LDK Implodes (LDK, FSLR, TSL, STP, JASO, YGE)

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Shares of solar PV maker LDK Solar Co. Ltd. (NYSE: LDK) are pointed toward a new 52-week low today following the company’s report on its fourth quarter 2011 earnings. The company had delayed the report until now, probably hoping for some sort of miracle.

No such luck. For the quarter the company reported a loss per diluted ADS of -$4.63 compared with a consensus estimate for a loss of -$0.85. Revenue for the quarter came in at $420.2 million versus an estimate of $431.6 million. Gross margins were not only negative, they were abysmal — -65.5%. In the same period a year ago, gross margins were 27.3%.

Other solar makers like First Solar Inc. (NASDAQ: FSLR) had rotten fourth quarter results, but nothing like this. First Solar is expected to post EPS of $0.59/share in the first quarter, after delivering EPS of $1.26 in the fourth quarter, a big miss on expectations. Trina Solar Ltd. (NYSE: TSL) is expected to recover a bit in the first quarter, with an EPS loss of $0.29 compared with a loss of $0.93 in the fourth quarter. Suntech Power Holdings Co. Ltd. (NYSE: STP) is expected to post an EPS loss of $0.50 in the first quarter, better than the company’s loss of -$0.76 in the fourth quarter. JA Solar Holdings Co. Ltd. (NASDAQ: JASO) put up a loss of -$0.11 in the fourth quarter and is expected to post an EPS loss of -$0.15 in the first quarter. Yingli Green Energy Holding Co. Ltd. (NYSE: YGE) put up a loss of -$0.38 last quarter and is expected to improve to a loss of -$0.21 this quarter.

More than half of LDK’s quarterly loss was due to writedowns:

During the preparation of its fourth quarter 2011 financial results, LDK Solar’s management determined that an inventory write-down and provision for firm purchase commitment of $232.6 million was required as a result of the significant drop in market price for polysilicon, wafers and modules during the fourth quarter. As a result, gross margin and results from operations were negatively impacted in the fourth quarter of fiscal 2011.

The total loss for the quarter amounted to $531.4 million. LDK is not particularly optimistic either:

In 2012, we expect that excess capacity and further policy uncertainties in Europe and the U.S. will result in continued intense competition within the solar industry.

The company forecasts revenue of $2.0-$2.7 billion, with a prior consensus estimate of $2.19 million. The expected ADS loss in 2012 is $1.37, but that is almost sure to drop after today.

The question for LDK and the other Chinese solar maker is whether or not the government will ride to their rescue. In late 2010, the government made more than $25 billion in loans available to its solar makers so that the companies could expand production. That idea didn’t work out too well, so now the country and the country’s solar industry must go to Plan B. And that has to include consolidation and picking winners. LDK is probably not on the list.

LDK’s shares are down just over -1% in the pre-market at $2.93 in a 52-week range of $2.55-$11.73.

Paul Ausick

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