SunPower Corporation (Nasdaq: SPWRA SPWRB) yesterday announced that substantial strengthening of the U.S. dollar relative to the Euro during the fourth quarter is expected to reduce earnings growth in the current quarter and fiscal year 2009.
Solar shares across the board slumped on Wednesday, as investors wait for the release of quarterly earning by other big solar companies later this month.
SunPower has historically operated under a hedging policy to minimize its exposure to changes in the foreign exchange rate between the U.S. dollar and other currencies. In connection with its global tax planning the company recently changed the functional currency of certain European subsidiaries from dollars to Euros, resulting in greater exposure to changes in the value of the Euro, the company said in a release.
Implementation of this tax strategy had, and will continue to have, the ancillary effect of limiting SunPower’s ability to hedge certain Euro-denominated revenue. As a result of the U.S. dollar’s recent substantial appreciation relative to the Euro, the company became under-hedged during 4Q08 and for the fiscal year 2009.
SunPower believes that it has adjusted its hedging positions to limit its net income exposure to currency fluctuations and believes that it will be hedged for 80 to 90% of Euro-denominated net income in 4Q08 and more than 50% for the first three quarters of 2009.
The aggregate foreign exchange impact on fourth quarter results is expected to be approximately $17 million on revenue, $15 million on GAAP and non-GAAP gross profit and $0.15 on non-GAAP net income per share. For the fiscal year 2009 the company anticipates the impact to be approximately $50 million in revenue and $0.50 on non-GAAP net income per share.
These adjustments reflect only the impact of exceptional foreign exchange fluctuations. Excluding these adjustments, SunPower’s previously announced guidance for 4Q08 and fiscal year 2009 remains unchanged. The company expects the foreign exchange impact to be weighted significantly toward its Components business segment.
SunPower expects 4Q08 total revenue of $388 million to $418 million, company non-GAAP gross margin of 25% to 26% and non-GAAP diluted net income per share of $0.58 to $0.65.(1) For 2009, the company expects total revenue of $2.0 billion to $2.1 billion and non-GAAP diluted net income per share of at least $3.00.(2)
About SunPower Corporation
SunPower Corporation designs, manufactures and delivers electric systems worldwide for residential, commercial and utility-scale power plant customers. With headquarters in San Jose, Calif., SunPower has offices in North America, Europe, Australia, and Asia.
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