LDK Solar said Wednesday evening that its third-quarter profit jumped 40 percent from the second quarter and eightfold from the year-ago quarter.

The company (NYSE: LDK) posted a net income of $41.6 million, or 37 cents per share, compared to $28.7 million, or 29 cents per share, in the second quarter and $5 million, or 4 cents per share, for the third quarter of last year.

Net sales quadrupled to $158.7 million from $31.5 million in the third quarter of last year, beating the company's own guidance of between $140 million and $150 million (see LDK Steps Up 3Q Guidance). Analysts polled by Thomson Financial had expected a profit of 37 cents per share and revenue of $143.2 million.

"During the third quarter, we experienced continued robust demand for our wafers and made great strides in expanding our customer base," CEO Xiaofeng Peng said in a written statement.

In a conference call, LDK also raised its guidance for the fourth quarter to revenue of between $180 million and $185 million and a profit of 40 to 43 cents per share. In October, the company had estimated its fourth-quarter profit would be 27 to 41 cents per share on revenue of $165 million to $170 million (see Chinese Solar Gets a Boost).

But shareholders were unimpressed by the long-awaited earnings report. LDK shares fell 8.2 percent to $60.88 per share in after-hours trading as of 8 p.m. Eastern, on top of a 5.2-percent drop in regular trading Wednesday.

And analysts said they had plenty of unanswered questions.

On the earnings call, for instance, the company wasn't able to answer a question from Piper Jaffray analyst Jesse Pichel about why competitors using some of the same machines were reporting "significantly higher" polysilicon costs.

LDK, which had been facing allegations of discrepancies in its silicon inventory from a former financial controller, on Monday announced that it had been exonerated by an independent audit (see Independent LDK Audit Finds No Material Errors, New Details Surface as LDK Stock Continues to Plunge and LDK Says Inventory Allegations Have 'No Merit').

The company still faces a U.S. Securities and Exchange Commission investigation and a class-action lawsuit, but says it is confident of the independent audit's findings (see LDK Shares Rise Despite Class-Action Threat and LDK Says SEC is Inquiring into Inventory Discrepancy Allegations).

"With the inventory investigation behind us, we have returned our focus to growing our business," Peng said in the written statement.

In the earnings call, he said the company expects some price erosion in 2008, with prices dropping about 1.5 to 2 percent per quarter "in the long run."

Peng also said the company expects a "slight squeeze" in its gross margins, but said it didn't expect its polysilicon costs would increase much.

LDK said it has fixed contracts for 75 percent of the silicon, including recycled silicon, that it expects to require next year -- up from 70 percent only a few weeks ago -- and that slurry recycling and other efforts should offset those increases.

Peng also said LDK has broken ground on the construction of its polysilicon plant, expecting to have the capacity to produce 7,000 metric tons of polysilicon annually by the end of next year and 16,000 metric tons by the end of 2009 (see LDK Shores Itself with New Silicon Supply).

But Nick Sarno, senior vice president of manufacturing, didn't forecast the amount of silicon it actually will produce next year and Lai said the amount probably would be relatively small compared to the amount of silicon the company will use next year.

"We know this is not going to be as easy as making wafers," Sarno said, adding that LDK has hired an experienced team to design and build the plant. "It will take some time to get our costs down to the level of our more experienced competitors, but we expect to get to the point where we'll get competitive in the least possible time."

Peng said the company had signed four long-term wafer-supply contracts during the third quarter and five more since the quarter closed, and called the agreements "a testament to the quality of our products."

The company also released another detail about a 10-year contract to sell silicon wafers withsolar-cell manufacturer Q-Cells, saying the latter would prepay about 10 percent of the undisclosed value of the deal (see LDK Shares Jump 30% on Q-Cells Deal).

LDK also has no intention of expanding into other parts of the supply chain, Peng said.

"The polysilicon production will be used internally and only wafers will be sold to customers," he said. "We have no interest in moving downstream because we don't want to compete with our customers."