Bloomberg News

LDK Slumps Most in Six Weeks on Lower Sales Forecast, Downgrade

November 16, 2011

Nov. 15 (Bloomberg) -- LDK Solar Co., a Chinese maker of solar wafers and panels, fell the most in six weeks in New York trading after cutting full-year forecasts for sales and margins. Kaufman Bros LP cut the stock to “sell.”

LDK dropped as much as 11 percent, the biggest intraday decline since Oct. 3, and traded down 2.6 percent at $3.44 as of 11:51 a.m. local time.

The Xinyu-based company said yesterday it expects to report sales of $2.2 billion to $2.25 billion in 2011, compared with an earlier forecast of $2.5 billion to $2.7 billion. LDK will write down $45 million to $50 million in inventory, it said in a statement, citing a “rapidly declining market price.”

Slowing demand is pulling down solar-panel and component prices along with shares. LDK’s Chinese rivals have also cut forecasts and U.S.-based First Solar Inc. and SunPower Corp. said this month they’ll reorganize as increased competition weighs on prices and pushes weaker companies into bankruptcy.

“Falling prices and lower volumes are industrywide issues,” Jeffrey Bencik, a New York-based analyst at Kaufman Bros said today, reducing his recommendation on LDK to “sell” from “hold” and cutting its share-price target to $2 from $5.

“LDK’s problem is that they have much greater capacity so they have lower capacity utilization, that hurts profitability,” Bencik said in an interview. The stock is “challenged” and LDK’s debt, one of the highest among peers, “adds risks to it being an ongoing concern,” he said.

Revised Outlook

LDK’s wafer shipments will total 1.55 gigawatts to 1.65 gigawatts this year, the company said yesterday. That compares with an earlier forecast of 1.8 gigawatts to 2 gigawatts. Module shipments will be 550 megawatts to 650 megawatts, down from an earlier projection of 750 megawatts to 800 megawatts.

Gross margins are forecast at 9 percent to 12 percent, down from a previous outlook of 15 percent to 20 percent, LDK said.

“This isn’t a one-quarter blip,” Bencik said. “We’re not seeing demand rebound, even though prices have dropped for modules.”

--Editors: Amanda Jordan, Reed Landberg

To contact the reporter on this story: Ehren Goossens in New York at egoossens1@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net


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