June 22, 2012 (Chinavestor) LDK Solar (NYSE:LDK), one of the largest PV manufacturer in China, announced today that it will report first quarter earnings on June 26 before the market open. This will be the last major Chinese solar company to do so for the first quarter.
Whatever the numbers are going to be, one thing will be key in my judgement: liquidity. LDK Solar (NYSE:LDK) solar had a debt to equity ratio of 400% in the fourth quarter of last year, he highest in the industry by far. Only China Sunergy (NASDAQ:CSUN) has been close to that level, another highly leveraged company. This is in sharp contrast to Trina Solar (NYSE:TSL) and Hanwha Solarone (NASDAQ:HSOL).
See historical debt to equity ratio gfor all major Chinese solar manufacturers below.
While there is nothing wrong with using other people's money in general, solar companies may be exempt from this thumb rule. Solar companies have been loosing money since 2010, finding it difficult to make good on debt payments. As a matter of fact, current ratio for LDK Solar (NYSE:LDK) was the lowest in the last reported quarter, highlighting the uphill battle the company is fighting. Trina Solar (NYSE:TSL) and Hanwha Solarone (NASDAQ:HSOL) are again the best companies in terms of liquidity. If anything, these two measures, debt to equity and current ratio, will tell a a lot about LDK's near future. Cash crunch may be just around the corner.