Ucilia Wang 08 12 09, 5:05 PM

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LDK Widens Quarterly Loss, Posts Negative 90% Gross Margin

LDK Solar (NYSE: LDK) disappointed investors Wednesday by posting greater losses for the second quarter, prompting its shares to drop nearly 16 percent to reach $9.44 per share in after market trading.

The Chinese silicon wafer maker posted $216.9 million in net loss, or $2.03 per ADS, on $228.3 million in revenue for the second quarter. In comparison, it posted $22.5 million in net loss, or 21 cents per ADS, on $283.3 million in revenue for the first quarter. In the second quarter of 2008, the company posted $149.5 million in net income, or $1.29 per ADS, on $441.7 million in revenue.

Gross margin reached negative 90 percent, compared 25.4 percent in the year-ago period and 1.7 percent in the first quarter of this year.

During a conference call to discuss its earnings, an analyst asked why the company wouldn't just stop production given the terrible gross margin. In reply, Chief Financial Officer Jack Lai said, "We need to support our cell and module customers around the world. They have their customers who require their support. In our business, we believe in the long-term profitability and long-term relationships. Even though we are hurting at this moment, we are working hard to get through these tough challenges."

LDK executives said the rapid decline in wafer pricing and low market demand had a big impact on its financial figures.

The company said it took a $175.8 million inventory write-down and recorded $16.7 million in lost in purchase commitments for the second quarter. The company cut its workforce by 223 people to reach a total of $13,064.

Lai said the company needs to raise money and is applying for loans from China-based banks. LDK could end up securing RMB 2.5 billion ($365.7 million) or more in loans to fund its operations, he added. The company also is working with banks to replace short-term loans with long-term loans to reduce liabilities. It also is looking at offering up to $200 million in new shares when market conditions improve, Lai said. Most of the proceeds from the offering would be used to pay off short-term loans. 

The company is continuing its plans to complete a factory that could produce 15,000 metric tons of silicon per year.

LDK wasn't alone in experiencing a tough second quarter. JA Solar and ReneSola also reported their quarterly earnings today, and the results were mixed.