LDK Narrows Loss, Offers Weak Outlook

LDK Solar Co. Ltd. (NYSE: LDK) reported third-quarter 2012 results before markets opened this morning. The solar PV maker reported a diluted earnings per American depositary share (ADS) loss of $1.08 on revenues of $291.5 million. In the same period a year ago, LDK reported a loss per ADS of $0.87 on revenue of $471.9 million. Today’s results also compare to the Thomson Reuters consensus estimates for a loss per ADS of $1.24 and $246.4 million in revenue.

In the second quarter of 2012, LDK posted a loss per ADS of $2.00 on revenue of $235.4 million. The gross margin improved sequentially from a negative 39.1% to negative 11.2%. In the third quarter of 2011, LDK’s gross margin was negative 3.6%.

The company’s CEO said:

While we saw improvement to our top and bottom line in the third quarter, our results continue to reflect the industry-wide pricing pressure and demand weakness that is negatively impacting the entire solar supply chain.

For the current quarter, LDK estimates revenue will total $230 to $290 million, while wafer shipments will total 200 to 250 megawatts, and cells and modules will total 50 to 80 megawatts. The consensus fourth-quarter estimates call for a loss per ADS of $1.35 on revenues of $552.35 million. That revenue estimate has to be way out of date.

For the full 2012 fiscal year, LDK estimates revenue of $950 million to $1 billion, compared with a consensus estimate of $1.41 billion. Again, that consensus estimate likely needs to be revisited.

The company took an inventory write-down of $37.8 million “as a result of a continuous drop in the market price for polysilicon, wafers, cells and modules.” ReneSola Ltd. (NYSE: SOL) took a $31.6 million dollar inventory write-down last week, and solar manufacturing equipment maker Applied Materials Inc. (NASDAQ: AMAT) wrote down $421 million in goodwill impairment charges in the quarter, reflecting “the deterioration in solar equipment market conditions, [AMAT’s] customers’ financial condition, and reduced market valuations.”

That is today’s market for solar — weak and getting weaker. Only China is still being counted on to keep the market for solar PV afloat in the coming year.

LDK’s shares are inactive in premarket trading today, having closed at $1.17 last Friday, in a 52-week range of $0.71 to $6.92. Thomson Reuters had a consensus analyst price target of around $1.20 before today’s results were announced.

Paul Ausick