LDK Solar Co., Ltd. (

LDK

)

Q3 2011 Earnings Call

November 22, 2011 08:00 AM ET

Executives

Xiaofeng Peng - Chairman and Chief Executive Officer

Ellen Davis - The Blueshirt Group, Investor Relations

Jack Lai - Executive Vice President, Chief Financial Officer

Xingxue Tong - President, Chief Operating Officer

Yuepeng Wan - Senior Vice President, Chief Technology Officer

Analysts

Shawn Lockman – Piper Jaffray

Sanjay Shrestha – Lazard Capital Markets

Dan Ries – Collins Stewart

Joe Osha – Bank of America Merrill Lynch

Paul Leming – Ticonderoga Securities

Edwin Mok – Needham & Company

Colin Rusch – ThinkEquity

Presentation

Operator

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Good day, ladies and gentlemen. Thank you for standing by. Welcome to LDK Solar Company Third 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, Tuesday, November 22, 2011.

At this time, I'd like to turn the conference over to Ellen Davis with the Blueshirt Group. Please go ahead, ma'am.

Ellen Davis

Good morning and thank you for joining us on today's conference call to discuss LDK Solar's third quarter 2011 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 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.

Earlier this morning, LDK Solar issued a press release discussing the results for its third quarter of 2011. We also 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 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 third 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 third quarter of 2011.

Net sales for the third quarter were $471.9 million, down 5.5% from $499.4 million in the second quarter.

Wafer sales decreased to $145.6 million from $281.7 million. Module sales increased to $280.7 million from $101.8 million. Polysilicon sales decreased to $75.7 million from $76.1 million. OEM sales for wafers decreased to $0.05 million from $0.06 million. OEM sales for module increased to $9.1 million from $6.0 million.

During the third quarter, LDK Solar had an inventory write-down of $47.3 million due to the rapidly declining market price for wafers and modules during the third quarter. As a result, gross margin and operating results were negatively impacted. By geography, net sales in the third quarter were 35.2% generated from China, 16.6% from Asia Pacific excluding China, 42.9% from Europe and 5.3% from North America. Our top 10 accounts in the third quarter accounted for 36.9% of total revenues, with the top three accounts combined accounting for 17.6%. Wafer shipments, including our processing business, decreased to 292.5 megawatts from 429.2 megawatts in the second quarter of 2011. Wafer shipments, which exclude the OEM business decreased to 292.4 megawatts from 427.8 megawatts in the second quarter of 2011.

The average selling price for wafers was $0.50 per watt in the third quarter of 2011. Sales returns reserved in the third quarter of 2011 was $3.6 million. OEM shipments for wafers decreased to 0.04 megawatts from 1.4 megawatts in the second quarter of 2011.

Module shipments, including our processing business, were 192.1 megawatts in the third quarter of 2011, up from 79.4 megawatts in the second quarter of 2011. The average selling price for modules was $1.24 per watt in the third quarter of 2011. Module shipment significantly increased during the third quarter, reflecting some seasonal uptick in demand.

Gross margin in the third quarter was negative 3.6% compared to positive 2.2% in the second quarter. Our gross margin for our wafer business in the third quarter was a negative 26.5%, which decreased from positive 5.3% in the second quarter of 2011. Gross margin for our polysilicon business increased in the third quarter to 40.3% from 34.0% in the second quarter of 2011. Gross margin for our module business increased to negative 3.7% in the third quarter from negative 31.7% in the second quarter of 2011. Overall, the significant sequential decline in our gross margin in the third quarter was due to the severe price erosion, which was significantly steeper than anticipated and the inventory write-down taken during the third quarter.

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