LDK Solar Co. Ltd. (
LDK)
Q3 2008 Earnings Call Transcript
November 19, 2008 8:00 a.m. ET
Executives
Pita Christensen
Jack Lai Executive Vice President, Chief Financial Officer & Secretary
Xiaofeng Peng Chairman and Chief Executive Officer
Nicola Sarno Senior Vice President of Manufacturing
Analysts
Pierre Maccagno Needham & Company, LLC
Kim-Chong Tan UBS
Sam Dubinsky Oppenheimer & Co.
Jesse Pichel Piper Jaffray
Sanjay Shrestha Lazard Capital Markets
Titus Menzies Libertas Capital
Charles Yonts CLSA
Jake Greenblatt Barclays Capital
Paul Leming Soleil Securities
Presentation
Operator
Welcome to the LDK Solar third quarter 2008 earnings conference call on the 19th of November. Throughout todays presentation, all participants will be in a listen-only mode. After the presentation, there will be an opportunity to ask questions. If any participant has difficulty hearing the presentation, please press the * followed by the 0 on your telephone for operator assistance. I will now hand the conference over to Pita Christensen. Please go ahead.
Pita Christensen
Good morning and thank you for joining us on today''s conference call to discuss LDK Solar''s third quarter 2008 financial results. This call is being broadcast live over the Web and can be accessed on the Investor Relations section of LDK Solar''s website, www.ldksolar.com for 90 days. On today''s call are Xiaofeng Peng, Chairman and Chief Executive Officer, Jack Lai Chief Financial Officer, and Nick Sarno, Senior VP of Manufacturing.
Before the market opened in the US today LDK Solar issued a press release discussing the results for the third quarter 2008. We also filed the press release on Form 6-K with the US Securities and Exchange Commission. The press release is accessible online at the company''s website as well as the SEC''s website or you can call The Blueshirt Group at 415-217-4961 and we will fax or e-mail you a copy.
We would like to remind you that during the course of this conference call LDK Solar''s management team may make projections or other forward-looking statements regarding future events or the future financial performance of the company made pursuant to the Safe Harbor provisions at the US Private Securities Litigation Reform Act of 1995. Although LDK Solar believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions, such statements are subject to risk and uncertainties that could cause actual results to differ materially from those projected. We refer you to the documents that LDK Solar filed from time-to-time with SEC, specifically the company''s most recent Form F-1 and any Form 6-Ks. These documents identify important factors that could cause the actual results to differ materially from those contained in our projections or forward-looking statements.
And now I''d like to turn the call over to Mr. Jack Lai, Executive Vice President and CFO to go over LDK Solar''s third quarter 2008 financial results. Jack.
Jack Lai
Good morning and thank you for joining us to discuss LDK Solar''s third quarter financial results. LDK Solar achieved record revenues and profit in the third quarter of fiscal year 2008. Net sales were $541.8 million, up 22.7% sequentially from $441.7 million in the second quarter of 2008. Our revenue was at high-end of our previously released third quarter guidance.
Total wafer shipments including our processing service business increased 31.8% to 252.7 MW in the third quarter from 191.7 MW in the second quarter. Our wafer sales, which exclude the processing service business, increased 30.0% to 208.3 MW from 160.2 MW in the second quarter of 2008. The average selling price per watt was $2.48, an increase of $0.04 or approximately 1.6% from the prior quarter. The higher ASP was primarily a result of a price increase implemented in the second quarter.
Sales returns made in the third quarter was $2.0 million, decreased from approximately $2.1 million in the second quarter of 2008 as the sales return rate improved to 1.0% from approximately 1.4% in the prior quarter.
OEM shipments were approximately 44.3 MW in the third quarter of 2008. By geography, revenue was 28.6% generated from China, 41.8% from Europe, 25.7% from Asia Pacific excluding China and 3.9% from North America in the third quarter of 2008.
Our top 10 accounts in the third quarter of 2008 accounted for 73.7% of total revenues. Top three accounts totaled approximately 44.9%, while customers number four through ten each averaged approximately 4.1% of our total revenues.
Our gross margin during the third quarter 2008 was 22.7%, down from 25.4% in the second quarter of 2008. The expected decline in gross margin resulted primarily from increasing our silicon sourcing costs, which was partly offset by the selling price increase and the productivity improvements.
