The haves and the have-nots of the solar industry are starting to separate themselves, but those in the latter category are still holding on for dear life. LDK Solar (NYS: LDK) was the latest "have-not" to issue less-than-stellar guidance for the fourth quarter in advance of releasing earnings in April.
LDK said that it expects to report $440 million to $450 million in revenue, wafer shipments of 215 MW to 220 MW, and module shipments of 250 MW to 260 MW. The revenue number falls at the low end of its old guidance, but the module shipments guidance is near the top end of previous guidance. That likely means that margins will be negative, just as they were last quarter, and may not meet the 2% to 7% gross margin management expected. When an inventory write-down is included, something many companies have done in recent quarters, we do know that management is expecting negative gross margins.
The big question for LDK is: What will adjusted gross margins look like compared to other solar companies? Leading manufacturers like SunPower (NAS: SPWR) , Canadian Solar, and Suntech Power (NYS: STP) have posted margins in the high single digits for the fourth quarter. Lower-tier supplier Renesola (NYS: SOL) just reported negative gross margins, despite shipping more product than it anticipated. I expect LDK to be much closer to Renesola than the others.
JA Solar (NAS: JASO) will come out with earnings tomorrow morning, giving us another peek into the solar-supplier market. JA Solar is one of the better suppliers in the market, but I'm still not expecting strong results.
Investors haven't met LDK's preliminary numbers with a lot of enthusiasm. As I'm writing this, the stock is down 4.5% for the day. In the bigger picture, if consolidation is indeed going to take place in the solar industry, one of these weaker players is going to have to crumble -- and LDK Solar, expecting revenue at the low end of guidance despite shipping more modules, isn't good news. Now the question may become: How long will Chinese banks allow the company to maintain its massive short-term debt load while losing money on everything it makes?
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At the time thisarticle was published Fool contributorTravis Hoiumowns shares of SunPower and manages an account that owns shares of SunPower. You can follow Travis on Twitter at@FlushDrawFool, check out hispersonal stock holdings, or follow his CAPS picks atTMFFlushDraw.Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.
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