UPDATE 2-Regulatory probe clouds Canadian Solar, shares fall

* Co’s internal probe over, analysts wait for SEC verdict

* Q1 EPS $0.03 vs est $0.07

* Sees Q2 shipments of 173-177 MW, backs FY shipment view

* Shares down 13 pct, at 1-week low
(Adds analysts’ comments, details; updates share movement)

By Krishna N. Das

BANGALORE, Aug 20 (BestGrowthStock) – Shares of Canadian Solar Inc
(CSIQ.O: ) fell 13 percent on Friday, a day after the Chinese
solar firm failed to allay fears surrounding a regulatory probe
on its accounting methods, and reported weak quarterly profit
and shipment outlook.

Despite the company signaling an end to its internal audit
committee investigation unless new information coming to light,
analysts fear that without any comment from the U.S. Securities
and Exchange Commission (SEC), the probe was far from over.

The solar modules maker, valued at about $500 million, had
delayed reporting its full first-quarter results after getting
a subpoena from the SEC in June. [ID:nN01170500]

Canadian Solar’s accounting issue could hurt the company’s
ability to secure supply in a tight market, Jefferies & Co
analysts said, pointing to the company’s expectations of a
sequential fall in second-quarter module shipments.

“They restated their results, giving people lack of
confidence in management credibility; the SEC inquiry is
unresolved … this might linger for a long time,” analysts at
Jefferies, who rate the stock “hold,” told Reuters.

Solar companies, which have been seeing blistering growth
based on their potential, have come under regulatory scrutiny
for alleged accounting irregularities, sparking fears that more
cases could start to surface. [ID:nTOE65R04]

The company’s shares, which fell 21 percent in the two days
from June 1 surrounding the news of the regulatory probe,
dropped a further 13 percent to a one-week low of $10.88 Friday
on Nasdaq.


For the April-June second quarter, Canadian Solar sees
shipments of 173-177 MW, and backed its 2010 shipment view for
700-800 MW. First-quarter shipments were 185 MW.

The company’s gross margin for the first quarter was 12.4
percent, lower than own forecast, as operating costs more than
tripled. Margins are expected to improve in the second half,
the company said.

Analysts at Wells Fargo Securities said the company’s focus
on weak first-quarter results in its statement and
post-earnings conference call, rather than the potential for
second-half recovery, was disappointing.

“We believe the first-half challenges were well understood
and we were hoping management would shift investor focus to the
second half recovery,” the analysts said.

The company said first-quarter net income was $1.5 million,
or 3 cents a share, and net revenue rose about seven-fold to
$336.9 million, helped by higher demand in Europe.

For the first quarter, Europe was the largest market for
the company, with shipments boosted by the prospect that
Germany would soon cut solar subsidies.

Analysts on average had expected profit of 7 cents a share
on revenue of $330.9 million, according to Thomson Reuters

Canadian Solar revised its fourth-quarter results to
reflect long-term wafer supply agreements, doubtful accounts,
payment collection issues and other tax provisions.

“We expect $21 million of products shipped in the 2009
fourth quarter will be recognized in future quarters when cash
is collected,” the company said.

On the conference call, Canadian Solar said it has given
notice to LDK Solar Co Ltd (LDK.N: ) for terminating its two
long-term wafer supply agreements.
(Reporting by Krishna N. Das in Bangalore; Editing by Jarshad
Kakkrakandy, Maju Samuel)

UPDATE 2-Regulatory probe clouds Canadian Solar, shares fall