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LDK Solar in crisis

, June 17, 2013, 0 Comments

LDK Solar (LDK) which used to be the world’s biggest supplier of solar wafers and was building the biggest polysilicon plant is now contracting rapidly. The company which has more than $3 billion in debt saw its revenues contract by 50%, when other solar peers expanded their shipments and revenues. The company managed to ship only 30 MW of solar panels as it faced huge problems on the working capital front. Its massive 15,000 ton poly plant on which it spent more than $2 billion, is now closed at it can’t produce polysilicon for even 50% more than the current ASP. With no money for working capital, spending money to make a huge cost competitive plant  seems a distant dream.

LDK is a complete basket case and is running on fumes as even the Chinese government cannot manage to turnaround this hugely indebted loss making company. The company has defaulted twice on its debt in the last few months, as it does not have enough cash to meet supplier payments. It has been sued by banks and suppliers for not making payments on time. The company’s stock still has a market capitalization in excess of $150 million, even with a negative net worth. The company shipped less than 300 MW of solar products this quarter, which means that its global marketshare is now less than 4% and decreasing.

No company in the right mind would want to buy solar products from LDK Solar or sell material to the company. It is now managing to win contracts only through the help of the Chinese government. The management does not seem to have any plan (I don’t blame them). The company has also fired more than 60% of its workforce. The company is now becoming small enough to fail in my view. Investors in LDK stock and bonds should exit at the earliest as the company does not have a future.


LDK Solar Co. said Tuesday that its first-quarter loss increased slightly, hurt by a nearly 50 percent drop in revenue.The results spooked investors and LDK shares tumbled 15 cents, or 9.2 percent, to $1.49 in premarket trading.Revenue fell to $104.3 million from $200.1 million. Shipments totaled 240 megawatts of wafers and 31.4 megawatts of cells and modules.LDK projected second-quarter revenue of between $100 million and $150 million. Wafer shipments are expected to total between 250 megawatts and 300 megawatts, while cell and module shipments are expected to total between 30 megawatts and 40 megawatts.