HOKU Disappoints Slightly

Despite Increasing Production Capacity, HOKU Reports Slightly Disappointing Q3'09 Results

Hoku Scientific Inc.'s (HOKU - Snapshot Report) 3rd quarter 2009 GAAP results deteriorated marginally with a net loss of $0.04 per diluted share compared to net loss of $0.03 per diluted share in the prior-year quarter. HOKU's non-GAAP net loss in the 3rd quarter fiscal 2009, excluding stock-based compensation expense, was $0.03 per diluted share versus $0.01 per diluted share in the year-ago quarter.

At the end of the 3rd fiscal quarter 2009, HOKU had a poly-silicon order backlog with 5 leading solar companies of up to $2.3 billion over a 10-year period and has customer prepayment commitments of $216 million.

During the 2nd fiscal quarter 2009, Hoku Materials increased its annual production forecast from 3,500 metric tons to 4,000 metric tons for its poly-silicon production plant in Pocatello, Idaho. It has also expanded and finalized its power supply agreement with Idaho Power for supporting the increased production.

In January 2009, the company received its first six polysilicon Siemens (SI - Analyst Report)-process reactors out of total 28, at its Idaho plant. Of this, two polysilicon reactors have been assembled and installed on the production floor. The rest of the shipment of ten and twelve polysilicon reactors is expected in the first half and second half of calendar year 2009, respectively.

Hoku represents a growth story. Buoyed by strong demand, the company realigned its poly-silicon customer portfolio. However, its poly-silicon plant faces a resource crunch and will not be operational until later this year, and will achieve full capacity only in 2010. Until then, the company will have to depend upon its PV system installation business, which got a strong boost through the extension of the federal solar tax credits through calendar year 2016.

However, a non-contributory fuel cells business, rising cost structure, earnings dilutive stock issuance and a strong competitive challenge in the alternative energy industry may present material risks to the company.

Hoku Scientific, Inc. is a diversified clean energy technologies company with three business units: Hoku Materials, Hoku Solar and Hoku Fuel Cells. Hoku Materials focuses on manufacturing, marketing and selling polysilicon for the solar market from its plant, which is under construction in Pocatello, Idaho.

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