Daqo New Energy Announces Unaudited First Quarter 2019 Results

Pubblicato su 22 mag 2019
Daqo Group 
Daqo New Energy Corp. today announced its unaudited financial results for the first quarter of 2019.

First Quarter 2019 Financial and Operating Highlights

- Polysilicon production volume of 8,764 MT in Q1 2019, compared to 7,301 MT in Q4 2018
- Polysilicon external sales volume of 8,450 MT in Q1 2019, compared to 7,030 MT in Q4 2018
- Polysilicon average total production cost(1) of $7.42 /kg in Q1 2019, compared to $7.94/kg in Q4 2018
- Polysilicon average cash cost(1) of $6.20/kg in Q1 2019, compared to $6.64/kg in Q4 2018
- Polysilicon average selling price (ASP) was $9.55/kg in Q1 2019, compared to $9.69/kg in Q4 2018
- Revenue from continuing operations was $81.2 million in Q1 2019, compared to $75.6 million in Q4 2018
- Gross profit from continuing operations was $18.3 million in Q1 2019, compared to $16.9 million in Q4 2018. Gross margin from continuing operations was 22.6% in Q1 2019, compared to 22.4% in Q4 2018
- EBITDA (non-GAAP)(2) from continuing operations was $20.0 million in Q1 2019, compared to $29.5 million in Q4 2018
- EBITDA margin (non-GAAP)(2) from continuing operations was 24.6% in Q1 2019, compared to 39.1% in Q4 2018
- Adjusted net income (non-GAAP)(2) attributable to Daqo New Energy shareholders was $11.1 million in Q1 2019, compared to $15.7 million in Q4 2018 and $32.9 million in Q1 2018
- Adjusted earnings per basic American Depository Share (ADS) (non-GAAP)(2) of $0.83 in Q1 2019, compared to $1.18 in Q4 2018, and $3.03 in Q1 2018
- Net income from continuing operations was $5.9 million in Q1 2019, compared to $17.1 million in Q4 2018 and $29.9 million in Q1 2018
- Net income from discontinued operations was $0.8 million in Q1 2019, compared to net loss from discontinued operations of $5.7 million in Q4 2018 and net income from discontinued operations of $2.1 million in Q1 2018
- Net income attributable to Daqo New Energy shareholders was $6.6 million in Q1 2019, compared to $11.4 million in Q4 2018 and $31.6 million in Q1 2018.
- Earnings per basic ADS was $0.50 in Q1 2019, compared to $0.86 in Q4 2018, and $2.91 in Q1 2018


Notes:

(1) Production cost and cash cost only refer to production in our Xinjiang polysilicon facilities. Production cost is calculated by the inventoriable costs relating to production of polysilicon in Xinjiang divided by the production volume in the period indicated. Cash cost is calculated by the inventoriable costs relating to production of polysilicon excluding depreciation expense in Xinjiang, divided by the production volume in the period indicated.

(2) Daqo New Energy provides EBITDA from continuing operations, EBITDA margin from continuing operations adjusted net income attributable to Daqo New Energy Corp. shareholders and adjusted earnings per 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.

Management Remarks

"We are very pleased to report solid operational and financial performance for the first quarter of 2019, during which we achieved record-high production and sales volumes, as well as our most competitive cost structure," commented Mr. Longgen Zhang, CEO of Daqo New Energy. "During the quarter, our polysilicon facilities were running at full capacity and produced 8,764 MT and sold 8,450 MT of polysilicon. We were also able to successfully reduce our total production cost and cash cost to $7.42/kg and $6.20/kg, respectively, our lowest ever."

"We are currently undertaking a capacity debottlenecking project to gradually upgrade several older CVD furnaces with improved technology, allowing us to increase production capacity by additional 5,000 MT. This project is progressing well and we expect to complete the project ahead of schedule in early June 2019. The ramp-up process of this debottlenecking project will temporarily impact production volumes and cost and as a result we expect to produce approximately 7,200 to 7,400 MT of polysilicon at total production cost of $8.0~8.5/kg during the second quarter of 2019. Once our facilities are fully ramped up in June, we anticipate our total annual production capacity will reach 35,000 MT and our production costs will return to the current level of approximately $7.5/kg." 

"Our Phase 4A project is also progressing smoothly and remains on schedule. The foundation work has been completed and the construction of various buildings and structures are progressing as planned. The initial equipment installation has already begun and is planned to continue through the third quarter of 2019. Based on our current assessment, we expect to complete Phase 4A by the end of 2019 and ramp up to full capacity of 70,000 MT by the end of the first quarter of 2020."

"China installed approximately 5.2GW of new solar PV installations during the first quarter of 2019. While installation numbers for the second quarter of 2019 haven't been released yet, we believe they will likely be even lower. Installations should significantly pickup in the second half of this year as China's solar PV policy is gradually rolled out. Grid parity projects will be the first batch to start installations and then followed by subsidized projects which will bid for the total three billion RMB of subsidy. Market consensus indicates that China will install approximately 35-40 GW in 2019, which means solar project installation volumes during the second half could potentially double or even triple those in the first half. As polysilicon is the key raw material of solar PV modules, we believe demand for polysilicon will significantly increase in the second half of 2019."

"We are optimistic about China's booming demand for solar PV in the second half of this year. Since May, the market conditions for polysilicon have shown signs of improvement as prices appear to have bottomed out. While Daqo remained solidly profitable in the first quarter with our low cost and high mix of mono-grade polysilicon products, we believe the current challenging pricing environment for polysilicon has resulted in serious financial losses for many of the existing polysilicon producers. According to news from China Silicon Industry Association, at least three major Chinese polysilicon producers have shut down their facilities for maintenance since April and May, resulting in reduced supply. In addition, the ramp-up process of other Chinese players' new capacities have not been as fast and smooth as they expected, including production delays and unscheduled shutdowns. Furthermore, these new capacities are generally unable to immediately produce high quality mono-grade polysilicon due to quality issues. This has resulted in increased pricing spread between mono-grade and multi-grade polysilicon. Looking into the future, we believe current oversupply will be alleviated by a reduction in supply from high cost players. For the second half of 2019, we anticipate the booming demand from China's domestic PV market will significantly improve the overall supply-demand situation, particularly for the tightly-supplied mono-grade polysilicon."

"We are confident to overcome the temporary market challenges with our low cost structure and first class product quality. Moreover, our Phase 4A project is expected to double our capacity and reduce our cost even further, strengthening our leading position as one of the world's most competitive polysilicon manufacturers."

Outlook and guidance

Due to the significant pricing spread between mono-grade and multi-grade polysilicon, the Company is currently maximizing the amount of mono-grade polysilicon as percentage of our total production volume to approximately 80% in April and May. In addition, the ramp up process of the Company's debottlenecking project is expected to take place ahead of schedule in early June. As such, the Company may see some impact on production volume and cost structure in the second quarter.

The Company expects to produce approximately 7,200 to 7,400 MT of polysilicon with total production cost of $8.0~8.5/kg during the second quarter of 2019 and sell approximately 7,100MT to 7,300MT of polysilicon to external customers during the second quarter of 2019. The Company expects the total production cost will come back to normal at the level of $7.5/kg in the third quarter of 2019. For the full year of 2019, the Company expects to produce approximately 37,000 to 40,000 MT of polysilicon, 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.

First Quarter 2019 Results

Revenues

Revenues were $81.2 million, compared to $75.6 million in the fourth quarter of 2018 and $95.6 million in the first quarter of 2018. The sequential increase in revenues was primarily due to higher polysilicon sales volumes partially offset by lower ASPs.

Gross profit and margin

Gross profit was $18.3million, compared to $16.9 million in the fourth quarter of 2018 and $43.1 million in the first quarter of 2018. Gross margin was 22.6%, compared to 22.4% in the fourth quarter of 2018 and 45.0% in the first quarter of 2018. The sequential increase was primarily due to lower average polysilicon production cost, partially offset by lower ASPs.

Selling, general and administrative expenses

Selling, general and administrative expenses were $7.9 million, compared to $8.2 million in the fourth quarter of 2018 and $3.8 million in the first quarter of 2018. The year-over-year increase in SG&A was primarily due to an increase in non-cash share-based compensation costs related to the Company's share incentive plan.

Research and development expenses

Research and development (R&D) expenses were $1.3 million, compared to $1.0 million in the fourth quarter of 2018 and $0.1 million in the first quarter of 2018. Research and development expenses could vary from period to period and reflected R&D activities that took place during the quarter.

Income from operations and operating margin

As a result of the foregoing, income from operations was $9.2 million, compared to $20.3 million in the fourth quarter of 2018 and $39.2 million in the first quarter of 2018.

Operating margin was 11.3%, compared to 26.8% in the fourth quarter of 2018 and 41.0% in the first quarter of 2018.

Interest expense

Interest expense was $2.0 million, compared to $1.9 million in the fourth quarter of 2018 and $3.7 million in the first quarter of 2018.

EBITDA

EBITDA from continuing operations was $20.0 million, compared to $29.5 million in the fourth quarter of 2018 and $48.6 million in the first quarter of 2018. EBITDA margin was 24.6%, compared to 39.1% in the fourth quarter of 2018 and 50.8% in the first quarter of 2018.

Income(loss) from discontinued operations, net of tax

During the third quarter of 2018, the Company decided to discontinue its solar wafer manufacturing operations. Net income from discontinued operations was $0.8 million in the first quarter of 2019, compared to net loss from discontinued operations of $5.7 million in the fourth quarter of 2018 and net income from discontinued operations of $2.1 million in the first quarter of 2018. The net income from discontinued operations during the quarter was mainly due to the disposal of fixed assets which were impaired in 2018 and previous years.

Net income attributable to Daqo New Energy Corp. shareholders and earnings per ADS

As a result of the aforementioned, net income attributable to Daqo New Energy Corp. shareholders was $6.6 million, compared to $11.4 million in the fourth quarter of 2018 and $31.6 million in the first quarter of 2018.

Earnings per basic ADS of $0.50, compared to $0.86 in the fourth quarter of 2018, and $2.91 in the first quarter of 2018.

Financial Condition

As of March 31, 2019, the Company had $113.7 million in cash, and cash equivalents and restricted cash, compared to $94.0 million as of December 31, 2018 and $79.0 million as of March 31, 2018. As of March 31, 2019, the accounts receivable balance was $2.2 million, compared to $1.2 million as of December 31, 2018 and $12 thousand as of March 31, 2018. As of March 31, 2019, the notes receivable balance was $0.7 million, compared to $8.1 million as of December 31, 2018 and $45.2 million as of March 31, 2018. As of March 31, 2019, total borrowings were $193.0 million, of which $149.7 million were long-term borrowings, compared to total borrowings of $171.5 million, including $133.3 million long-term borrowings, as of December 31, 2018 and total borrowings of $189.6 million, including $106.8 million long-term borrowings, as of March 31, 2018.

Cash Flows

For the three months ended March 31, 2019, net cash provided by operating activities was $48.5 million, compared to $22.0 million in the same period of 2018.

For the three months ended March 31, 2019, net cash used in investing activities was $38.6 million, compared to $11.8 million in the same period of 2018. The net cash used in investing activities in 2018 and 2017 was primarily related to the capital expenditure on Xinjiang Phase 3B and 4A polysilicon projects.

For the three months ended March 31, 2019, net cash provided by financing activities was $7.2 million, compared to net cash used in financing activities of $2.4 million in the same period of 2018.


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