September 8, 2009 / 3:23 PM / in 9 years

UPDATE 2-MEMC sees weak Q3 rev, margins; to close facilities

* Says equipment failure at Texas facility to hurt Q3

* Sees Q3 rev $285 mln-$315 mln vs est $325.2 mln

* To phase out production at Texas, Missouri facilities

* Plant closures to impact about 540 employees

* Shares fall as much as 4 percent (Recasts; adds details, background, updates share movement)

Sept 8 (Reuters) - Silicon maker MEMC Electronic Materials Inc WFR.N said third-quarter revenue and margins would be hurt by the recent equipment failure at its Pasadena, Texas facility, and it plans to close two facilities and incur related charges.

The company said it would cease production of silicon crystal ingots and wafers in phases at its Sherman, Texas and St. Peters, Missouri facilities, affecting about 540 employees.

The company, which said a small number of the affected employees would be offered positions at other locations, expects to incur about $73 million to $78 million in charges related to the closures.

The closings will occur in stages during 2010 and early 2011, as production shifts to other locations, the company said in a statement.

MEMC eventually plans to sell the Sherman facility.

The St. Peters, Missouri-based company said a large portion of its Pasadena facility had to be shut down on Aug. 7 following the equipment failure.

“Although the failed equipment has been replaced, subsequent rebuild and restart difficulties have delayed the resumption of normal operations at this facility,” the company said.

It expects normal production to resume before the end of September.

The maker of the key raw material for the solar and semiconductor industries forecast third-quarter revenue between $285 million and $315 million.

Analysts on average were expecting revenue of $325.2 million, according to Reuters Estimates.

MEMC also sees gross margins in the mid to high single digits during the third quarter.

“We must continue to aggressively drive all unnecessary costs out of the business during these extraordinary times. We will be shifting this high-volume production closer to a number of our customers, who are located in lower cost regions,” Chief Executive Ahmad Chatila said.

MEMC has been hurt by the sharp drop in silicon prices as the weak economy shrunk demand for chips and financing dried up for solar projects.

Polysilicon prices went as high as $500 a kilogram last year due to shortages as solar manufacturers scrambled to buy supplies. But new production capacity and shrinking demand has pushed those prices near the $50 mark in recent weeks.

Shares of the company were trading down 4 percent at $15.93 Tuesday late morning on the New York Stock Exchange.

For the alerts, double-click [ID:nWNAB7296] (Reporting by Shradhha Sharma in Bangalore; Editing by Anne Pallivathuckal)

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