LDK Cuts, Suntech Waits As Solar Winter Nears End 太阳能行业冬季将结束：赛维裁员，尚德等待

By newsdoug on April 10, 2012

Suntech sees skies clearing by year end Spring could be coming soon for embattled solar cell makers, according to the chief executive of industry leader Suntech (NYSE: STP), who said the sector could return to the profit column by the end of the year. Unfortunately, that could be too late for weaker players like LDK Solar (NYSE: LDK), which is reportedly making massive layoffs as it struggles just to survive through the current solar winter. The last year has been a tough one for solar cell makers, which have seen prices plunge amid a huge supply glut and the threat of anti-dumping tariffs by western markets like the US and Europe, which accuse Beijing of unfairly subsidizing its industry. But recent stabilization of prices and signs that US punitive tariffs won’t be as harsh as many feared (previous post) have brought some new optimism back to the space, leading Suntech Chairman Shi Zhengrong to forecast that his company and the entire industry should return to profitability by around the fourth quarter of this year. (English article) He added that shipments will begin to rise on a sequential basis starting in the second quarter of this year as manufacturers finish clearing out old inventory accumulated during the industry’s worst-ever downturn. From that point, margins should start to improve, helping companies to pare their losses and make it back to the black by the end of the year. Investors seem cautiously optimistic on the future, with Suntech shares rising sharply at the beginning of the year before giving back a lot of the gains in recent weeks. Still, at current levels they are about 20 percent above their all-time lows reached last year, and I would expect them to gradually rise through the year barring any unforeseen new developments. While Suntech and its healthier peers may have the resources to weather the next 8 or 9 months, the same might not be true for LDK, which is implementing mass layoffs in its struggle to survive through the current downturn, according to domestic media reports citing unnamed company sources. (Chinese article) LDK isn’t commenting, but it is struggling under a massive pile of debt, and has only survived due to a large issue of new bonds last year that many believe were purchased by Chinese government entities. Like Suntech, LDK shares also rallied sharply at the beginning of the year then gave back much of the gains, though they are also still up around 20 percent from all-time lows. Right now all solar shares are clearly moving in unison, but I would expect to see a divergence begin sometime around the middle of the year after companies starting giving their first quarter earnings reports and guidance for the rest of the year. At that point, look for healthier players like Suntech to show some strong growth potential, while weaker players like LDK could get stuck in the doldrums for a longer time — if they manage to survive the current downturn.

Bottom line: The solar power sector should see a gradual rebound for the rest of the year and could return to profits by year end, but that may be too late for some of its weaker players.

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