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Dark Clouds Gather as LDK Readies Earnings Report

NEW YORK ( TheStreet) -- LDK Solar (LDK) has so many storm systems overhead it's hard to know which one to fear the most.

I'm not an enthusiastic believer in solar as an investment and for good reason. Almost everyone who has tried their luck in the solar space watched their investment evaporate into thin air.

LDK Chart LDK data by YCharts

LDK Solar is a manufacturer of multicrystalline solar wafers, which are the principal raw material used to produce solar cells. LDK's headquarters and manufacturing facilities are in China and the company's office in the United States is located in Sunnyvale, Cal.

LDK's biggest obstacle is turning a profit from production. Once again, Wall Street is looking for a significant earnings loss to be reported before the market opens Tuesday. Analysts expect LDK to lose 96 cents a share, an improvement over the $1.46 lost in the corresponding period a year ago.

After reviewing LDK's balance sheet and cash burn rate, the $1.39 current share price may be generous. LDK is more or less broke from a realistic financial picture. At the close of 2012, the company held about $265 million in cash and short-term investments. After adding in inventory and subtracting for the near-term liabilities, the balance sheet turns upside down quickly.

LDK depends on European sales, and if you've turned on the news lately you know the popping of Champaign corks has slowed over the last four years without an end in sight. Germany, arguably the strongest member of the European Union, cut solar subsidies, as did other member nations.

The loss of the subsidies cast storm clouds over solar that haven't dissipated. In fact, Chinese solar companies are right in the cross-hairs of European trade negotiators. Europe may increase import duties for solar panels from 37% to 68%, depending on the firm.
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