LDK Solar Co. LDK -2.78% posted a fiscal fourth-quarter loss and lower revenue Thursday, two days after the Chinese solar firm defaulted on a $24 billion bond payment.
LDK, attributing the missed payment to a "temporary cash-flow shortage," said Tuesday it reached a settlement with two bondholders to delay $16.6 million in payments, but was still in discussions about the rest. The company makes solar wafers and cells made from silicon, which are then used to make solar panels, also called solar modules. LDK and its competitors have been stung by plunging prices and increasingly fierce competition amid a global oversupply of solar panels and manufacturing capacity.
LDK blamed falling prices for a $25 million write-down it took in the quarter and said a "deteriorating solar market" had made it difficult for the company to collect more than $50 million in payments from customers. Another Chinese solar-equipment manufacturer, Suntech Power Holdings Co. STP -5.09% Ltd., has been involved in bankruptcy-court proceedings in Wuxi, China, after eight Chinese banks last month filed a petition for insolvency and restructuring of Suntech's main operating subsidiary in China. Suntech's bankruptcy came less than a week after the company defaulted on $541 million of bonds that were due March 15. LDK's debt swelled to more than $2.2 billion as of last year as it fueled an expansion of manufacturing capacity through heavy borrowings. The company, however, has received assistance from creditors such as China Development Bank and has sold about a third of the company to other entities to stay afloat.
On Tuesday, the company said it had agreed to sell another asset, a subsidiary in Anhui Province called Anhui LDK New Energy Co., to an affiliate of the Hefei city government, for about 120 million Chinese yuan, or $19.4 million. Some analysts expressed caution about LDK, after the company's fourth-quarter results missed analysts' expectations. "With a less-than-competitive cost structure, we expect LDK's wafer and module businesses to continue to incur losses in the coming quarters," said Needham & Co. analyst Y. Edwin Mok. He has a "hold" rating on LDK shares and noted that "with limited progress on its liquidity, the highly leveraged balance sheet is likely to remain a major concern for investors." Despites challenges in the global solar market, LDK said it would focus on the U.S. and emerging solar markets in China, Africa and India to boost revenue. "These markets represent the strongest growth potential," Chief Executive Xingxue Tong said in a statement. LDK reported a loss of $517 million, or $3.68 a share, compared with a year-earlier of $588.7 million, or $4.63 a share. Sales slumped 68% to $135.9 million, well below the company's forecast for sales of $230 million to $290 million. Wafer shipments during the quarter were 184.7 megawatts. Module shipments totaled 69.1 megawatts. The company had most recently expected wafer shipments between 200 megawatts and 250 megawatts, and cells and module shipments between 50 megawatts and 80 megawatts. For the current quarter, the company forecast revenue of $80 million to $100 million; analysts were projecting $167 million. China has continued to support its solar industries, even as U.S. and European solar-equipment manufacturers have been forced into restructuring or bankruptcy.
But China's State Council, the country's cabinet, in December signaled it would stop funding unprofitable domestic solar-panel makers and instead encourage mergers among major companies. The council also indicated it would bar local governments from supporting struggling companies and allow the market to determine winners and losers.
