LDK Solar Shares Leap; Earnings Soar Past Forecasts

LDK Solar on Monday posted quarterly earnings that blew past Wall Street estimates as a manufacturing capacity expansion allowed the company to sell more solar wafers, sending its shares up 18 percent in extended trade.

The Chinese solar power company also raised its revenue and wafer shipment forecasts for the year.

Second-quarter net income rose to $149.5 million, or $1.29 per American Depositary Share, from $49.8 million, or 45 cents per ADS, a year ago.

Excluding the change in fair value of prepaid forward contracts, the company earned 82 cents a share, according to Reuters Estimates. Wall Street analysts had been expecting earnings of about 40 cents a share.

LDK and other solar power companies have enjoyed rapid growth in the last year as rising fossil fuel prices and concerns about global warming have spurred demand for renewable energy sources.

In recent months, however, investors have shunned solar stocks due to fears that an expected pullback in Spain's generous government subsidies for solar power would hamper demand next year.

ThinkPanmure analyst Peter Peng said much of the second-quarter demand for LDK's solar wafers likely came from Spanish solar system installers who are scrambling to finish projects before a new cap on subsidies goes into effect.

"There is a pull for the Spanish integrators to get projects in by September, but even beyond that most of these solar companies are seeing very, very strong demand for 2009," Peng said. "There is a possibility that Germany, Italy and potentially France and other smaller markets could offset the loss of market size in Spain."

More Capacity, More Sales

LDK's second-quarter revenue was $441.7 million, well above the company's May forecast of $278 million to $288 million. Analysts were expecting $288 million, on average, according to Reuters Estimates.

LDK raised its full-year revenue outlook to between $1.65 billion and $1.75 billion. It had previously expected revenue of $1.08 billion to $1.18 billion for 2008.

"We experienced substantial revenue growth during the second quarter as our wafer capacity expansion exceeded our expectations," LDK Chairman and Chief Executive Xiaofeng Peng said in a statement, adding that construction of LDK's polysilicon plants remained on schedule.

Polysilicon is the solar industry's key raw material, and prices have soared in recent years due to booming demand.

To help offset those higher costs, LDK is currently building its own polysilicon production plant adjacent to its solar wafer facility in Xinyu City, China.

For the full year, LDK said wafer shipments are expected to be between 750 megawatts and 770 MW, up from a previous forecast of 560 MW to 580 MW for the year.

The company's 2008 gross margin forecast was unchanged at between 23 percent and 28 percent.

LDK shares rose to $39.76 after closing up 9 cents at $33.58 on the New York Stock Exchange.