Chinese polysilicon producer Daqo New Energy says oversupply and excess industry inventory led to delays and reductions of orders from its downstream customers that pulled down its Q2/2023 revenues by 10% sequentially and 49% annually to $636.7 million.
Polysilicon prices plunged by close to 70% at the end of Q2/2023, compared to the previous quarter as new entrants as well as some 'established industry players engaged in aggressive pricing'. Prices reached bottom in the second half of June.
During the reporting quarter, the average selling price (ASP) for Daqo was $12.33/kg, compared to $27.83/kg in Q1/2023 (see Daqo New Energy Gets Mixed Bag In Q1/2023).
Average cash cost for the company was $6.05/kg, down from $6.61/kg in the last quarter. However, it also lowered the average total production cost to $6.92/kg by 8.3% from $7.55/kg over the same period, attributing it to manufacturing efficiency improvement and reduction in the cost of metallurgical-grade silicon.
Net income for the company declined by more than 83% annually to $103.7 million, while gross profit tumbled over 72% to $258.9 million.
The Chinese manufacturer met its Q2 production guidance for the period, producing 45,306 metric ton (MT), and sold 51,550 MT as phase 5A came online, expanding its annual nameplate production capacity to 205,000 MT (see Daqo's Production Capacity Expands).
Daqo remains confident of the situation improving in the near future as it maintains annual production guidance for 2023 at 193,000 MT to 198,000 MT, while guiding for Q3/2023 output of 55,000 MT to 57,000 MT polysilicon.
"Polysilicon inventory at our original Xinjiang facility decreased to less than a week's production volume," said Daqo CEO Longgen Zhang. "At the end of the quarter, with customer orders on hand that covered all our inventory, we had practically sold all shippable products. The customer qualification process for the products of our Inner Mongolia facility completed successfully in July, and at the end of July, with brisk customer orders and demand, we had further reduced our polysilicon inventory to a very healthy level of approximately one week of production across our two facilities."
Zhang has been announced to step down as the CEO with immediate effect, handing over the position to Xiang Xu (see Senior Leadership Overhaul At Daqo New Energy).