LDK Solar Lowers Sales Outlook, Delays Factory Plan

By Ucilia Wang

LDK Solar (LDK) on Monday slashed its sales and shipment estimates for the fourth quarter of 2008 and is now expecting a lackluster 2009, news that caused its stock to plunge by 15 percent.

The Chinese maker of silicon wafers, which are turned into solar cells for making solar panels, said preliminary data showed that it likely generated $425 million to $435 million for the quarter that ended in December, instead of the previously anticipated $555 million to $565 million.

LDK said it also shipped an estimated 245 megawatts to 255 megawatts worth of wafers during the quarter, down from the 260 megawatts to 270 megawatts.

Recession and customers who wanted to delay delivery prompted the lower sales, the company said. LDK plans to announce full fourth-quarter and 2008 financial results in late February or early March.

The revised estimates underscore how declining prices are whacking the solar industry. The company reduced revenue estimates by around 23 percent but lowered shipment by only 5 percent. Thus, prices are dropping far faster than any decline in actual demand for products.

The situation could get worse in 2009 as it completes manufacturing projects while facing declining demand.

LDK launched ambitious plans to build two factories in China for producing polysilicon, the main ingredient for making wafers, over the past year and half. The two polysilicon factories are LDK's first efforts to make polysilicon instead of relying on outside suppliers (see LDK Silicon Confirms Plant Is on Track).

But LDK is having trouble bringing its first factory into full production mode, the company said Monday. The 1,000-metric ton factory was supposed to be completed and running at capacity by the end of 2008. The factory is producing polysilicon, but it isn't likely to reach full production until mid 2009.

LDK blames problems with the "optimization process" for the delay but didn't provide more details. Calls and emails to the company weren't immediately returned.

The company said the construction of its second polysilicon plant is on track. LDK expects the 15,000-metric ton factory to begin production in the second quarter of 2009.

The outlook for 2009 isn't rosy. LDK expects lower average selling prices for its products and lower wafer shipment this year.

For 2009, it expects to generate between $2.3 billion and $2.5 billion in sales. Shipment could reach between 1.57 gigawatts and 1.67 gigawatts.

The company previously thought it would bring in between $2.9 billion and $3.1 billion in sales and ship between 1.8 gigawatts and 1.85 gigawatts worth of wafers in 2009. Its customers include Q-Cells (QCSLF.PK), Suntech Power Holdings (STP) and Canadian Solar (CSIQ).

LDK now expects to produce between 3,000 metric tons and 5,000 metric tons of polysilicon instead of 5,000 metric tons to 7,000 metric tons.

The company's annual wafer capacity would reach 2.3 gigawatts in 2009, an estimate that hasn't changed from the prior forecast.

LDK's shares dropped more than 15 percent to reach $12.61 per share in after-market trading. The company announced the lower sales and forecast after the market closed.

Comments

[canb888:]

Your statement that: "LDK expects ... lower wafer shipment this year." is clearly false but it also clearly shows your sentiment against the company, i.e., you are very biased as a reporter/comentator. I really prefer to read objective, independent and preofessional comments.

Jan 06 09:52 AM

[semi-guru:]

ummm... in their Nov earnings release, LDK said they expect wafer shipments in the range of 1.80 GW to 1.85 GW; now they have lowered this to 1.57 GW to 1.67 GW - so yes, they indeed said they expect lower wafer shipments this year. I'm long LDK and expect them to outperform other solars but this isn't bashing, this is just reporting the news. LDK said it, Ucilia Wang reported it. I wish people would stop looking at PR as opinion pieces and start seeing it as the facts. I want good news too, so when there is good news that goes unreported, I'll be fuming with you.

Jan 06 11:35 AM

[canb888:]

Wafer shipment in 2009 will be higher than 2008. How did that become "lower this year". People compare year to year. This year is 2009. Compare that to last year which is 2008. Still think "lower this year"?

Jan 06 11:58 AM

[semi-guru:]

Maybe it will help if they state "LDK expects lower average selling prices for its products and lower wafer shipment THAN PREVIOUSLY GUIDED this year." This is all about painting a rosy picture in November which was unsustainable, and not acknowledging it until the qtr was over, and the market already knew it in November. Everybody knew it except LDK. THAT is why they're getting hammered. Its not over the numbers, its over the lack of visibility into their own business, when the analysts called it 6 weeks ago. Bottom line, you're parsing words here, nothing more. As I said, I am long LDK, but I'm pretty angry that they have been silent until qtr-end and THEN say they will miss by 20%. There's no excuse for that. It will turn around though, their business is strong and they remain highly profitable.

Jan 06 12:14 PM

[canb888:]

No problem with your revised wording by adding in "THAN PREVIOUSLY GUIDED". Being a long, I am mad at them too for missing their Novemebr guidance just like you but I expect commentators to be honest in their choice of words - because it is very important. Maybe some people do it unconsciously - some analysts/writers are unconsciously incompetent - the lowest form and the real hopeless form of incompetence. I believe LDK, being the largest and lowest-cost producer of wafers, will recover and will be a winner in the long run.

Jan 06 01:13 PM

[gebby:]

words are chosen intentionally, there is a concerted effort to undermine the equity values of alternative energy companies. the brokers do business for utilities and all other competitors oil , coal , nat gas, ge, on and on. believe me the brokers know who is feeding them their fees. the solars are soooo cheap and now they get sell recommendations. if they had no earnings they should be worth more based on future market penetration potential.

Jan 06 04:33 PM

[jbde:]

"Delays Factory Plan" Please point out where LDK said anything about delaying anything! This inflamatory headline serves no purpose.

They are doing eveything they can to get small plant running efficiently and they clearly state the much larger 2nd plant is on schedule. Not a delayed schedule.

Jan 07 08:11 AM

[gebby:]

here is the good news: Recession and customers who wanted to delay delivery prompted the lower sales, the company said. LDK plans to announce full fourth-quarter and 2008 financial results in late February or early March. customers were incentivized to postpone projects because with the new tax credits in US kick in in 2009 not late 2008. this is the real story . meanwhile there is nothing lackluster about 2009 outlook.

Jan 07 10:11 AM

[semi-guru:]

"The company also announced that it experienced a delay in ramping production at its 1,000 MT polysilicon plant due to issues in the final stages of plant commissioning."

Right from their PR. Just parsing words again, but they said it. As a long, I hate to admit it but this was expected by everyone (myself included) except the company itself. I don't think the headline is inflammatory at all, but the stock price took it in stride. Already priced in. I think LDK needed something like this to show that they're a normal company and not the angelic save-all for this global recession. They will only get stronger from here. The headlines can no longer beat down a beaten down stock.

Lets hope they learn a lesson about gaining a little better visibility into their business and coming to terms with the realities a bit sooner next time.

US has only been a few % of their revenues so don't expect some huge bump because of that. It should help increase market share in US but the real story is in china and asia, where the bigger market share and bigger stories are coming from.

Jan 07 10:30 AM

[canb888:]

Exact same news story but different attitude towards LDK thus different conclusion, link: seekingalpha.com/artic...

Jan 08 09:39 AM

[canb888:]

By the way, Zacks disclosed having no position on LDK at the end of the fairly positive article. I can't find any position disclosure by Ucilia in her fairly negative article. My question to Ucilia: are you short LDK??? I hope she will answer because I don't think my qustion is not fair.

Jan 08 09:45 AM

[canb888:]

I know Ucilia is reading these comments. I hope she is open to my question: are you short LDK?

Jan 08 05:22 PM

[Ucilia Wang:]

I have no position on LDK, canb888.


On Jan 08 05:22 PM canb888 wrote:

> I know Ucilia is reading these comments. I hope she is open to my
> question: are you short LDK?

Jan 12 06:50 PM

[canb888:]

Thanks for disclosing, much appreciated.


On Jan 12 06:50 PM Ucilia Wang wrote:

> I have no position on LDK, canb888.

Jan 14 09:39 PM