I can best sum up the LDK Solar (LDK)
earnings review with the comment that the shortages of
polysilicon continue to act as a dark cloud overhead. While the company beat solidly on both revenue and earnings this quarter, gross margins continue to degrade - down to 27.7% from last quarter's 30.1% [Feb 25: LDK Solar Reports Solid Numbers]
- and much worse than the year ago period which was in the high 30%s.
This continues to be an issue for the space. Even worse is guidance for
2008 which now is guidance for 23-28% gross margins (this is down from
a 26-31% gross margin guidance for the full year given less than 90
days ago). As polysilicon prices stay stubbornly high, the drag on
profit margins for these companies continues.
Essentially with
lower gross margins, you need a much higher revenue number, just to stay
"flat" to where you would have been with higher margins. So incremental
revenue gains over previous projections simply get washed out by lower
margins. At *some point* polysilicon prices will drop and we should see
margins stabilize/expand, but we've been saying that for a few quarters
now, and the target continues to get pushed out into the future.
Frankly, if I could trade after hours, I would have been out on the initial spike to $38, but since I cannot do that in the Marketocracy.com account, I have to see how the stock reacts tomorrow and then re-assess after thinking it through tonight. This is not of a situation of a lack of growth, but the associated profits with said growth continue to be curtailed - much farther out than originally anticipated. This is not a LDK specific issue and all the players on the polysilicon side of solar are facing the same issues - some can offset it with other efficiencies or scale, but it's a drag on profits for all of them. So I suppose the story now is margins will improve..... in 2009.
- Net sales for the first quarter of fiscal 2008 were $233.4 million, up 21.1% from $192.8 million for the fourth quarter of fiscal 2007, and up 218.0% year-over-year from $73.4 million for the first quarter of fiscal 2007.
- Gross profit for the first quarter of fiscal 2008 was $64.6 million, up 11.2% from $58.0 million for the fourth quarter of fiscal 2007, and up 127.5% year-over-year from $28.4 million for the first quarter of fiscal 2007. Gross profit margin for the first quarter of fiscal 2008 was 27.7% compared with 30.1% in the fourth quarter of fiscal 2007 and 38.7% in the first quarter of fiscal 2007.
- Net income for the first quarter of fiscal 2008 was $49.8 million, or $0.45 per diluted ADS, compared to net income of $49.2 million, or $0.44 per diluted ADS for the fourth quarter of fiscal 2007.
- "Regarding our polysilicon plant project, the construction remains on track for completion based on our previously announced schedule. With the recent funding we secured, in addition to our other financial resources, such as advances from customers, LDK is well positioned to pursue its aggressive growth strategy," concluded Mr. Peng.
- For the second quarter of fiscal 2008, LDK Solar estimates its revenue to be in the range of $278 million to $288 million with wafer shipments between 136 MW to 146 MW.
- LDK Solar also revised its outlook for the full year of fiscal 2008: Revenue to be in the range of $1.08 billion to $1.18 billion; Gross margin in the range of 23% to 28%
