SHANGHAI, Aug. 26, 2024 /PRNewswire/ -- Daqo New Energy Corp. (NYSE:DQ) ("Daqo New Energy," the "Company" or "we"), a leading manufacturer of high-purity polysilicon for the global solar PV industry, today announced its unaudited financial results for the second quarter of 2024.
Second Quarter 2024 Financial and Operating Highlights
Polysilicon production volume was 64,961 MT in Q2 2024, compared to 62,278 MT in Q1 2024
Polysilicon sales volume was 43,082 MT in Q2 2024 compared to 53,987 MT in Q1 2024
Polysilicon average total production cost(1) was $6.19/kg in Q2 2024 compared to $6.37/kg in Q1 2024
Polysilicon average cash cost(1) was $5.39/kg in Q2 2024, compared to $5.61/kg in Q1 2024
Polysilicon average selling price (ASP) was $5.12/kg in Q2 2024, compared to $7.66/kg in Q1 2024
Revenue was $219.9 million in Q2 2024, compared to $415.3 million in Q1 2024
Gross loss was $159.2 million in Q2 2024, compared to gross profit of $72.1 million in Q1 2024. Gross margin was -72.4% in Q2 2024, compared to 17.4% in Q1 2024
Net loss attributable to Daqo New Energy Corp. shareholders was $119.8 million in Q2 2024, compared to net income attributable to Daqo New Energy Corp. shareholders of $15.5 million in Q1 2024
Loss per basic American Depositary Share (ADS)(3) was $1.81 in Q2 2024, compared to earnings per basic ADS(3) of $0.24 in Q1 2024
Adjusted net loss (non-GAAP)(2) attributable to Daqo New Energy Corp. shareholders was $98.8 million in Q2 2024, compared to adjusted net income (non-GAAP)(2) attributable to Daqo New Energy Corp. shareholders of $36.0 million in Q1 2024
Adjusted loss per basic ADS(3) (non-GAAP)(2) was $1.50 in Q2 2024, compared to adjusted earnings per basic ADS(3) (non-GAAP)(2) of $0.55 in Q1 2024
EBITDA (non-GAAP)(2) was -$144.9 million in Q2 2024, compared to $76.9 million in Q1 2024. EBITDA margin (non-GAAP)(2) was -65.9% in Q2 2024, compared to 18.5% in Q1 2024
Three months ended
US$ millions
except as indicated otherwise
Jun. 30, 2024
Mar. 31, 2024
Jun. 30, 2023
Revenues
219.9
415.3
636.7
Gross (loss)/profit
(159.2)
72.1
258.9
Gross margin
(72.4 %)
17.4 %
40.7 %
(Loss)/income from operations
(195.6)
30.5
213.9
Net (loss)/income attributable to Daqo New Energy Corp. shareholders
(119.8)
15.5
103.7
(Loss)/earnings per basic ADS(3) ($ per ADS)
(1.81)
0.24
1.35
Adjusted net (loss)/income (non-GAAP)(2) attributable to Daqo New Energy Corp. shareholders
(98.8)
36.0
134.5
Adjusted (loss)/earnings per basic ADS(3) (non-GAAP)(2) ($ per ADS)
(1.50)
0.55
1.75
EBITDA (non-GAAP)(2)
(144.9)
76.9
230.0
EBITDA margin (non-GAAP)(2)
(65.9 %)
18.5 %
36.1 %
Polysilicon sales volume (MT)
43,082
53,987
51,550
Polysilicon average total production cost ($/kg)(1)
6.19
6.37
6.92
Polysilicon average cash cost (excl. dep'n) ($/kg)(1)
5.39
5.61
6.05
Notes:
(1) Production cost and cash cost only refer to production in our polysilicon facilities. Production cost is calculated by the inventoriable costs relating to production of polysilicon divided by the production volume in the period indicated. Cash cost is calculated by the inventoriable costs relating to production of polysilicon excluding depreciation cost and non-cash share-based compensation cost, divided by the production volume in the period indicated.
(2) Daqo New Energy provides EBITDA, EBITDA margins, adjusted net income attributable to Daqo New Energy Corp. shareholders and adjusted earnings per basic ADS on a non-GAAP basis to provide supplemental information regarding its financial performance. For more information on these non-GAAP financial measures, please see the section captioned "Use of Non-GAAP Financial Measures" and the tables captioned "Reconciliation of non-GAAP financial measures to comparable US GAAP measures" set forth at the end of this press release.
(3) ADS means American Depositary Share. One (1) ADS represents five (5) ordinary shares.
Management Remarks
Mr. Xiang Xu, CEO of Daqo New Energy, commented, "The solar industry experienced significant challenges during the second quarter, as market prices fell across the solar value chain to below production costs for nearly the entire industry. As end-of-quarter polysilicon ASP fell below our production cost, we were required in accordance with accounting rules to record a non-cash inventory impairment expense of $108 million because our inventory market value fell below book value. This had a significant negative impact on our cost of revenue, gross loss, operating loss and net loss. Nevertheless, we continued to maintain a strong balance sheet free of financial debt. By the end of the quarter, we had a cash balance of $997 million and a combined cash and bank note receivable balance of $1.1 billion. To take advantage of higher interest rates compared to bank savings, we purchased $1.4 billion of short-term investments and fixed term deposits during the quarter. Inclusive of short-term investments and fixed term deposit, we had adequate liquidity with a balance of quick assets of $2.5 billion."
"On the operational front, during the second quarter, we started initial production at our 100,000 MT Phase 5B polysilicon project in Inner Mongolia as planned, which contributed approximately 12% of our total production volume. Overall, the total production volume of our two polysilicon facilities for the quarter was 64,961 MT, exceeding our expectations and representing an increase of 2,683 MT compared to our production volume for the previous quarter. Through continued investments in R&D and dedication to purity improvements at both facilities, our overall N-type product mix reached 73% during the quarter. Remarkably, even our Phase 5B, which was still in the ramping up stage, had 70% N-type in the product mix, strengthening our confidence in achieving 100% N-type by the end of next year. In addition, our production cost trended down further in the second quarter, decreasing by 3% from Q1 2024 to an average of $6.19/kg."
"In light of the current market conditions and pricing, we have adjusted our target production utilization rate for the third quarter and our production plan for the full year. We expect our Q3 2024 total polysilicon production volume to be approximately 43,000 MT to 46,000 MT, as we started maintenance and lowered our production utilization rate to support pricing and reduce our cash burn. As a result, we anticipate our full year 2024 production volume to be in the range of 210,000 MT to 220,000 MT."
"During the second quarter, solar market sentiment was depressed and customers showed little interest in purchasing products. As a result, polysilicon prices kept setting new lows, below production costs and even below cash costs. Polysilicon prices plummeted from slightly above RMB60/kg on average in early April to RMB40-55/kg in late April, and further dropped below RMB40/kg near the end of May through the end of June. Overall, sales pressure intensified as industry-wide polysilicon inventory increased from approximately 18-20 days of production in early April to more than a month of production by the end of June. With prices declining for weeks to below the industry's cash cost and inventory accumulating, we began to see maintenances and production cuts across the industry. Based on industry statistics, the total polysilicon production volume in China dropped about 16% from approximately 192,000 MT per month in April to approximately 162,000 MT in June. However, the supply of polysilicon still exceeded the wafer customer demand, which has dropped to around 50GW in June due to lower utilization rate. Although there were further industry polysilicon production cuts in July, an uptick in demand from downstream manufacturers will be needed to drive inventory reduction and price recovery. The solar industry has gone through multiple cycles in the past, and based on our previous experience, we believe the current low prices and market downturn will eventually result in a healthier market, as poor profitability, losses, and cash burn will lead to many industry players exiting the business, with some possible bankruptcies. This will bring the inevitable capacity rationalization, eventually solve the current overcapacity, and ultimately bring the solar PV industry back to normal profitability and better margins."
"This year will be challenging for China's solar PV industry, as solar manufacturers along the value chain experience weak margins driven by oversupply, excessive inventory, and lower prices. At this point, we may have reached a cyclical bottom but do not yet see clear signs of potential improvement. We believe that the current situation of selling below cash cost is unsustainable and that many solar firms are facing significant cash flow challenges leading to delays in loan repayment and order deliveries. Therefore, we are likely to see market consolidation with higher-cost manufacturers gradually phasing out capacity and exiting the business. Recently, the China Photovoltaic Industry Association (CPIA) has urged central and local governments, financial institutions and companies to coordinate to accelerate industry consolidation. Chinese policymakers are also calling for the healthy expansion of the solar industry. China's Ministry of Industry and Information Technology (MIIT) issued a draft in early July that sets rules for solar projects, such as meeting specific electricity consumption requirements and minimum capital ratio for new and expansion projects, to ensure the high-quality development of the solar PV industry and eliminate outdated capacity. On the demand side, we continued to see strong growth in new solar PV installations in China during the first half of 2024, which reached 102.48GW, representing a 30.7% year-over-year growth rate. Overall, in the long-run, solar PV is expected to be one of the most competitive forms of power generation in China, and the continuous cost reductions in solar PV products and the associated reductions in solar energy generation costs are expected to create substantial additional demand for solar PV. We are optimistic that we will capture the long-term benefits of the growing global solar PV market and maintain our competitive advantage by enhancing our higher-efficiency N-type technology and optimizing our cost structure through digital transformation and AI adoption. As one of the world's lowest-cost producers with the highest quality N-type product, a strong balance sheet and no financial debt, we believe we are well positioned to weather the current market downturn and emerge as one of the leaders in the industry to capture future growth."
Outlook and guidance
In light of the current market condition and pricing, the Company has adjusted its target production utilization rate for the third quarter and production plan for the full year. The Company expects to produce approximately 43,000 MT to 46,000 MT of polysilicon during the third quarter of 2024. The Company expects to produce approximately 210,000 MT to 220,000 MT of polysilicon for the full year of 2024, inclusive of the impact of the Company's annual facility maintenance.
This outlook reflects Daqo New Energy's current and preliminary view as of the date of this press release and may be subject to changes. The Company's ability to achieve these projections is subject to risks and uncertainties. See "Safe Harbor Statement" at the end of this press release.
Second Quarter 2024 Results
Revenues
Revenues were $219.9 million, compared to $415.3 million in the first quarter of 2024 and $636.7 million in the second quarter of 2023. The decrease in revenues compared to the first quarter of 2024 was primarily due to a decrease in the ASP as well as sales volume.
Gross (loss)/profit and margin
Gross loss was $159.2 million, compared to gross profit of $72.1 million in the first quarter of 2024 and $258.9 million in the second quarter of 2023. Gross margin was -72.4%, compared to 17.4% in the first quarter of 2024 and 40.7% in the second quarter of 2023. For the second quarter, the company recorded $108 million in inventory impairment expenses, as the Company's inventory's market value falls below book value. The decrease in gross margin compared to the first quarter of 2024 was also due to lower ASP, which was partially mitigated by lower production cost.
Selling, general and administrative expenses
Selling, general and administrative expenses were $37.5 million, compared to $38.4 million in the first quarter of 2024 and $43.3 million in the second quarter of 2023. SG&A expenses during the second quarter included $19.6 million in non-cash share-based compensation cost related to the Company's share incentive plans, compared to $19.6 million in the first quarter of 2024.
Research and development expenses
Research and development (R&D) expenses were $1.8 million, compared to $1.5 million in the first quarter of 2024 and $2.2 million in the second quarter of 2023. Research and development expenses can vary from period to period and reflect R&D activities that take place during the quarter.
(Loss)/income from operations and operating margin
As a result of the foregoing, loss from operations was $195.6 million, compared to income from operations of $30.5 million in the first quarter of 2024 and $213.9 million in the second quarter of 2023.
Operating margin was -89.0%, compared to 7.3% in the first quarter of 2024 and 33.6% in the second quarter of 2023.
Foreign exchange loss
Foreign exchange loss was $1.4 million, compared to $0.3 million in the first quarter of 2024, attributable to the volatility and fluctuation in the USD/CNY exchange rate during the quarter.
Net (loss)/income attributable to Daqo New Energy Corp. shareholders and (loss)/earnings per ADS
As a result of the aforementioned, net loss attributable to Daqo New Energy Corp. shareholders was $119.8 million, compared to net income attributable to Daqo New Energy Corp. shareholders of $15.5 million in the first quarter of 2024 and $103.7 million in the second quarter of 2023.
Loss per basic American Depository Share (ADS) was $1.81, compared to earnings per ADS of $0.24 in the first quarter of 2024, and $1.35 in the second quarter of 2023.
Adjusted net (loss)/income (non GAAP) attributable to Daqo New Energy Corp. shareholders and adjusted (loss)/earnings per ADS (non GAAP)
As a result of the aforementioned, adjusted net loss (non-GAAP) attributable to Daqo New Energy Corp. shareholders, excluding non-cash share-based compensation costs, was $98.8 million, compared to adjusted net income (non-GAAP) attributable to Daqo New Energy Corp. shareholders of $36.0 million in the first quarter of 2024 and $134.5 million in the second quarter of 2023.
Adjusted loss earnings per basic American Depository Share (ADS) was $1.50, compared to adjusted earnings per basic ADS of $0.55 in the first quarter of 2024 and $1.75 in the second quarter of 2023.
EBITDA
EBITDA (non-GAAP) was -$144.9 million, compared to $76.9 million in the first quarter of 2024 and $230.0 million in the second quarter of 2023. EBITDA margin (non-GAAP) was -65.9%, compared to 18.5% in the first quarter of 2024 and 36.1% in the second quarter of 2023.
Financial Condition
As of June 30, 2024, the Company had $997.5 million in cash, cash equivalents and restricted cash, compared to $2,689.3 million as of March 31, 2024 and $3,169.7 million as of June 30, 2023. As of June 30, 2024, the notes receivables balance was $80.7 million, compared to $194.1 million as of March 31, 2024 and $798.5 million as of June 30, 2023. Notes receivables represent bank notes with maturity within six months. As of June 30. 2024, fixed term deposit within one year balance was $1.2 billion, compared to nil, and nil as of March 31, 2024 and June 30. 2023.
Cash Flows
For the six months ended June 30, 2024, net cash used in ...
