LDK Solar Co., Ltd. Q2 2010 Earnings Call Transcript

LDK Solar Co., Ltd. Q2 2010 Earnings Call Transcript
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LDK Solar Co., Ltd. (LDK)

Q2 2010 Earnings Call Transcript

August 10, 2010 5:00 pm ET

Executives

Grace Reyes – IR, The Blueshirt Group

Jack Lai – EVP, CFO and Secretary

Xiaofeng Peng – Chairman and CEO

Xingxue Tong – President and COO

Yuepeng Wan – SVP and CTO

Analysts

Edwin Mok – Needham & Company

Paul Leming – Soleil Securities

Matt Farwell – Imperial Capital

Colin Rusch – ThinkEquity

Vishal Shah – Barclays Capital

Sam Dubinsky – Wells Fargo

Sanjay Shrestha – Lazard Capital Markets

Presentation

Operator

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Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the LDK Solar’s second 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 opened for questions. (Operator instructions) The conference is being recorded today, Tuesday, August 10th, 2010. And at this time, I would like to turn the conference over to Grace Reyes. Please go ahead, ma’am.

Grace Reyes

Good afternoon and thank you for joining us on today’s conference call to discuss LDK Solar’s second 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 U.S. today, LDK Solar issued a press release discussing the results for its second 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 you 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 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.

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 second quarter 2010 financial results. Jack?

Jack Lai

Thank you, Grace. We are so happy to have you joining us for the LDK Solar’s investor relationship team. We are very happy to have you. Good afternoon and thank you for joining us to discuss the result of LDK Sola for the second quarter of 2010. Net sales for the second quarter were $565.3 million, up 63% from $347.6 million in the first quarter. Wafer, module and polysilicon sales significantly increased quarter-over-quarter. Wafer sales increased to $321.7 million from $212.0 million. Module sales increased to $130.8 million from $54.4 million. Polysilicon sales increased to $31.3 million from $6.3 million. OEM sales slightly decreased to $68.4 million from $71.9 million.

By geography, wafer shipments in the second quarter was 38.1% generated from China, 21.2% from Asia-Pacific, excluding China, 32.6% from Europe, and 8.1% from North America. Our top ten accounts in the second quarter accounted for 53.4% of total revenues with the top three accounts combined accounting for 25.9%.

Wafer shipments including our processing service business increased 20% sequentially to 510.5 megawatt from 426.7 megawatts in the first quarter. Wafer sales, which exclude the OEM business, increased to 377.6 megawatt from 256.7 megawatts in the first quarter of 2010.

The average selling price for wafers was $0.85 per watt in the second quarter of 2010. Sales returns (inaudible) in the second quarter of 2010 was $1.2 million. OEM shipments were 132.9 megawatt in the second quarter, which was sequentially down due to higher OEM shipments in the first quarter from one-time customer order. Module shipments were 73.9 megawatt in the second quarter of 2010, up from 31.3 megawatt in the first quarter of 2010.

Gross margin in the second quarter was 18.0% compared to 15.7% in the first quarter. Our gross margin for our wafer business was 21.8% in the second quarter, which increased from 17.1% in the first quarter of 2010. Gross margin for all polysilicon business also increased in the second quarter to 17.4% from 7.4% in the first quarter of 2010.

Gross margin for our module business declined to 7.6% in the second quarter from 8.3% in the first quarter. We anticipate that gross margin for our module business will rebound in the third quarter as we gain efficiencies in recently acquired strategic business unit.

Overall, the substantial improvement in our gross margin in the second quarter was due to improved ASP trends supported by strong demand. We anticipate that continuing improvement in ASP trends throughout the year should allow us to expand our gross margin in the next few quarters. Our wafer convergence cost was $0.31 per watt and the average cost of polysilicon we consumed was $61.5 per kilogram in the second quarter of 2010.

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