By Christiana Sciaudone
Investing.com -- Array Technologies Inc (NASDAQ:ARRY) stumbled more than 34% as it pulled guidance amid a surge in costs.
The manufacturer of ground-mounted systems used in solar energy projects reported adjusted earnings before interest, taxes, depreciation and amortization that was below expectations because of higher than expected logistics costs. Despite record demand, increases in "unprecedented" steel and shipping costs will hurt results, the company said in a statement.
“At the same time as we are seeing record demand for solar, our industry is contending with increases in steel and shipping costs that are unprecedented both in their magnitude and rate of change. From Q1 2020 to Q1 2021, spot prices of hot rolled coil steel, the primary raw material used in our products, more than doubled and have continued to increase in the second quarter with spot prices up over 10% since April 1st.
"Steel represents almost half of our cost of goods sold and we do not hold large amounts of steel inventory, so a significant increase in the price of steel over a short period of time can negatively impact our results," Chief Executive Officer Jim Fusar said. "The continuing increases in both steel and freight costs will impact our margins in the second quarter and potentially in subsequent quarters if prices do not normalize."
The news comes as inflation hit its highest in more than a decade, up 4.2% on the year, according to the Bureau of Labor Statistics. Commodity prices are jumping as demand pops after the U.S. pumped trillions of dollars into the economy and parts of the world return to pre-pandemic times.
Quoting activity for the company's products is at the highest levels yet and Array is planning on passing costs onto customers, among other tactics to handle the high prices.
“We are not able to affirm our previously provided guidance for the full year," said Chief Financial Officer Nipul Patel. "We expect to update our guidance once we have completed the review of all of our open purchase orders and commodity and shipping prices remain stable for a long enough period of time to give us confidence in using them to develop a forecast for the remainder of the year."