Solar Companies Tumble as Profit Outlook Sours: China Overnight
LDK Solar Co. and Suntech Power Holdings Co. led declines in Chinese companies trading in New York last week, on prospects the nation’s solar makers won’t report a profit this year.
The Bloomberg China-US Equity Index of the most-traded Chinese companies in the U.S. fell for a fourth week, the longest losing streak in six months. The gauge lost 0.1 percent to 90.60. LDK, the world’s second-largest maker of wafers, sank to the lowest price on record while Suntech, the world’s biggest solar manufacturer, slid to the weakest level in seven months. Semiconductor Manufacturing International Corp. (981) declined to trade at a 3.3 percent discount to the Hong Kong shares.
Suntech, the world’s biggest solar-panel maker, and Trina Solar Ltd. (TSL) reported last week worse-than-estimated first-quarter results while LDK posted a net loss for a third consecutive quarter on April 30. Earnings are falling at a time Europe is cutting solar energy subsidies as the region’s debt crisis lingers and the U.S. is imposing tariffs on Chinese solar-product imports.
“No one is expecting solars to make money this year, so the question is which company will make it through the next year or two,” Aaron Chew, New York-based analyst at Maxim Group LLC said on May 25 by phone. “There has to be consolidation.”
The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., slipped 0.5 percent to $32.58 on May 25, ending the week with a 1.3 percent loss. The Shanghai Composite Index (SHCOMP) of mainland stocks dropped 0.7 percent to a six-week low of 2,333.55.
The Standard & Poor’s 500 Index of U.S. shares fell 0.2 percent to 1,317.82 on May 25, snapping a four-day gain, as concern Spain’s regional governments are having trouble with finances tempered optimism with data showing American consumer confidence rose to the highest since 2007. The measure rose 1.7 percent for the week.
Suntech’s American depositary receipts tumbled 7.8 percent to $1.78, swelling the weekly decline to 11 percent. The company, based in Wuxi in China’s Jiangsu province, reported May 23 a net loss of $133 million for the first three months of 2012, wider than the average forecast for an $83 million loss by 16 analysts in a Bloomberg survey.
The U.S. imposed tariffs of 31 percent to 250 percent on Chinese solar-product imports, the Commerce Department announced on May 17. Suntech was told to pay 31.22 percent.
LDK reported on April 30 a fourth-quarter net loss of $588.7 million, more than five times analysts’ average prediction of a $109.7 million loss. The company, based in Xinyu in China’s Jiangxi province, forecast first-quarter sales of $190 million to $230 million, lower than a $285.7 million estimate by analysts.
LDK’s ADRs tumbled 14 percent to a record low of $2.24, boosting the tumble last week to 21 percent, the biggest weekly decline since September. The company said it is subject to a preliminary U.S. tariff rate of 31 percent in a statement on May 24.
“Investors have been looking at all of the solar company earnings this week and seeing that companies are just not achieving the cost benefits and profits that people had expected,” Gordon Johnson, an analyst at Axiom Capital Management in New York, said by phone on May 25.
Yingli Green Energy Holding Co. (YGE), the sixth-largest silicon-based solar module producer, will probably report a $32.8 million net loss in the first quarter on May 30, according to the average estimate of 12 analysts surveyed by Bloomberg. This compares with a $56.2 million net income a year ago.
China said it lodged a complaint at the World Trade Organization over U.S. anti-subsidy duties. During probes to determine whether Chinese companies received illegal government aid, the U.S. acted “inconsistently with WTO rules and rulings in many aspects,” China’s mission to the WTO in Geneva said in an e-mailed statement on May 25. The U.S. “repeated its wrongful practice” during its recent anti-subsidy investigation on Chinese solar cells, it said.
The request for consultations is the first step in the case and means the two governments must now hold talks for at least 60 days in a bid to resolve the dispute. After that, China can ask WTO judges to investigate the complaint. Rulings are typically made within six months, after which either side can appeal.
Yanzhou Coal Mining Co. (YZC), the nation’s fourth-largest coal minder, declined 4.5 percent to $16.01 last week in New York, the fifth weekly loss in a row. Aluminum Corp. of China Ltd., the nation’s largest maker of the lightweight metal also known as Chalco, fell 0.9 percent to $10.07, the lowest level since November 2008.
China’s purchasing managers’ index shrank to a preliminary reading of 48.7 in May, compared with a final 49.3 for April, HSBC Holdings Plc and Markit Economics said May 24. The world’s second-largest economy expanded 8.1 percent in the first three months this year, the slowest pace in 11 quarters.
Semiconductor Manufacturing International Corp. (SMI), a circuit-chip maker based in Shanghai, sank 11 percent last week to $1.90, the weakest level since April 2009.
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