Solar's Wimpy Wafer Earnings

Unless your name is First Solar (Nasdaq: FSLR  ) , your solar results stink.

That's the general conclusion we're led to draw after hearing from all corners of the solar market. We saw Energy Conversion Devices (Nasdaq: ENER  ) grasp in vain for green shoots, solar equipment provider Applied Materials (Nasdaq: AMAT  ) go splat, and revenues go missing at JA Solar (Nasdaq: JASO  ) . An d now, a pair of wafer makers have their own weak results to report.

Things actually could have been quite a bit worse for ReneSola (NYSE: SOL  ) , considering that blended average sales prices (ASPs) for its mono- and multicrystalline wafers cratered by more than 40% sequentially. Shipments only fell 10% from the prior quarter, bringing revenue down by about a third.

With prices plummeting, margins didn't stand a chance of being in the black this quarter. The $68 million inventory writedown was smaller than the one recorded in the prior quarter, but it still kept gross profits deeply in negative territory.

Weighing on the second quarter outlook is the fact that first quarter order delays left ReneSola with an excess of inventory on hand, leading capacity utilization to drop from 80% or so to the 20% to 30% range in April. The firm's optimistic that it will get back to the 80% range for the remainder of the year, however.

Meanwhile, LDK Solar (Nasdaq: LDK  ) investors are feeling far from optimistic after that company's first quarter report, which included a large retroactive inventory writedown. The "sell" recommendation issued by yet another Wall Street research shop certainly set the tone for today's trading session.

LDK's top line actually surprised to the upside, coming in at $283 million. On a percentage basis, revenue registered right around the same level of decline as the smaller ReneSola. Volume suffered, while ASPs held up relatively well, at $1.54/watt versus ReneSola's $1.27.

Why the gap? LDK pointed to its long-term contracts, but that's not the whole story. ReneSola noted on its call that monocrystalline wafer pricing has lagged year-to-date, and mono wafers made up about one third of the firm's output in the first quarter. LDK, which is just moving into mono production this year, had less exposure to the drop in demand there.

With ReneSola talking about ASPs averaging around $1 for the rest of the year, LDK looks like its prices have quite a ways to fall. Combined with production costs that aren't all that much lower, LDK is in a tough spot today.