Hanwha Solutions, 'Solar Power' Crying Behind Strong Q2 Performance

Strong Q2 Performance Expected... Solar Power Business Forecasted to Post Losses for Third Consecutive Quarter
Rising Costs of Solar Raw Materials and Shipping Drive Losses
Strategy to Offset Losses in Second Half with Renewable Energy Plants and Retail Business

[Asia Economy Reporter Hwang Yoon-joo] Hanwha Solutions is unable to smile despite the strong performance forecast for the second quarter of this year. This is because the solar power business, which Hanwha Group is actively nurturing as a new growth engine, has continued to post losses for three consecutive quarters due to a sharp rise in raw material prices.

According to the industry on the 16th, the consensus operating profit for Hanwha Solutions in the second quarter of this year is estimated at 278 billion KRW, a 116.3% increase compared to the same period last year. It is also 9.1% higher than the previous quarter.

It is analyzed that the chemical division, which produces basic petrochemical products, led the strong performance in the second quarter as well as the previous quarter. The chemical division recorded an operating profit of 254.8 billion KRW in the first quarter, a 300.6% surge compared to the same period last year.

This figure contrasts with the performance of the solar power business, which Hanwha considers a future core. Securities firms expect Hanwha Solutions to record an operating loss of 15.5 billion KRW in the solar power division in the second quarter, continuing losses for three consecutive quarters. The solar power division posted losses of 2.4 billion KRW and 14.9 billion KRW in the fourth quarter of last year and the first quarter of this year, respectively.

The poor performance of the solar power business is due to the rise in raw material prices. Hanwha Solutions used to produce polysilicon but closed the business last year due to low-priced competition from China and is now focusing on producing solar cells and modules (panels). Meanwhile, as the prices of raw materials such as wafers, aluminum, and solar glass have sharply increased, it is interpreted that the company has not escaped losses. In fact, the price of aluminum rose 23.9% from $2,013.50 per ton at the beginning of this year to $2,495.00 per ton yesterday. Han Sam Park, a researcher at SK Securities, explained, "In the second quarter, the price of Chinese wafers rose 69% compared to the previous quarter, while module prices increased by 10% during the same period," adding, "The profitability of Hanwha Solutions' module business has deteriorated."

Rising freight costs also contributed to the losses. The Shanghai Containerized Freight Index (SCFI) recorded 3932.35 last week (as of July 9), the highest since the SCFI began compiling data. Since raw material and freight costs are external variables, cost reduction is not easy.

A Hanwha Solutions official said, "Since 80% of solar power business sales come from overseas, the sharp rise in freight costs is a significant burden," adding, "We will offset the burden of rising costs through power plant development and retail business in the second half of the year."

This content was produced with the assistance of AI translation services.