Reuters, Tue Jun 14, 2011 11:43am EDT

* Q1 EPS C$0.01 vs loss/shr C$0.04 yr-ago

* Q1 rev down 33 pct as PV cell prices fall

* In talks with several parties to fund silicon making plant

* Shares up as much as 25 pct (Adds CEO comments, details, share movement)

By Aftab Ahmed

BANGALORE, June 14 (Reuters) - Canadian solar cells maker, Arise Technologies Corp reported its first quarterly profit and said it is in talks with several parties to fund the growth of its silicon production unit, sending its shares up by a fourth.

The rising costs of polysilicon -- the key raw material in photovoltaic (PV) cells -- have led to companies like LDK Solar to produce the raw material themselves in an effort to cut costs in an industry, which is increasingly being forced to sacrifice margins to pump up volumes.

Arise gets about 90 percent of its revenue from making PV cells and is also looking to set up its own silicon manufacturing unit in Kitchener, Ontario to better control its supply and costs.

Arise recently commissioned the facility after it successfully produced more than 400 kilograms of almost pure silicon -- a milestone required under the government-funded Sustainable Development Technology Canada (SDTC) initiative.

"While we work to advance the development of this (SDTC) program, we are also continuing to hold talks with numerous parties regarding potential partnerships, joint ventures, and external funding opportunities for our silicon division," Chief Executive Dan Shea said in a conference call with analysts.

"We believe our silicon technology has the potential to be a key differentiator for our business."

Shares of the Waterloo, Ontario-based company soared 25 percent, before surrendering some gains to trade up 10 percent at 12 Canadian cents on Monday on the Toronto Stock Exchange.

PROFITABLE QUARTER

Amid the uncertainty surrounding the feed-in-tariff (FIT) programs in the German, Italian and other European markets, Arise managed to post its first quarterly profit by keeping a strict control over its costs.

"We took action to minimize impact on the financial results and ongoing operations by scaling back production at our German PV cell manufacturing plant," Shea said.

Germany contributes more than half of Arise's revenue, while Italy and France contribute about 11-14 percent each and Shea said the industry demand would stabilize as the European countries outlined their plans on solar power incentives.

"It was a difficult quarter for the solar industry, (and) we remain hopeful that demand will stabilize in the latter half of this year," he said.

For the January-March quarter, Arise posted a profit of C$2.4 million ($2.4 million), or 1 Canadian cent a share, compared with a loss of C$5.9 million, or 4 Canadian cents, a year ago.

Operating cost fell 14.2 percent mainly due to a drop in research and development expenses.

Revenue fell 33 percent to C$10.9 million hurt by lower prices of its PV cells, a long winter in Europe and the uncertainty around the European .

Sales from the systems division, which provides rooftop and ground solar installations, rose 67 percent to C$1.0 million.