Even ‘Steve Jobs of China’ may not be able to save LDK solar

LDK Solar Co. (LDK), the world’s second-largest maker of solar wafers, lost 38 percent of its market value in four trading days as analysts cut estimates and questioned whether its balance sheet can withstand a global oversupply and threats from US tariffs, according to a Bloomberg report today.

The company’s American depositary receipts closed at USD1.88 in New York, down from USD3.05 on May 23 and a 55 percent drop for the year.

Chinese solar companies have slumped since the US Commerce Department announced May 17 duties on solar cells imported from the country. LDK’s 35 percent slide since then was the worst among the 17-member Bloomberg Global Large Solar Energy index, and Aaron Chew, an analyst with Maxim Group LLC in New York, said high debt and slowing sales are a concern.

Investors “have for the most part identified LDK as the one solar company with the most precarious balance sheet and most liquidity issues,” Chew told Bloomberg in a telephone interview. “LDK’s solvency issues are coming to the forefront, and that’s just killing the stock. You have people rushing for the exits.”

The company reported net debt of USD2.9 billion in the fourth quarter. Sales were USD420.2 million and LDK forecast sales would fall to USD190 million to USD230 million in the first quarter.  

“The money LDK owes isn’t to the government, it’s to publicly traded Chinese banks,” Chew said. “They totally expect to get their money back. They’re not just going to eat USD3 billion.”

“There’s a lot of chatter within China that LDK is about to go under,” Chew said. “Not even the Steve Jobs of China may be able to save it,” referring to LDK’s chief executive officer Peng Xiaofeng who, in a May 28 interview, likened himself to the former Apple CEO’s turn-around of the struggling US computer firm into the world’s most valuable company.

LDK announced April 30 plans to fire more than 5,500 workers and its net loss of USD588.7 million in the fourth quarter was its third straight quarterly loss and more than five times analysts’ estimates of USD109.7 million.