Silicon Sales Drop For Daqo In Q2/2018

Daqo New Energy’s Polysilicon Sales & Revenues Head Downward In Q2/2018 With Chinese Government’s PV Policy Changes; Yet It Is Upbeat About Future Prospects
08:02 AM (Beijing Time) - 10. August 2018
daqo q2

External sales volumes for both polysilicon and wafer slumped during Q2/2018 for Daqo New Energy. The sales guidance for the next quarter is promising for polysilicon, but not so much for wafers. (Source: Daqo New Energy)

Key Takeaways

  • Solar policy changes in China impacted Daqo New Energy’s business in Q2/2018 as sales went down to 3,881 tons and revenues slumped to $67 million
  • Average selling price for polysilicon came down and contributed to drop in revenues
  • As 30-35% polysilicon production capacity in China has shut as manufacturers couldn’t compete with current market prices, Daqo says limited supply has improved ASPs since July
  • Management is confident its annual targets won’t be affected by the market situation and has reiterated full year guidance of polysilicon production being 22,000 to 23,000 tons

Chinese polysilicon producer Daqo New Energy’s business during Q2/2018 suffered from the repercussions of the Chinese government’s new solar PV policy that lead to a drop in downstream demand during June 2018 and has uncertainty about future demand in the domestic solar market.

Yet, Daqo’s management remains confident about long-term growth prospects for the polysilicon sector. The company has reiterated full year 2018 guidance. “The new solar policies caused uncertainty in the domestic solar market and impacted downstream demand in June. Leveraging our strong cash position and efficient corporate management, we maintained full production capacity and resumed shipments when customer demand and pricing stabilized in early July. With our production facilities now running at full capacity and inventory at low levels, we are reiterating our full year polysilicon production guidance of 22,000 to 23,000 MT,” said Daqo CEO Longgen Zhang.

For Daqo, market changes manifested in the form of external sales volume for polysilicon down to 3,881 metric tons (MT) in Q2/2018, down from 5,411 MT in the previous quarter. Its revenues of $67 million were also down from the previous quarter’s $103.3 million. Gross profit was $27.2 million, compared to last’s quarter’s $46.2 million, with gross margin reaching 40.6% compared to 44.8% in Q1/2018.

Polysilicon average selling price (ASP) for the company in Q2 was $16.22 per kg, decreasing from $17.68 per kg in Q1.

Daqo says there has been limited supply of polysilicon in the Chinese market due to the fact that 30-35% of China’s domestic polysilicon production capacity has been shut down because of their inability to survive at the current market prices, according to the China Silicon Association. This has led to demand gradually recovering. In any case, Daqo continues its expansion project.

“We expect to complete our Phase 3B expansion project and start pilot production in the fourth quarter of 2018, which will increase our annual capacity to 30,000 MT and further reduce our polysilicon production cost by approximately $1 per kg across our entire production facility,” added Zhang.

Silicon guidance positive

In September 2018, there will be a scheduled maintenance shutdown of the Xinjiang polysilicon facility. During this time, it will connect the newly constructed phase 3B facility to the existing facilities. In Q3/ 2018, it hopes to produce between 4,100 MT to 4,300 MT of polysilicon and sell 5,900 MT to 6,100 MT of polysilicon to external customers.

Lower wafer business guidance

Daqo’s wafer business wasn’t too good either in Q2/2018 when sales volume for this segment was 9.8 million pieces. During Q1/2018, this number it sold 13.3 million pieces. Q2 sales generated revenues of $4 million, compared to $7.6 million in the previous quarter. In Q2/2017, revenues were $14.9 million for 27 million pieces. This huge decrease was because of lower sales volumes and lower ASPs, according to Daqo.

For Q3/2018, wafer sales volume is guided to be somewhere between 7.0 million to 8.0 million pieces.

Roth Capital wrote in a company note assessing Daqo’s quarterly results, “We believe DQ not only has among the best quality poly, but also the best cost structure, and we expect it to continue to improve.” Adding, “ We expect DQ’s average cash cost to decline to ~ $6.50/kg in 2019 as the company benefits from increased scale and lower cost electricity enabled by its Phase 3B expansion to nameplate capacity of 30k MT by YE’18. DQ, in our view, is well-positioned to benefit from the shift from multi to mono as the company increased its production of mono grade poly to 70% in Q2.”

 

Anu Bhambhani

Anu Bhambhani is the Senior News Editor of TaiyangNews

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Anu Bhambhani