LDK Solar CEO Discusses Q3 2010 Results - Earnings Call Transcript
LDK Solar Co., Ltd. (
)
Q3 2010 Earnings Call Transcript
November 8, 2010 5:00 pm ET
Executives
Grace Reyes – IR, The Blueshirt Group
Jack Lai – EVP, CFO and Secretary
Xiaofeng Peng – Chairman and CEO
Sam Tong – President and COO
Yuepeng Wan – SVP and CTO
Analysts
Vishal Shah – Barclays Capital
Brandon Moller [ph] – ThinkEquity
Edwin Mok – Needham & Company
Min Xu – Jefferies & Company
Ahmar Zaman – Piper Jaffray
Sanjay Shrestha – Lazard Capital Markets
Lu Yueng – UBS
Sunil Gupta – Morgan Stanley
Presentation
Operator
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Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the LDK Solar Company’s Third Quarter 2010 Earnings Conference Call. At this time, all participants will be in a listen-only mode. Following the presentation, instructions will be given for the question-and-answer session. (Operator instructions) As a reminder, this conference is being recorded today, Monday, November the 8th of 2010.
I'd now like to turn the conference over to Ms. Grace Reyes. Please go ahead.
Grace Reyes
Good afternoon and thank you for joining us on today’s conference call to discuss LDK Solar’s third quarter 2010 financial results. This call is being broadcast live over the web and can be accessed on the Investor Relations section of LDK Solar’s website, www.ldksolar.com for 90 days.
On today’s call are Xiaofeng Peng, Chairman and Chief Executive Officer; Jack Lai, Chief Financial Officer; and Sam Tong, Chief Operating Officer; and Dr. Yuepeng Wan, Chief Technology Officer.
After the market closed in the U.S. today, LDK Solar issued a press release discussing the results for its third quarter 2010. We also filed a press release on Form 6-K with the U.S. Securities and Exchange Commission. The press release is accessible online at the company’s website, as well as the SEC’s website, or you can call The Blueshirt Group at 415-217-4961 and we will fax or e-mail you a copy.
We would like to remind you that during the course of this conference call, LDK Solar’s management team may make projections or other forward-looking statements regarding future events or the future financial performance of the company made pursuant to the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995.
Although LDK Solar believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions, such statements are subject to risk and uncertainties that could cause actual results to differ materially from those projected. We refer you to the documents that LDK Solar files from time to time with the SEC, specifically the company’s most recent Form F-20 and any Form 6-Ks. These documents identify important factors that could cause the actual results to differ materially from those contained in our projections or forward-looking statements.
And now, I would like to turn the call over to Mr. Jack Lai, Executive Vice President and CFO, to go over LDK Solar’s third quarter 2010 financial results. Jack?
Jack Lai
Thank you, Grace. Good afternoon and thank you for joining us to discuss the results of LDK Solar for the third quarter of 2010. Net sales for the third quarter were $675.6 million, up 19.5% from $565.3 million in the second quarter.
Wafer sales increased to $426 million from $321.7 million. Module sales increased to $164.7 million from $130.8 million. Polysilicon sales decreased to $29 million from $31.3 million due to the increase of internal consumption during the quarter. OEM sales for wafer decreased to $41.7 million from $68.4 million, while OEM sales for module increased to $3.4 million.
By geography, net sales in the third quarter was 31.4% generated from China, 17% from Asia-Pacific excluding China, 46.1% from Europe, and 5.5% from North America. Our top 10 accounts in the third quarter accounted for 50.2% of total revenues, with the top three accounts combined accounting for 27%.
Wafer shipments including our processing business increased 11.6% sequentially to 569.5 megawatts from 510.5 megawatts in the second quarter. Wafer sales, which exclude the OEM business, increased 29% to 487 megawatts from 377.6 megawatts in the second quarter of 2010. The average selling price for wafers was $0.87 per watt in the third quarter of 2010.
Sales returns provision in the third quarter of 2010 was $2 million. OEM shipments were 82.5 megawatts in the third quarter, which was sequentially down from the second quarter, since we have used most of our capacity to address the wafer sales demand.
Module shipments including our processing business were 94.1 megawatts in the third quarter of 2010, up from 73.9 megawatts in the second quarter of 2010.
Gross margin in the third quarter was 22.2% compared to 18% in the second quarter. Our gross margin for our wafer business was 27.9% in the third quarter, which increased from 21.8 in the second quarter of 2010. Gross margin for our polysilicon business also increased in the third quarter to 30.3% from 17.4% in the second quarter of 2010. Gross margin for our module business declined to 4.6% in the third quarter from 7.6% in the second quarter, due to tight supply of cells and higher cost of raw materials in the third quarter.
With the continued ramping up of our cell production facilities, we believe our margin on modules will increase substantially in the near future. Overall, the sequential improvement in our gross margin in the third quarter was due to improved ASP trends, supported by strong demand. We anticipate that continued improvement in ASP trends together with expected reduction in our overall manufacturing costs should allow us to expand our gross margin in the next few quarters.
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