The Polysilicon Issue: LDK’s Solid Earnings, But Lower Margins

Chinese solar cell wafer maker LDK Solar posted what appeared to be a pretty strong first quarter earnings report on Monday: a net income of $49.8 million, compared with $21.6 million from a year ago reports Reuters, and a raised revenue outlook for the year. But the company also said that the rising price of polysilicon meant a lower margin forecast and that sent the company’s stock down almost 6 percent.

Ah, the short polysilicon supply issue — the thorn in the side of solar manufacturers throughout the year. As Trader Mark put it: “the shortages of polysilicon continue to act as a dark cloud overhead.” LDK forecast its gross margins at 23 percent to 28 percent, which was down from its previous forecast of 26 percent to 31 percent.

To help combat high polysilicon costs, LDK is building a silicon plant, expanding its wafer production capacity and is raising hundred of millions to complete the task. While the polysilicon issue doesn’t seem to be easing soon, the industry is hoping 2009 will be better.