Daqo New Energy Announces First Quarter 2014 Results

Publié le 13 mai 2014
Daqo New Energy 
May 12, 2014 - Daqo New Energy today announced its unaudited financial results for the first quarter of 2014.



"I am pleased to report Daqo New Energy's return to profitability in the first quarter of 2014," announced Dr. Gongda Yao, the Company's Chief Executive Officer.

"We increased shipment volumes by 9.4% quarter-on-quarter (QoQ) to 1,391 MT, expanded EBITDA margin to 32.5% from 21.9% in the previous quarter, and produced positive operating income of $6.6 million, marking the Company's return to profitability on a net income basis for the first time since the third quarter of 2011. This was achieved despite the costs relating to the non-operational Chongqing polysilicon plant of $3.7 million this quarter."

"I would also like to highlight that we have achieved a cash cost (which excludes depreciation) of $11.8/kg, and a production cost (including depreciation) of $14.5/kg, which we believe are amongst the lowest globally. We will continue to focus on optimizing our operation and improving our cost structure for the remainder of 2014. We expect our annual average cash cost (excluding depreciation) and production cost (including depreciation) to be approximately $11.3/kg and $14/kg, respectively. As we expand our polysilicon annual capacity from 6,150 metric tons (MT) to 12,150 MT, and upgrade our production process, we expect to further lower our polysilicon cash cost (excluding depreciation) and production cost (including depreciation) to approximately $8.7/kg and $12/kg respectively by the second quarter of 2015. Specifically, by improving our processes and relocating our polysilicon facilities to Shihezi, Xinjiang, we continue to strengthen our position as a low-cost leader. We have secured exclusive, preferential electricity rates from the Shihezi local government until 2020, which we believe are amongst the lowest in China."

"By executing our strategy of reducing costs and producing high quality polysilicon, we have emerged a stronger and profitable company." Dr. Gongda Yao added.

"We also benefited from continued strong demand in the photovoltaic market and the high quality of our product, which increased ASPs to $21.63/kg from $18.67/kg in the previous quarter."

"On the capacity front, following the debottlenecking project in December 2013, we have now reached name plate capacity of 6,150 MT of polysilicon per annum, with production of 1,517 MT in the first quarter of 2014, up from 1,445 MT and 1,311 MT in the fourth and third quarters of 2013, respectively."

"We have also commenced construction for the next stage of expansion, which will add a further 6,000 MT and take nameplate capacity to 12,150 MT once completed. We expect to complete construction work by the end of 2014, with a target of reducing our cash cost (excluding depreciation) and production cost (including depreciation) to approximately $8.7/kg and $12/kg respectively when capacity is fully ramped up by the second quarter of 2015."

"We have spent approximately $22 million on the expansion to date, with a further $59 million to be spent through the remainder of 2014, and finally a further $16 million after capacity has been fully ramped up."

"In addition to the polysilicon capacity expansion to 12,150 MT that is underway, the Company is also considering further capacity expansion at the Xinjiang facility in the medium term, with a goal of expanding capacity to 25,000 MT, subject to market and industry conditions."

"We are also improving our production process by adopting hydrochlorination technology which will significantly reduce the conversion temperature thus resulting in much lower electricity consumption and further reducing costs."

"Overall, we have prudently managed the business and diligently worked towards improving the Company's scale, cost structure and technology. Having turned around both financially and operationally, we believe the Company is in an excellent position to drive future growth and navigate any future market challenges which may arise," concluded Dr. Yao.

Commentary

Improvement in operational and financial performance

Daqo New Energy's operational and financial performance for the quarter benefited from several factors, including the continued increase in ASPs resulting from strong market demand for polysilicon, and higher production levels and sales volumes. Our average selling price for polysilicon increased 15.9% compared to the fourth quarter of 2013.

In the first quarter of 2014, we produced 1,517 MT of polysilicon, up from 1,445 MT and 1,311 MT in the fourth and third quarters of 2013, respectively. Polysilicon production reached nameplate capacity of 6,150 MT in the first quarter of 2014. We shipped 1,391 MT of polysilicon and 16.8 million pieces of wafer in the first quarter of 2014, compared with 1,271 MT of polysilicon and 16.7 million pieces of wafer in the fourth quarter of 2013.

Total production cost (including depreciation) was $14.5/kg and cash cost was $11.8/kg, compared to production cost of $15.8/kg and cash cost of $12.0/kg respectively in the fourth quarter of 2013.

Our continuous cost reduction efforts, along with the improvement in average selling prices, have enabled us to return to profitability for the first time since the third quarter of 2011. We believe the upward trend will continue as long as the solar PV market maintains its strong momentum in 2014 and the years to come.

Subsequent to the end of the first quarter of 2014, the Company also successfully completed its annual maintenance and preparation works for the expansion project within a 5 day period in early April. This is 2 days faster than scheduled and 12 days faster than the annual maintenance work carried out in 2013, reducing operational downtime and the associated impact on production.

Market outlook and Q2 2014 guidance

According to NPD Solarbuzz, new solar PV demand added during the first quarter of 2014 exceeded 9GW, which was 35% more than the previous first-quarter record, set in 2013. The record level of demand achieved in the first quarter was driven by strong growth in Japan and the United Kingdom. These two countries combined accounted for more than one-third of global solar PV demand in the first quarter of 2014 and set new quarterly records for PV deployed. Solar PV demand during the first quarter typically accounts for up to 20% of annual demand. We expect China and the United States markets to rapidly ramp up in the second half of 2014, which will help the industry to achieve 45GW of installations in 2014. We also expect the average selling price of polysilicon to be strongly supported by end market demand at the level of $20/kg to $25/kg during 2014.

For the second quarter of 2014, the Company expects to ship 1,375 MT to 1,400 MT of polysilicon. The Company also expects to ship approximately 16.6 million to 17.0 million pieces of wafer. Note that we halted polysilicon production in April for 5 days of annual maintenance which negatively impacted our April production output. This outlook reflects our current and preliminary view and may be subject to change. Our ability to achieve this projection is subject to risks and uncertainties. 

First Quarter 2014 Results

Revenues

Revenues were $42.1 million, increased from $37.0 million in the fourth quarter of 2013 and $14.5 million in the first quarter of 2013.

The Company generated revenues of $30.1 million from polysilicon, increased from $24.2 million in the fourth quarter of 2013, and $11.3 million in the first quarter of 2013. The increase from the fourth quarter of 2013 was primarily due to higher sales volumes and higher average selling prices.

The Company generated $12.0 million from sales of wafers, compared to $12.8 million in the fourth quarter of 2013 and $3.2 million in the first quarter of 2013.

Gross profit and margin

Gross profit was $9.0 million, compared to approximately $1.0 million in the fourth quarter of 2013 and a gross loss of $12.9 million in the first quarter of 2013.

Gross margin was 21.4%, substantially increased from 2.6% in the fourth quarter of 2013 and negative 89.0% in the first quarter of 2013. The continuous improvement in gross margin was mainly attributable to higher average selling prices and lower production costs for both polysilicon and wafer.

During the first quarter of 2014, we revised our estimates of the expected useful lives of our machinery and equipment from 10 years to 15 years, and our buildings and structures from 20 years to 30 years, to better reflect the economic lives of these assets. The change in estimate was in part based on an analysis provided by a third party valuation firm to assess the useful lives of these fixed assets. We believe the revised estimate of the useful lives is consistent with industry averages. The change in useful lives reduced depreciation expense that would otherwise have been recorded in the first quarter of 2014 by approximately $4.7 million, and we expect a similar impact going forward. The approximate effect on production cost from the change in estimate of the useful lives of certain long-lived assets for the quarter was approximately $1/kg.

In the first quarter of 2014, total costs related to the non-operational Chongqing polysilicon plant including depreciation were $3.7 million, decreased from $5.9 million and $9.7 million in the fourth and first quarter of 2013, respectively. Excluding such costs, the non-GAAP gross margin was approximately 30.2%, compared to 18.5% in the fourth quarter of 2013 and negative 22.3% in the first quarter of 2013. For a definition and a reconciliation of non-GAAP gross margin to gross margin, see "-- Non-GAAP financial measures" and " -- Reconciliation of non-GAAP financial measures to comparable US GAAP measures" below.

Selling, general and administrative expenses

Selling, general and administrative expenses were $1.5 million, decreased from $4.0 million in the fourth quarter of 2013 and $4.1 million in the first quarter of 2013. The decrease in selling, general and administrative expenses from the fourth quarter of 2013 was primarily due to a reversal of doubtful accounts of $1.8 million in the first quarter of 2014.

Research and development expenses

Research and development expenses were approximately $0.9 million, compared to $1.1 million in the fourth quarter of 2013 and $0.4 million in the first quarter of 2013.

Other operating income

Other operating income was $36 thousand, compared to $134 thousand in the fourth quarter of 2013 and $832 thousand in the first quarter of 2013. Other operating income was mainly comprised of unrestricted cash incentives that the Company received from local government authorities, which fluctuates from period to period.

Operating income/(loss) and margin

As a result of the foregoing, operating income was $6.6 million, compared to operating loss of $4.1 million in the fourth quarter of 2013 and operating loss of $16.6 million in the first quarter of 2013. This is the first quarter since the third quarter of 2011 that we have achieved positive operating income.

Operating margin was 15.7%, compared to negative 11.0% in the fourth quarter of 2013 and negative 114.7% in the first quarter of 2013.

EBITDA

EBITDA was $13.7 million for the quarter, compared to $8.1 million in the fourth quarter of 2013 and negative $2.4 million in the first quarter of 2013. EBITDA margin was 32.5% for the quarter, compared to 21.9% in the fourth quarter of 2013 and negative 16.6% in the first quarter of 2013. For a definition and a reconciliation of EBITDA and EBITDA margin to our income from operations, see " -- Non-GAAP Financial Measures" and "-- Reconciliation of Non-GAAP financial measures to comparable US GAAP measures" below.

Net income/(loss) attributable to our shareholders and Income/(loss) per ADS

As a result of the aforementioned, net income attributable to Daqo New Energy Corp. shareholders was $2.6 million, compared to net loss attributable to Daqo New Energy Corp. shareholders of $8.0 million and $18.7 million in the fourth and first quarters of 2013, respectively. This is the first quarter since the third quarter of 2011 that we have achieved positive net income.

Income per ADS was $0.38, compared to loss per ADS of $1.16 and $2.70 in the fourth and first quarters of 2013, respectively

Financial Condition

As of March 31, 2014, the Company had $24.2 million in cash and cash equivalents and restricted cash, compared to $16.7 million as of December 31, 2013 and $11.7 million as of March 31, 2013.

As of March 31, 2014, the accounts receivable balance was $5.1 million, compared to $9.9 million as of December 31, 2013. As of March 31, 2014, the notes receivable balance was $34.0 million, compared to $15.9 million as of December 31, 2013. As of March 31, 2014, total borrowings were $260.2 million, of which $124.9 million were long-term borrowings, compared to total borrowings of $253.7 million, including $134.9 million long-term borrowings, as of December 31, 2013.

Cash Flows

For the three months ended March 31, 2014, net cash provided by operating activities was $15.2 million, compared to net cash used in operating activities of $24.3 million in the same period of 2013. From a quarterly perspective, we generated positive operating cash flow of $15.2 million, $0.3 million and $8.8 million in the first quarter of 2014, fourth quarter and third quarter of 2013, respectively. The improvement in operating cash flow was primarily due to the recovery of sales prices associated with improvements in the overall solar market and our continuous cost reduction efforts at our Xinjiang facilities.

For the three months ended March 31, 2014, net cash used in investing activities was $11.0 million, compared to net cash provided by investing activities of $0.4 million in the same period of 2013.

For the three months ended March 31, 2014, net cash used in financing activities was $3.8 million. Net cash provided by financing activities in the same period of 2013 was $22.8 million.

Non-GAAP Financial Measures

To supplement Daqo's consolidated financial results presented in accordance with United States Generally Accepted Accounting Principles ("US GAAP"), Daqo uses in this press release non-GAAP gross profit and non-GAAP gross margin, which exclude costs related to the non-operational polysilicon operations in Chongqing, EBITDA, which represents earnings before interest, taxes, depreciation and amortization, and EBITDA margin, which represents the proportion of EBITDA in revenue. The presentation of the non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with US GAAP. Daqo believes that the non-GAAP financial measures facilitate investors' and management's comparisons to Daqo's historical performance and assists management's financial and operational decision making.


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Daqo New Energy (Matériaux Solaires): https://fr.enfsolar.com/daqo-new-energy
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