A spike in ocean freight rates is likely to impact SolarEdge Technologies’ second quarter results, the company warned in an earnings call to review its first quarter performance. The company also detailed its front-row seat during the debacle in March when the container ship Ever Given became lodged in the Suez Canal.
SolarEdge reported that its quarter-on-quarter revenues rose 13% to $405.5 million in the first quarter of 2021. Despite strong demand for its residential and commercial products, SolarEdge said it expects that a spike in ocean freight prices, which resulted from the effects of Covid-19 on trade and supply chains, to dampen its second quarter gross margins.
“Ocean freight prices have increased by more than 100% over the last month, and our pre-negotiated prices have gradually expired and exposed us to higher fright costs worldwide,” said Ronan Faier, SolarEdge’s chief financial officer. Higher costs for certain components and freight costs related to the expedited shipping of components will also factor into lower Q2 margins, he said.
Faier said SolarEdge is managing component shortages in a way that enables the company to meet its annual operating plan. At times, however, it has to pay more for a component or resort to air transport to ship components to its contract manufacturers’ facilities.
“Our logistics are always complex and global,” said Zvi Lando, CEO. He noted that the company manufactures at five sites globally.
In late March, SolarEdge had more than 100 containers of products delayed in the Suez Canal congestion, which resulted when a container ship became lodged in the canal. Lando said that some of its products were on the ship that blocked the canal and some were on ships on either side of the blockage. He said delivery dates remained intact despite the delay.
Faier said that the company has a “pretty clear visibility” for the ocean freight prices for the second quarter. The path for prices beyond Q2 is not yet clear, but the company expects a slight downward trend, he said.
SolarEdge’s U.S. revenues grew 23% in the first quarter, driven by sales of residential products. Commercial shipments also grew in the U.S. on quarter-on-quarter basis. Most of the company’s Q1 growth in commercial volumes originated in Europe.
SolarEdge said that it started to see meaningful signs of recovery in its commercial business across all regions during the first quarter. Megawatt shipments of commercial products grew 35% from Q4, Lando said.
Overall, however, the commercial sector has been slower to recover from the economic downturn triggered by the pandemic. SolarEdge now expects revenues from that segment to return to pre-pandemic levels in the second and third quarter, Lando said.
SolarEdge’s year-over-year total revenues fell 6% from $431.2 million in Q1 2020. Revenues related to the sale of solar products were down 8% from last year’s $407.6 million.
SolarEdge Technologies is a U.S.-domiciled, Israel-headquartered provider of power optimizer, solar inverter and monitoring systems for photovoltaic arrays. Its stock trades on NASDAQ.
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