LDK Solar cuts jobs as margins collapse

Mon Apr 30, 2012 5:07pm EDT

(Reuters) - Solar products maker LDK Solar Co Ltd said it cut more than 5,000 jobs this year as the industry grapples with a steep decline in prices that has decimated profit margins and pushed several companies into bankruptcy.

LDK Solar's shares, which had touched a six-month low of $2.55 earlier in the day following weak results and a bleak outlook, reversed course to close up 7 percent at $3.18 on the New York Stock Exchange.

LDK Solar, which supplies polysilicon, wafers and cells used to build photovoltaic panels, has cut more than 20 percent of its workforce this year to 19,195 employees, said CFO chief Jack Lai on a post-earnings conference call.

Prices for modules that turn sunlight into electricity halved last year, stemming largely from overproduction in China and lower subsidies in Europe.

First Solar Inc cut 2,000 jobs, or 30 percent of its work force, earlier this month, following cuts at wafer producer MEMC Electronics Materials Inc last December.

Germany's Q-Cells, once the world's largest solar maker, filed for insolvency earlier this month. Several small companies in the United States have also folded, including Solyndra, whose collapse triggered sharp political criticism of U.S. government's support for the industry.

"In 2012, we expect excess capacity and further policy uncertainties in Europe and the U.S. will result in continued intense competition within the solar industry," LDK Chief Executive Xiaofeng Peng said in a statement.

Global demand for solar panels grew by about 40 percent last year, but excess manufacturing capacity created a glut that forced companies to slash prices.

LDK forecast first-quarter module shipments of 170 megawatts (MW) to 180 MW. It shipped 255.5 MW in the fourth quarter.

The company said it expects revenue of $190 million to $230 million for the first quarter. Analysts were expecting $397.2 million, according to Thomson Reuters I/B/E/S.

The stock has lost nearly three-fourths of its value in the past 12 months. The broader WilderHill Clean Energy index fell 24 percent during the same period.

LOW POLYSILICON PRICES

LDK expects to produce 1,800 metric tons (MT) to 1,900 MT of polysilicon -- the main raw material in the solar industry -- in the first quarter. The company produced 2,317.8 MT in the fourth quarter.

A frenzy in solar power demand pushed up prices of polysilicon to around $500 per kg in 2008, before the global financial crisis struck. The resulting oversupply hammered the spot prices of the material down to around $20 per kg.

LDK, which had delayed reporting its fourth-quarter results, posted a loss of $4.63 per American Depositary Shares (ADS), compared with a profit of $1.09 per ADS a year ago.

It recorded a negative gross margin of 65.5 percent for the quarter, compared with a positive gross margin of 27.3 percent a year ago.

Net sales fell 54 percent to $420.2 million. (Reporting by Vaishnavi Bala, Sakthi Prasad and Swetha Gopinath in Bangalore; Editing by Sriraj Kalluvila, Saumyadeb Chakrabarty)

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