LDK Solar revises capacity expansion plans amid slowing market demand

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LDK Solar has succumbed to the slowing demand for solar wafers from its customer base that includes Q-Cells, Sharp and Suntech, having revised revenue estimates significantly downwards for its fourth quarter guidance. The revised revenue is between US$425 and US$435 million, compared to its previous projection of between US$555 to $565 million. Wafer shipments were previously projected to be in the range of 260 to 270MW but are now expected to be in the range of 245 to 255MW. Gross margins have also been seriously affected with guidance revised to between 10% and 13%, compared to gross margins of between 18% and 21%, issued previously.

“Late in the fourth quarter, we experienced a slowdown in our business related to the current global financial crisis,” stated Xiaofeng Peng, Chairman and CEO of LDK Solar. “Despite a difficult operating environment, we remain focused on executing our growth strategy and believe that our competitive positioning as the largest and lowest-cost wafer producers in the solar industry will provide us with a competitive edge for navigating through these challenging times. We continue to have a solid cash position, with more than $380 million, in addition to unused credit facilities totaling in excess of $850 million and will continue to conservatively manage our resources. Our operations remain at full capacity, with contract backlog remaining strong for 2009.”

LDK Solar noted that wafer capacity had reached 1,460MW at the end of 2008, compared to guidance given in August 2008 that capacity would reach 1,200MW in 2008. LDK Solar had originally forecasted in January 2008 that capacity would reach 800MW.

In August 2008, the company said capacity would reach 2,200MW by the end of 2009. In November 2008, LDK Solar revised capacity to 2,300MW for 2009. This figure is unchanged in its latest guidance.

LDK Solar now expects 2009 revenues to be in the range of US$2.3 billion to US$2.5 billion. Wafer shipments were guided in the range of 1,570MW and 1,670MW, with gross margins significantly better than current Q4 estimates at between 22% and 27%. A key aspect of this improvement even over previous fourth quarter guidance could be attributed to the markedly lower polysilicon costs and its ramp of the company’s own polysilicon production in 2009, as well as greater economies of scale in its wafer manufacturing operations.

However, LDK Solar has also lowered its own polysilicon production targets. In July 2008, LDK Solar expected to produce between 100-350MT from its first 1,000MT polysilicon plant by the end of 2008. However, the company has now said that in the final stages of plant commissioning the optimization process has taken longer than expected. Although reiterating that the plant had started production, LDK Solar did not provide any production figures.

In its third quarter conference call, held in November 2008, LDK executives said that they expected polysilicon output in early December, 2008 would be between 15MT and 25MT. The plant is now expected to ramp up to its designed full capacity in mid-2009.

With respect to its larger, 15,000MT polysilicon plant, LDK Solar said in November 2008 that it expected production of between 5,000 and 7,000MT in 2009. However, in its latest revisions, the company has guided ‘total’ polysilicon production to be in the range of between 3,000 and 5,000MT in 2009, suggesting a significantly lower expectation from the larger plant.

LDK Solar plans to report full fourth quarter and fiscal year 2008 results in late February or early March 2009.

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