First Solar, Inc.’s (NASDAQ: FSLR) first quarter earnings fell from $172.3 million in the first quarter of 2010 to $116 million for the quarter ended March 31, 2011. During its earnings presentation executives reaffirmed its full-year earnings guidance of $9.25 to $9.75 per share projecting increased business in the second half of the year.

First Solar attributed the drop in net income due to a number of factors. Among them were lower average selling prices and uncertainty in the European market. “Quarterly net sales decreased slightly from $568 million in the first quarter of 2010, primarily due to lower average selling prices,” the company said in its release.

The company also said some of its sales were impacted by actual or contemplated feed-in tariff changes in Germany, France and Italy, which it said is resulting in project delays and uncertainties.

“We expect the European industry demand to go through a period of change,” said First Solar CEO Rob Gillette during the investor conference.

There are also pending changes in the European market, Gillette said, adding to the uncertainty.

“The market started out very slow. Prices are moving faster than people expected. Financing costs are rising in Germany and elsewhere. The market in Italy has been delayed. It will take another quarter to sort out,” he said.

To address some of the issues there, the company also started selling its panels to smaller-sized projects there, as small as 10 kilowatts. It previously only sold panels to projects that were 30 kilowatts or larger in size.

To help combat the European uncertainty, the company is looking to other markets to meet its guidance for 2011. For instance, the company has a 450-megawatt pipeline of projects in North America for the rest of 2011.

“We could build up to 600 megawatts in North America if other markets don’t perform as expected,” said First Solar’s new Chief Financial Officer Mark Widmar.

In addition, the company is increasingly looking to new markets, such as India and the Middle East. The company is expecting to supply up to 100 megawatts of modules to India, where they’ll be used and sold by project developers.

“We’re trying to figure out how to establish the best approach in the market there,” Gillette said.

First Solar will use this flexible approach to meet its 2011 earnings goals, Gillette said.

Looking forward, the company anticipates that it will be able to produce 2.8 gigawatts of modules annually by the end of 2012. To accomplish that, it will run 40 manufacturing lines. An additional solar panel manufacturing plant, planned for France, would have added more production lines, but the plant has been put on hold.

As production increases, so will the efficiency of the modules.

By 2014, First Solar expects its modules to reach 14 percent conversion efficiency, Gillette said.

Between the increased capacity and efficiency, he said the cost per watt should fall from 75 cents per watt now to between 52 cents per watt and 63 cents per watt, bringing cost per watt in parity with other forms of electric generation.

Image courtesy of First Solar.