LDK Solar Co., Ltd. Q1 2010 Earnings Call Transcript

LDK Solar Co., Ltd. Q1 2010 Earnings Call Transcript
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LDK Solar Co., Ltd. (LDK)

Q1 2010 Earnings Call Transcript

May 10, 2010 5:00 pm ET

Executives

Pia Kristiansen – IR, The Blueshirt Group

Jack Lai – EVP, CFO & Secretary

Xiaofeng Peng – Chairman & CEO

Xingxue Tong – President & COO

Yuepeng Wan – SVP & Chief Technology Officer

Analysts

Vishal Shah – Barclays Capital

Sunil Gupta – Morgan Stanley

Edwin Mok – Needham & Company

Hendi Susanto – Gabelli & Company

Sanjay Shrestha – Lazard Capital Markets

Paul Leming – Soleil Securities

Lu Yeung – Banc of America/Merrill Lynch

Mahaveer Sanghvi [ph] – UBS

Presentation

Operator

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» LDK Solar Co., Ltd. Q4 2009 Earnings Call Transcript
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Good afternoon, ladies and gentlemen, thank you for standing by. Welcome to the LDK Solar’s first quarter 2010 earnings conference call. During today’s presentation, all participants will be in a listen-only mode. Following the presentation, the conference will be open for questions. (Operator instructions) The conference is being recorded today, Monday, May 10

th

, 2010. And at this time, I would like to turn the conference over to Pia Kristiansen.

Pia Kristiansen

Good afternoon and thank you for joining us on today’s conference call to discuss LDK Solar’s first 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 Xingxue Tong, Chief Operating Officer; and Dr. Yuepeng Wan, Chief Technology Officer.

After the market closed in the US today, LDK Solar issued a press release discussing the results for its first quarter 2010. We also filed a press release on Form 6-K with the US Securities and Exchange Commission. This 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 providing future events or the future financial performance of the company made pursuant to the Safe Harbor provisions of the US 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 filed 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.

I would now like to turn the call over to Mr. Jack Lai, Executive Vice President and CFO, to go over LDK Solar’s first quarter 2010 financial results. Jack?

Jack Lai

Thank you, Pia. Good afternoon and thank you for joining us to discuss the results of LDK Solar for the first quarter of 2010. Net sales for the first quarter was $347.6 million, up 40% from $304.6 million in the fourth quarter. Wafer shipments, including our processing service business, increased 25% sequentially to 426.7 megawatts from 340.4 megawatts in the fourth quarter.

Wafer sales which exclude the processing service business decreased from 288.1 megawatts in the fourth quarter of 2009 to 256.7 megawatts in the first quarter of 2010. The average selling price for wafers was $0.83 per watt in the first quarter of 2010. Sales returns made in the first quarter of 2010 were $1.8 million. OEM shipments were 170 megawatts in the first quarter. This increase in the first quarter was due to a one-time OEM order from a customer.

Module shipments were 31.3 megawatts in the first quarter of 2010, up from 23.2 megawatts in the fourth quarter of 2009. By geography, revenue in the first quarter was 41.8% generated from China; 25.6% from Asia-Pacific, excluding China; 21.5% from Europe; and 11.1% from North America. Our top 10 accounts in the first quarter accounted for 56.9% of total revenues, with the top three accounts combined accounting for 28.6%.

Gross margin in the first quarter was 15.7%. The sequential improvement in our gross margin in the first quarter was due to strong wafer and OEM sales during the quarter. We anticipate that the improvement in ASP trends throughout the year should allow us to expand our gross margin in the next few quarters.

Our wafer conversion cost was $0.31 per watt, and the average cost of polysilicon we consumed was $64 per kilogram. Operating expenses were $21.6 million in the first quarter of 2010, down from $33.7 million in the fourth quarter of 2009. Our fourth quarter operating expenses included $12.2 million associated with the settlement of our class action lawsuit and related legal expenses. Our share-based compensation expenses were approximately $1.9 million in the first quarter of 2010.

Operating margin in the first quarter was 9.5%. Net income for the first quarter was $7.2 million, and earnings per diluted ADS was $0.06. Approximately 125.8 million shares were used in completing the diluted EPS. Depreciation and amortization was $33.6 million for the first quarter. Capital expenditures were $100.8 million in the first quarter, which includes $65.3 million for wafers and the modules and $34.6 million for polysilicon.

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