LDK Solar Co., Ltd. (LDK)

Q2 2011 Earnings Call

August 29, 2011 8:00 a.m. ET

Executives

Ellen Davis - The Blueshirt Group, Investor Relations

Xiaofeng Peng - Chairman and Chief Executive Officer

Jack Lai - Executive Vice President, Chief Financial Officer

Xingxue Tong - President, Chief Operating Officer

Yuepeng Wan - Senior Vice President, Chief Technology Officer

Analysts

Edwin Mok - Needham & Company

Sanjay Shrestha - Lazard Capital Markets

Colin Rusch - ThinkEquity

Karen Tai - Piper Jaffray

Philip Shen - Roth Capital Partners

Sam Dubinsky - Wells Fargo

Jesse Pichel - Jefferies

Presentation

Operator

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Good day, ladies and gentlemen. Thank you for standing by. Welcome to LDK Solar Company’s Second Quarter 2011 Earnings Conference Call. During today’s presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be opened for questions. (Operator Instructions)

This conference is being recorded today, Monday, August 29, 2011. At this time, I’d like to turn the conference over to Ms. Ellen Davis with The Blueshirt Group. Please go ahead, Ms. Davis.

Ellen Davis

Thank you. Good morning and thank you for joining us on today’s conference call to discuss LDK Solar’s second quarter 2011 financial results. This call is being broadcast live over the web and can be accessed on the Investor Relation’s section of LDK Solar’s website at www.ldksolar.com for 90 days.

On today’s call are Xiaofeng Peng, Chairman and Chief Executive Officer; Jack Lai, Chief Financial Officer; Sam Tong, Chief Operating Officer; and Dr. Yuepeng Wan, Chief Technology Officer.

Before the market opened in the U.S. today, LDK Solar issued a press release discussing the results for its second quarter 2011. We filed the 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 on the SEC’s website.

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 risks 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 20-F 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’d like to turn the call over to Mr. Jack Lai, Executive Vice President and CFO to go over LDK Solar’s second quarter 2011 financial results. Jack?

Jack Lai

Thank you, Ellen. Good morning and thank you for joining us to discuss the results of LDK Solar for the second quarter of 2011. Net sales for the second quarter were $499.4 million, down 34.8% from $766.3 million in the first quarter. Wafer sales decreased to $281.7 million from $526.5 million. Margin sales decreased to $101.8 million from $183.7 million. Polysilicon sales increased to $76.1 million from $8.6 million. OEM sales for wafer decreased to $0.6 million from $3.6 million. OEM sales for module decreased to $6.0 million from $6.8 million.

During the second quarter LDK Solar had an inventory write-down of $52.9 million due to the significant drop in market price for wafers and modules during the quarter. As a result gross margin and operating results were negatively impacted. By geography, net sales in the second quarter were 44.4% generated from China, 30.7% from Asia Pacific excluding China, 24.7% from Europe and 0.2% from North America. Our top ten accounts in the second quarter accounted for 51.5% of total revenues, with the top three accounts combined accounting for 25.8%.

Wafer shipments, including our processing business decreased to 429.2 megawatts from 631.5 megawatts in the first quarter of 2011. Wafer shipments which exclude the OEM business decreased to 427.8 megawatts from 623.6 megawatts in the first quarter of 2011. The average selling price for wafers was $0.66 per watt in the second quarter of 2011. Sales returns reserve in the second quarter of 2011 $2.0 million. OEM shipments decreased to 1.4 megawatt from 7.8 megawatt in the first quarter of 2011.

Module shipments, including our processing business, was 79.4 megawatts in the second quarter of 2011, down from 118.7 megawatts in the first quarter of 2011. During the second quarter all module sales were impacted by lower demands stemming from policy changes in Europe.

Gross margin in the second quarter was 2.2%, compared to 31.5% in the first quarter. Our gross margin for all water business was 5.3% in the second quarter which decreased from 38.0% in the first quarter of 2011. Gross margin for our polysilicon business decreased in the second quarter to 34.0% from 58.2% in the first quarter of 2011. Gross margin for our module business decreased to negative 31.7% in the second quarter from a positive 15.6% in the first quarter of 2011.

Overall, the significant sequential decline in our gross margin in the second quarter was due to price erosion which was significantly steeper than anticipated. And the inventory write-down taken during the second quarter, in recent weeks we are seeing ASPs beginning to stabilize. Based on the current business environment, combined with a expected reduction in our overall manufacturing cost, we expect to improve our gross margin during the second half of this year.

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