Highlights From LDK's Q3 Conference Call: Sales up 23% Over Prior Quarter; Guides Well Above for Q4

FREE Breaking News Alerts from StreetInsider.com!

More News related to LDK

More News related to Corporate News

November 23, 2009 11:55 AM EST

LDK Solar (NYSE: LDK) reports Q3 earnings of $0.27 per share, well above the consensus of a $0.10 loss. Revenues came in at $281.9 million, versus the consensus of $277.2 milion. Shares are up 8.12% today.

Highlights From LDK's Q3 Conference Call:

LDK sees Q4 revenues of $280-$310 million, versus the consensus of $258.72 million. The company sees wafer shipments between 320 MW to 340 MW and module shipments between 20 MW to 30 MW.
(CFO) Net sales for Q3 were $281.9 million, up 23% from $228.3 million in Q2.
Wafer shipments, including our processing service business, increased 38% sequentially to 320.5 megawatt. Wafer sales, which exclude the processing service business, increased from 182.2 megawatt in Q2 to 257.6 megawatt Q3.
The average selling price was $0.91 per watt.
Sales returns met in Q3 of 2009 were $2.1 million. OEM shipments were 62.9 megawatts in Q3. Module shipments were 9.4 megawatts in the quarter.
By geography, revenue was 25% generated from China, 61% from the rest of Asia, 12% from Europe, and 2% from North America.
Our top 10 accounts in Q3 accounted for 76% of our total revenues with the top three accounts
combined accounting for 40%.
Gross margin in Q3 was 20.1%. As we were able to negotiate low prices with some of our polysilicon material suppliers, we recognized $13.4 million in Q3 from the partial reversal of the provision for loss on firm purchase commitments of polysilicon materials we have taken in Q2. Excluding this item, the underlying gross margin was 15.4%.
Our wafer converting cost was $0.31 per watt, and average cost of silicon we consumed was $79 per kilogram. Operating expenses were $19.7 million in Q3, down from $29.5 million in Q2, which had
reflected the write down of prepayment to supply of approximately $9.2 million.
Operating margin in Q3 was 13.2%. Government subsidies increased to $13.8 million.
Capital expenditure were $187.1 million in Q3, of which, $35.5 million was for the wafers and $150.9 million for polysilicon. Our wafer manufacturing capacity at the end of Q3 was 1.7 gigawatts, and we completed the first two trends of the 15,000 metric ton polysilicon facility for total installed polysilicon capacity of 11,000 metric tons.
For Q4, we expect capital expenditure to be around $100 million. For 2010, we expect capital expenditure to be in the range of $200 million to $300 million.
We ended Q3 with $68 million of cash and cash equivalents.
We continue to operate with negative net working capital. Accounts receivable declined to 80 days while our payables were equivalent to about 63 days.
Inventories increased slightly to $480 million, including a $25 million non-current portion.
Our polysilicon inventory at the end of the quarter was approximately 28,000 metric tons at an average cost of $35 per kilogram reflecting procurement of material during Q3 and the previous purchase commitments.
Trust and Investment or equivalent of $219 million. We will continue to evaluate the private and public financing opportunities for our polysilicon business as we achieved operational milestones.
(CEO) We expect our module shipments to increase significantly in coming quarters as we response to the demand from customers and we expect wafer and module shipments will be 1.6 to 1.7 gigawatt in 2010. As Jack discussed, we remain dedicated to exploring a variety of options to strengthen our balance sheet and to improve our liquidity.
(COO) Our wafer production yield increased by 4% by ingot growing and 1.6% for slicing.
We remain on track towards our goal of reducing wafer converting cost to as low as $0.20 to $0.25 per watt. We expect to reach 1.8 gigawatt wafer manufacturing capacity by the end of the year. [indiscernible] will be reviewed in response to demand as well as our balance sheet.
Now let me move on to our polysilicon plant. Our 1,000 metric ton capacity facility continues to ramp up production. During the third quarter, we produced 60 metric tons of polysilicon and are currently producing 50 to 60 metric tons of silicon per month around the cost of about $50 per kilo.
We anticipate that the facility will ramp up to the design capacity by the end of the fourth quarter.
We commenced a trial production at the first five 5,000 metric tons train of the larger facility in the third quarter, and expect to end the commercial production at the end of the year.
The third trend is expected to reach mechanical completion in the first half of 2010. We expect to reach full capacity of 16,000 metric tons by the end of 2010.
Our initial target for the polysilicion production cost from the 15,000 metric tons facility is 40 to $50 per kilo. We target to reduce this to 25 per kilo by the end of 2011. The effective polysilicion production in Q4 to be between 150 to 180 metric tons.
(Q&A) Congratulations on your Q3 results. I have a couple of questions. First on your silic usage in Q3 on a per watt basis, if you could help us understand how much did you consume? Second, I have -- I would like to know what kind of ASP trends are you seeing especially going into Q4 and Q1? And then I have two minor questions on balance sheet. Perhaps I can follow-up later.(A)Sunil, I think first of all that the silicon consumption for Q1, we consumed between about 6.3 to 6.5 grams per watts. For ASP, currently we see in Q4, for wafers, around $0.85 to $0.90 for Q1. We see a similar trend, and now we see the demand for wafers was strong and the visibility for the sales of Q1 for wafer also very strong. For ASP for a module, Q4 is around 1.80 to $2 per watt and we see a similar end in Q1 '07.
And the balance sheet questions that I have for, Jack perhaps, I noticed that there is a big movement on your customer advances from long-term advances to short-term. So I just want to understand what's causing that movement or reclassification? And then, Jack you mentioned very quickly some of the write-offs and write-backs that you had in Q3 and I missed those numbers. So if you could please repeat those? (A)Concerning our pre-payment, because we have some ongoing discussions with Q sales as we have a court order to settle this issue with Q sales. So from an accounting point of view, we need to take this 10-year contract deposit to move from our long-term liability to the current liabilities. And actually, right now, we are still talking to Q sales on a daily basis. We believe in very short period of time we should reach agreement and this advance payments from Q sales should be moving back to the long-term liabilities after a new agreement is signed.(A)And also that you mentioned about the provision that we put back into the third quarter is related to some of the purchase commitment that we had to write down for about $9 million and because of the BOE we negotiated with the vendor. Actually, we need to reverse these provision in Q3, which we get a benefit of about $9 million benefit, which of course increase the gross margin in Q3. We obviously see our -- I think our gross margin will be somewhere about 15.2% or so.
And so you said that you've converted about $100 million of short-term debt into long-term debt over the last couple of months. I'm just curious to know what kind of discussions you're having with other banks to -- what's the magnitude of your short-term debt that they're looking to convert into long-term debt? And is this long-term debt, five-year, two-year, can you maybe give us some color on what the long-term nature of debt is? (A)Well, in China, still primarily the short-term debt is still maturity. However, I think the China-based banks, they're now exploring more into the mid-term means like two to three years. So now we are able to discuss with all banks to use this longer-term backgrounds, which of course in the same time also reduce the interest rate from probably somewhere 6.5 to maybe 4.5 to 5%. So from a cost-of-capital point of view, also we got to be a little bit better in terms of a cost break.
So should we expect more of this? I mean, can you tell us what kind of magnitude of short-term debt you are looking to convert into medium-to long-term debt? (A)Well, we have continuous discussion with our banks and of course that we continue to work with them. And in the normal course of business, we renew all this short-term loans for additional year. But as Tong said, if the banker will offer October 3 [ph] our longer-term bank loan certainly that will replace so that we can increase the liquidity of the company's position and the same time also reduce the cost of capital.