First-quarter earnings season is about halfway over, but we are still rounding out 2011's earnings report from the solar industry. LDK Solar (NYSE: LDK ) delayed its earnings report to make sure it got its writedowns right, and boy were they bad.
During the fourth quarter, LDK's revenue was down 11% to $420.2 million, and net loss was $588.7 million, or $4.63 per share. Gross margin, a proxy that shows how competitive a manufacturer is, was -10.1% even after you strip out a $232.6 million writedown. These numbers were absolutely awful, but it gets worse.
Management's outlook for the first quarter, which has been over for a month, is for revenue of $190 million to $230 million. This should lead to another huge quarterly loss. Somehow, even after a terrible first quarter, management expects to post over $2 billion in revenue during 2012.
Careening toward disaster
LDK Solar has long been on my short list of solar companies that won't survive much longer, and this earnings report is further proof why. The company can't even sell the product it makes above cost, and with $2.2 billion in short-term debt and $900 million in long-term debt, the sun is setting on this manufacturer. Funding from China is keeping it afloat, but I wonder how long that will last when there are better investments for the Chinese government to make right now.
LDK is underperforming even the worst names in solar right now. JA Solar (Nasdaq: JASO ) , which also supplies cells to manufacturers, is clinging to a slightly positive gross margin. Suntech Power (NYSE: STP ) , which can almost match LDK's debt, has posted some of the best gross margins in the business and is one of the companies that may emerge after consolidation.
A buyout of LDK isn't even likely at this point. High-cost manufacturing capacity is leaving the market quickly, and I don't see Chinese manufacturers being eager to add more capacity when the capacity they have is underused. I don't see how this could end well for LDK.
A note to solar buffs
I will be covering Greentech Media's Solar Summit 2012 starting tomorrow. I will be tweeting live @FlushDrawFool, and there will be coverage of the events, as well as interviews, in the coming days on Fool.com. Send me a tweet, email, or message in the comments section below if you have questions you want me to ask industry experts. Check back for updates.
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