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LDK's Q2 Loss Wider than Expected

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LDK Solar Co. Ltd. reported second-quarter of fiscal 2013 loss per American Depositary Share (ADS) of 97 cents, wider than the Zacks Consensus Estimate of a loss of 92 cents per ADS. However, quarterly loss narrowed from the year-ago loss of $2.00 per ADS.

Operational Results

LDK Solar’s net revenues were $114.7 million, lower than the Zacks Consensus Estimate by $4.3 million. A year-over-year decline of 51.1% was primarily due to a delay in the execution of photovoltaic (PV) projects for permits and subsidies from the customers, changes in conventional feed-in tariff markets, and a decline in utilization of manufacturing capability.

Quarterly gross loss was narrower by 41.5% year over year to $59.5 million due to lower cost of goods sold.

Total operating expenses were $41.3 million, down 49% year over year due to a decrease in selling, general and administrative, and research and development expenses.

LDK Solar’s loss from operations was $95.1 million compared with a loss of $172.7 million a year ago.

Interest expenses, amortization of debt issuance costs and debt discount decreased 22% year over year to $58.9 million due to a decline in long-term borrowings.

Financial Performance

LDK Solar had $85.1 million of cash and cash equivalents as of Jun 30, 2013 versus $296.2 million as of Jun 30, 2012.

Long-term borrowing was $103.4 million as of Jun 30, 2013 versus $854.2 million as of Jun 30, 2012.

Third Quarter Guidance

LDK Solar anticipates its revenues to be in the range of $140 - $180 million. In addition, the company expects wafer, and cell and module shipments in the band of 350 - 450 megawatt (MW) and 60 - 80 MW, respectively.
Peer Comparison

JinkoSolar Holding Co. Ltd. (JKS - Free Report) reported second-quarter 2013 adjusted loss per ADS of 56 cents, much wider than the Zacks Consensus Estimate of a loss per ADS of 7 cents.

First Solar Inc. (FSLR - Free Report) reported adjusted second-quarter 2013 earnings of 39 cents per share, lower than the Zacks Consensus Estimate by 22%.

Enphase Energy, Inc. (ENPH - Free Report) posted second quarter 2013 results with a loss of 15 cents per share (including stock based compensation expense), a penny lower than the Zacks Consensus Estimate of a loss of 16 cents.

Our Take

Currently, Chinese solar product manufacturers are facing hardship due to the stringent government laws rolled out by the U.S. and European Union on the import of PV modules from China. This was reflected on the Chinese solar companies’ last few quarters’ financial performance. LDK Solar also registered a negative earnings surprise in the last 3 out of 4 quarters.

However, the recent resolution between the European Union and China will help the Chinese companies to ship certain amount of solar modules to Europe annually. Moreover, rising demand for solar equipments in China is also encouraging for LDK Solar.

In addition, LDK Solar continues to reduce its solar module manufacturing costs through improvements in its manufacturing methods and reduction in operating expenses, which will in turn boost its margin, going forward.

Xinyu City, Jiangxi Province in the People's Republic of China-based LDK Solar and its subsidiaries are engaged in the design, development, manufacture, and marketing of photovoltaic products and development of power plant projects. The company currently has a Zacks Rank #3 (Hold).

In-Depth Zacks Research for the Tickers Above

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