solar industry from all parts of the world — even Europe. Is that too much to ask?

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