Q4 2024 Daqo New Energy Corp Earnings Call
terminated her freedom.
A film by Winnie the Pooh Babylonia
Director of Photography Production Designer Music by Music by Music by Music by Music by Music by Music by Music by
Director of Photography and Editing Production Manager Music by Music by Music by Music by Music by Music by
Speaker Change: Good day and welcome to the DeKalb New Energy Fourth Quarter 2024 Results Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.
Speaker Change: After today's presentation, there will be an opportunity to ask questions.
Speaker Change: To ask a question, you may press star then 1 on a touch-tone phone.
To withdraw your question, please press star then 2.
Please note this event is being recorded.
Speaker Change: I would now like to turn the conference over to Jessie Zhao. Please go ahead.
Speaker Change: Hello everyone, I'm Jessie Zhang, the investor relations of Jiacom New Energy. Thank you for joining our conference call today.
Speaker Change: Dakang New Energy just issued its financial results for the fourth quarter of 2024, which can be found on our website at www.dqsolar.com.
Speaker Change: Today, attending the conference call, we have our Chairman and CEO, Mr. Xiang Xu, our Deputy CEO, Ms. Anita Zhu, our CFO, Mr. Lin Yang, and myself.
Speaker Change: Mr. Xu is on a business trip now, so he will make a brief introduction, followed by Ms. Anita Xu, on our management remarks.
Speaker Change: Today's call will begin with an update from Ms. Xu on market conditions and company operations. And then Mr. Yang will discuss the company's financial performance for the quarter and the year.
Speaker Change: After that, we will open the floor to Q&A from the audience.
Before we begin the formal remarks
Speaker Change: I would like to remind you that certain statements on today's call, including expected future operational and financial performance
Speaker Change: and Industry Growth, are forward-looking statements that are made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. And these statements involve inherent risks and uncertainties.
Speaker Change: A number of factors could cause actual results to differ materially from those contained in any forward-looking statement.
Speaker Change: Further information regarding this and other risks is included in the report or documents we have dealt with or furnished to the Securities and Exchange Commission.
Speaker Change: These statements only reflect our current and preliminary view as of today and may be subject to change. Our ability to achieve these projections is subject to risk and uncertainty.
Speaker Change: All information provided in today's call is as of today and we undertake no duty to update such information except as required under applicable law.
Speaker Change: Also, during the call, we will occasionally reference monetary amounts in U.S. dollar terms. Please keep in mind that our functional currency is the Chinese RMB. We offer these translations into U.S. dollars solely for the convenience of the audience.
Speaker Change: Now I will turn the call to our chairman and CEO, Mr. Xiang Xu.
Thank you.
Hello?
Thank you for watching!
Speaker Change: Hello everyone, this is Xu Xiang, the CEO of Dark New Energy. We appreciate you joining us in the conference call today.
Anita, go ahead.
Speaker Change: Okay, thank you Mr. Xu. Hello everyone, this is Anita Zhu. Thank you for joining our conference call today and I'll now deliver the management remarks on behalf of Mr. Xu.
Speaker Change: So in 2024, we face a challenging market environment with excess capacity in the solar PV industry, leading to sharp price declines across the entire value chain.
Speaker Change: We proactively managed these difficulties by curtailing telecom production to reduce cash burn, particularly in the 3rd and 4th quarters.
Speaker Change: Nevertheless, we reached an annual polysilicon productive volume of 205 and 68 metric tons in 2024, meeting our guidance of 200,000 metric tons to 210,000 metric tons.
Speaker Change: which represented an increase of 3.7% year-over-year compared to 197,831 metric tons in 2023.
are N-type product mix.
Speaker Change: increased significantly from approximately 40% of total production in 2023 to 70% in 2024.
Speaker Change: And we sold 181,362 metric tons in 2024, ending the year at a reasonable inventory level.
Speaker Change: Despite growing demand for solar PV products globally, the mismatch between demand and supply drove prices lower in 2024, even below cash costs.
Speaker Change: Overall, our polysilicon ASPs decreased significantly from 11.28 USD per kg in 2023.
Speaker Change: to $5.66 U.S. dollars per kilogram in 2024. And revenue came in at $1 billion U.S. dollars compared to $2.3 billion U.S. dollars in 2023 as a result of lower ASPs as well as lower sales volumes.
Speaker Change: As polls show us on ASP's fallible production costs starting in the second quarter of 2024, we reported a non-cash provision for inventory impairment in expense with a negative growth margin of 20.7% for 2024.
Speaker Change: Due to the continuous negative growth margin, we recorded a non-cash, long-lived asset impairment charge of $175.6 million.
Speaker Change: million U.S. dollar for the quarter related to our older policy income production line.
Speaker Change: Despite the losses, Daco New Energy continues to maintain a strong balance sheet and ample cash reserves.
Speaker Change: At the end of 2024, the company had a cash balance of $1 billion U.S. dollars, short-term investments of $10 million U.S. dollars, bank notes receivables of $55 million U.S. dollars, and a fixed-term bank deposit balance of $1.1 billion U.S. dollars.
Speaker Change: Overall, the company maintains strong liquidity with a balance of quick assets of 2.2 billion USD, which can be readily converted to cash if needed.
Speaker Change: This solid financial position ensures we're well-equipped to navigate the market downturn and remain strategically resilient.
Speaker Change: On the operational front, during the fourth quarter, the company continued to operate at a lower utilization rate of 40% to 50% of our nameplate capacity in light of weak market prices.
Speaker Change: The total production volume at our two post-work facilities for the quarter was 34,236 metric tons, further decreasing from the third quarter by 9,356 metric tons.
Speaker Change: Meanwhile, we intensified our efforts to reduce inventory, and our sales volume reached 42,191 metric tons in the fourth quarter, compared to 42,101 metric tons in the previous quarter.
Speaker Change: As a result of lower utilization, idle facility-related cost for the quarter was approximately US$1.02 per kilogram, which was primarily related to non-cash depreciation expense.
Speaker Change: Overall, political client unit production costs edged up 3% sequentially to an average of $6.81 USD per kilo.
Speaker Change: However, thanks to our relentless efforts to improve operational efficiency, our cash cost declined further to $5.04 USD per kilogram, a 6% quarter-over-quarter decline compared to $5.34 USD per kilogram in the third quarter.
Speaker Change: Due to the current market pricing environment, we currently expect total polysaccharide production volume in the first quarter of 2025 to be approximately 25,000 metric tons to 28,000 metric tons.
Speaker Change: We plan to maintain a relatively low utilization rate in 2025 until a turning point emerges in the sector. As a result, we currently anticipate full-year production volume in 2025 to be approximately 110,000 metric tons to 140,000 metric tons.
Speaker Change: Discussions on industry self-regulation measures have been ongoing since the fourth quarter. Meanwhile, the political market remains sluggish heading into the quarter as downstream customers continue drawing down accumulated...
Speaker Change: inventory and coping with lower wafer capacity utilization rates of approximately 50%.
Speaker Change: Polysilicon pricing remains stable within the cyclical bottom range of RMB36 to RMB42 per kilogram throughout the quarter. In November and December, leading poly producers reduced production to offset the higher hydroelectricity costs during the winter season and to mitigate inventory risks.
Speaker Change: As such, industry production policy can continue to decline month over month.
Speaker Change: According to industry statistics, the total production volume in China descended to approximately 100,000 metric tons per month in December, the lowest level in the year. On December 26th, Tulsa Confucius Trading officially launched, with the initial benchmark price set at $1.2 billion.
38.6 RMB per kilogram.
Speaker Change: Although some prices were quoted higher at 42 to 43 RMB per kilogram, futures trading volume remained small and had limited impact on spot pricing.
Speaker Change: On a positive note, new solar PV capacity in China reached a record high of 68 gigawatts in December, which was beyond expectations and reinforced market confidence in the resilience of solar PV in the short run and market potential in the medium to long term.
Speaker Change: Despite the significant challenges resulting from overcapacity in the solar PV industry, we have seen proactive initiatives to restore the industry's healthy development.
Speaker Change: On December 6, 2024, led by the China Photovoltaic Industry Association, our company, along with other major solar PV manufacturers, have reached consensus that implementing self-discipline would be fundamental to mitigating the irrational competition amid falling prices and heightened global trade pressures.
Speaker Change: Moreover, the solar PV industry continues to show strong demand prospects. For the year 2024, China's newly installed solar PV capacity grew 28% year over year to 277 gigawatts.
Speaker Change: which not only hit a record high, but also exceeded market expectations. We remain optimistic that as supply adjusts to more rational levels, we'll see a better balance between supply and demand this year.
Speaker Change: In the long run, as a renewable energy source and one of the lowest cost sources of electricity worldwide, solar power continues to be a key driver of the global energy transition and sustainable development.
Speaker Change: Looking ahead, Daco New Energy will capitalize on the long-term growth in the global solar PV market and strengthen its competitive edge by enhancing its higher-efficiency n-type technology and optimizing its cost structure through digital transformation and AI adoption.
Speaker Change: As one of the world's lowest-cost producers with the highest quality intact products, a strong balance sheet, and no financial debt, we believe we're well-positioned to weather the current market downturn and emerge as one of the leaders in industries to capture future growth.
Speaker Change: So now I will turn the call to our CFO, Mr. Ming Yeh, who will discuss the company's financial performance with us. Ming, please go ahead.
Thank you for watching!
Speaker Change: Thank you, Anita, and hello everyone. This is Ming Yang, CFO of Daku New Energy.
We appreciate you joining our earnings conference call today.
Then follow with our full year 2020 for financial results.
Speaker Change: Revenues were $195.4 million compared to $198.5 million in the third quarter of 2024 and $476.3 million in the fourth quarter of 2023.
Speaker Change: The decrease in revenue compared to the third quarter of 2024 was primarily due to a decrease in ASP, mitigated by an increase in sales volume.
Speaker Change: Gross loss was $65.3 million, compared to $60.6 million in the third quarter of 2024, and gross profit of $87.2 million in the fourth quarter of 2023.
Thank you for watching!
Speaker Change: Gross margin was negative 33% compared to negative 30.5% in the third quarter of 2024 and 18.3% in the fourth quarter of 2023. The decrease in gross margin compared to the third quarter of 2024 was mainly due to the decrease in average selling prices.
Speaker Change: Selling General and Administrative Expense were $29.4 million, compared to $37.7 million in the 3rd quarter of 2024 and $39 million in the 4th quarter of 2023.
Speaker Change: SG&A expenses during the fourth quarter of 2024 included 14.9 million in non-cash share based compensation expense compared to the company's share related to the company's share incentive plan compared to 18.9 million in the third quarter of 2024
Speaker Change: The company recognized $18.1 million in non-cash expense related to allowance for expended credit loss of receivables in the fourth quarter, mainly due to uncertainty on the recoverability of long-age receivables.
The company recognized...
$175.6 million in fixed asset impairment loss
Speaker Change: mainly related to its older polysilicon production lines in the 4th quarter of 2023.
Speaker Change: due to the continuous downtrend in the policy-driven selling prices that impaired the recoverability of current amounts of these assets.
Speaker Change: R&D expenses were $0.4 million compared to $0.8 million in the third quarter of 2024 and $3.3 million in the fourth quarter of 2023.
Speaker Change: R&D expenses reflect R&D activities that take place during the quarter and can vary from period to period.
Speaker Change: As a result of the above mentioned, loss from operations was $300.9 million compared to $98 million in the third quarter of 2024, and income from operations of $83.3 million in the fourth quarter of 2023.
Speaker Change: operating margin was negative 154% compared to negative 49% in the third quarter of 2024 and 17.5% in the fourth quarter of 2023.
Speaker Change: Net loss attributed to Dakou New Energy shareholders was $180 million compared to $60 million in the third quarter of 2024 and net income of $53.3 million in the fourth quarter of 2023.
Speaker Change: Loss per basic ADS was $2.71 compared to $0.92 in the third quarter of 2024 and income per ADS of $0.76 in the fourth quarter of 2023.
Thank you for watching!
Adjusted Net Loss at Rule 2.0 New Energy Shareholders
Speaker Change: excluding non-cash share-based compensation costs was $170.6 million compared to $39.4 million in the third quarter of 2024 and just a net income of $74 million in the fourth quarter of 2023.
Speaker Change: Adjusted loss per basic ADS was $2.56 compared to $0.59 in the 3rd quarter of 2024 and adjusted earnings per basic ADS of $1.06 in the 4th quarter of 2023.
Speaker Change: EBITDA was $236 million compared to $-34 million in Q3 2024 and $128.2 million in Q4 2023.
Speaker Change: It was a margin with negative 121% compared to negative 17% in the third quarter of 2024 and 26.9% in the fourth quarter of 2023.
Thanks for watching!
Speaker Change: Now, I will go over the company's full year 2020 for financial results.
Revenues were $1.03 billion compared to $2.3 billion in 2023.
Speaker Change: The decrease was primarily due to lower polysilicon average selling prices and further compounded by lower sales volume.
Gross loss was $200,000
Speaker Change: and $12.9 million compared to gross profit of $920.7 million in 2023. Gross margin was negative 20.7% compared to 39.9% in 2023.
Speaker Change: The decrease in gross profit was probably due to lower ASP and inventory impairment.
Speaker Change: For the year of 2024, the company recorded $81.4 million in inventory impairment expenses compared to $0.5 million in 2023.
Speaker Change: HCA expenses were $143.1 million compared to $213.2 million in 2023.
Speaker Change: The decrease was primarily due to the reduction in non-cashier-based compensation costs related to the company's sharing incentive plan, which was $72.4 million and $121 million in 2024 and 2023, respectively.
Speaker Change: The company recognized $175.6 million in fixed asset impairment loss mainly related to its older policy and facilities in 2024.
Speaker Change: R&D expenses were $4.6 million compared to $10.1 million in 2023.
Thanks for watching!
Speaker Change: As a result of the foregoing, loss from operations were $564 million compared to income from operations of $783.4 million in 2023. Operating margin was negative 54.8 percent compared to 33.9 percent in 2023.
Speaker Change: Net interest income was $29.4 million compared to $52.3 million in 2023. The decrease in interest income was primarily due to lower cash at bank balance as well as lower bank interest rate.
Speaker Change: Net loss attributable to W&G shareholders was $345 million compared to net income of $429.5 million in 2023.
Speaker Change: Loss per basic ADS was $5.22 compared to earnings per basic ADS of $5.75 in 2023.
Speaker Change: adjusted net loss as put over the dark on new energy shareholders
was $272.8 million compared to $563 million in 2023.
Speaker Change: Adjusted loss per basic ADS was $4.12 compared to adjusted earnings per basic ADS of $7.64.
Speaker Change: EBITDA was negative $338 million compared to $918.6 million in 2023 EBITDA margin was negative 32.9% compared to 39.8% in 2023
now on the company's financial condition.
Speaker Change: As of December 31st, 2024, the company had $1.038 billion in cash equivalents and interested cash compared to $853.4 million as of September 30th, 2024 and $3.05 billion as of December 31st, 2023.
Speaker Change: And as of December 31st, 2024, the no receivable balance was $55.2 million, compared to $84.5 million as of September 30th, 2024, and $116.4 million as of December 31st, 2023.
Notes receivable balance represent banknotes with maturity within 6 months
Speaker Change: and as of December 31st, 2024, the balance of fixed-term deposits within one year was $1.087 billion compared to $1.215 billion as of September 30th, 2024, and none as of December 31st, 2023.
Thank you for watching!
Now on the company's cash flows.
Speaker Change: For the 12 months ended September 31st, 2024, net cash used by operating activities was $437.7 million, compared to $1.6 billion provided by operating activities in the same period of 2023.
Speaker Change: The decrease of primarily due to lower revenue than growth margin
Speaker Change: For the 12 months ended December 31, 2024, net cash used in investing activities was
1.478 billion
Speaker Change: compared to 1.196 billion in the same period of 2023. The net cash-using net activities in 2024 was primarily related to capital expenditures.
Speaker Change: on the company's 5A and 5B polycyclic expansion projects in Baotou City, Inner Mongolia and purchases of short-term investments and fixed-term deposits.
Speaker Change: For the 12 months ended December 31st, 2024, net cash used in financing activities was $47.4 million.
Speaker Change: compared to 795 million in the same period of 2023. Net cash used in financial activities in 2024 was primarily related to 35.8 million in dividend payments made by the company's subsidiary Xinjiang Daco to its minority shareholders.
And that concludes our report for March.
Speaker Change: We will now open the call to Q&A from the audience. Operator, please begin.
We will now begin the question and answer session.
Speaker Change: To ask a question, you may press star then 1 on your touchtone phone.
Speaker Change: If you are using a speakerphone, please pick up your handset before pressing the key.
Speaker Change: If at any time your question has been addressed and you would like to withdraw your question, please press star and two.
Speaker Change: At this time, we will pause momentarily to assemble our roster.
Thank you for watching!
Speaker Change: The first question today comes from Allen Hong with J.P. Morgan. Please go ahead.
Allen Hong: Hi, thanks for letting me to ask the questions. I have like three questions here. The first question is, I would like to know the reason for the how is the cash span in fourth quarter last year? On my tally, it seems like we have a span around $0.2 billion cash in fourth quarter. We'd like to have a feeling of the breakdown.
Allen Hong: My second question is, I would like to hear your opinions on the pricing outlook in the next two quarters.
Allen Hong: And the number three question is, I mean, like, there's been, like, various news talking about a potential policy intervention to suppress the industry capacity of, like, a supply-side reform. I would like to hear your thoughts on this, and thank you.
Thank you for watching!
Thank you.
Allen Hong: So I'll hold on, we're going to look at the numbers really quick.
Yang, Xiang Xu, Anita Zhu
Thank you.
Thanks for watching!
Speaker Change: Okay, Alan, thank you for the questions. Maybe I'll talk about the pricing outlook first.
before I may answer your first question.
Speaker Change: So I think in the short run, we are likely to see poly prices to increase in the next couple of months, at least before the end of the second quarter of 2025.
Speaker Change: like I talked about in the commentary section, starting the fourth quarter of 2024, the industry has initiated several discussions of self-regulation that would potentially cap the overall production volume.
Speaker Change: So right now, the overall industry utilization rate is roughly around 50% across all.
Speaker Change: And as a result, based on industry statistics, we have seen domestic polysupply to drop starting from December. So in December, the overall production volume is around 104,000.
Speaker Change: metric tons and in January it has even lower to 97,000 tons.
Speaker Change: And while the wafer supply in Jan is only about 45 gigawatts, which is roughly equivalent, or I should say supply is slightly lower than demand.
Speaker Change: So we expect supply to be in the range of 90 to 100K at least until May.
Speaker Change: primarily driven by the seasonality effect of hydroelectricity power which will be relatively high during the low rain season up until May.
Speaker Change: and as of last week the domestic industry inventory in the poly sector is around 250,000 tons and also about 200,000 at the end ghetto or wafer manufacturers level.
Speaker Change: So we believe the poly inventory may remain high throughout 2025, but would reduce gradually in the next year.
Speaker Change: few months, leading to a potential highly priced upside in the second quarter.
Speaker Change: And another catalyst to mention for a price uptick is the new regulations that have been talked about, the market reform, which would lead to potential front loading.
Speaker Change: So in the first quarter, the NDRC and also the National Energy Administration actually released new policies on distributed solar installations and also on the renewable power care reform.
Speaker Change: So, we would see a distributed solar regulation to take effect on May 1st and also the market base on grid pricing to be implemented for all new renewable projects starting from June 1st.
Speaker Change: So we expect to see some potential fund loading, especially because there's this implicit uncertainty to the yield of new projects starting from June 1st.
Speaker Change: So as we see higher, therefore we expect to see higher visibility.
Speaker Change: Industry went toward depletion and potential uptick in price across the value chain at least in the first half of 2025.
Speaker Change: Demand in the second half of 2025 and onward appears to be somewhat more challenging if there are not enough new application scenarios or alternative business models. We may ask them to determine the new solar project returns.
Speaker Change: So, in the mid-term to the more longer term, we think that the overall industry utilization would remain around 40 to 50 percent, especially as the corporates are complying to the self-regulation measures.
Speaker Change: to maintain or to promote a more healthy development of the industry. So price would likely linger in the range of 40 to 45 RMB foreign type and 37 to 40 OP type. So we see more clear turning points in the industry.
I hope that answers most of the questions.
Speaker Change: So you say 45 to 50 for n-type is your expectation.
for the Morbid Term.
Speaker Change: So up until, I would say, the end, the second half, or until the end of this year.
Speaker Change: Got it. Yep. So, the next question is on the supply-side reform, and also like the cash consumption in fourth quarter.
Thank you.
© 2018 The Ultimate Parody Site!
Speaker Change: Okay, I think if you look at cash on consumption, right, so I think about roughly 80 million is related to operations.
Speaker Change: or spend on the operations and then roughly 40 million is related to the CapEx
Thank you for watching!
The balance sheet items between operating assets and operating liabilities
Speaker Change: Oh, got it. Thank you. And the last question I have is I would like to hear your thoughts on how the government may conduct a part-time reform in our industry.
Okay, I think from our understanding is...
Speaker Change: Right now, the National Energy Administration, and in partnership with the Ministry of Industry and Technology, and
Uh...
the National Development and Reform Commission, I think combined
You know they're looking at
how to stem the losses within
Speaker Change: and the industry right? I think previously they were looking at how would the self-discipline framework would work and I believe thus far they are
Speaker Change: We don't know what that policy looks like yet. I mean, it might be...
you know some combination of you know capping
production, some kind of production quota and
I think retiring, inefficient capacity, or...
Speaker Change: older technology and things like that so I think we are yet to see what the policy
Speaker Change: looks like. I believe that's still being discussed and being informed. It might look like some of their former policies related to this, for example, what had happened in Illinois.
Thank you.
Speaker Change: Got it, and thank you very much for answering my questions, and I'll pass it on.
Very good, thank you so much, Alan.
Speaker Change: The next question comes from Phil Shen with Roth Capital. Please go ahead.
Phil Shen: Hey guys, hey guys, hey guys, good morning, good morning, good morning
Thank you for watching!
Phil Shen: Have you got, have you got, have you got, have you got
Thank you for watching!
Speaker Change: There seems to be some issues with Phil's line. The next question comes from Meng-Wen Wang with Goldman Sachs. Please go ahead.
Meng-Wen Wang: Hi, thanks management for taking my question. So my first question is about the turning point you mentioned. So, as Anita said, you expect polyprice height is likely to sustain until end of the second quarter. So what's the exact turning point we are looking for in order to raise our production?
Meng-Wen Wang: Also, it would be great if you can elaborate more on the basis that we come to our production target. Is it the so-called production quota assigned to us, or is it simply because we are more bearish on the demand outlook?
Thanks.
Thank you for watching!
Speaker Change: Thank you, Mullen. So for your first question, it's very difficult for us to estimate the exact timing of the turning point.
Speaker Change: because in 2024, if we look at the broader picture, the total production volume actually reaches 1.82 million metric tons.
Speaker Change: and the nameplate capacity of every sector on the main value chain has reached, on average, over 1,200.
So, for Polly, the nameplate production capacity of...
Speaker Change: all completed projects, regardless of whether it has been temporarily shut down or never started initial production after it exceeded 1,400 gigawatts, which is roughly 2.2 million metric tons. That's more than double of demand.
Speaker Change: and if we look at the outlook for 2025 based on industry forecasts, we see that global demand would actually be in the range of $5.50 billion.
Speaker Change: to 600 gigawatts. And from that we expect China's solar installation to be in the range of 250 to 300 gigawatts.
Speaker Change: which would be roughly equivalent to 1.4 to 1.6 million metric tons of polypropylene.
Speaker Change: So if we take these numbers into consideration, it's not difficult to see that it will be a somewhat more prolonged cycle to rebalance the current overcapacity or oversupply in the entire industry.
Speaker Change: So we would either need to see a stronger demand or a more rapid rebalancing in terms of supply. And in terms of our production target,
Speaker Change: We have decided to maintain a relatively low utilization rate on the backdrop of
abiding to the self-regulation measures.
Speaker Change: that has been led by the CPIA as well as considering our own strategic, our own strategy to cap our cash birth in 2025.
Thank you for watching!
Speaker Change: Yeah, sure. Thanks for that. So just to follow up, what's the current utilization rate in our Xinjiang and Inner Mongolia capacity? And since we plan to maintain the utilization rate at a low level for the whole year, will we consider to shut down our Xinjiang base? Because the Inner Mongolia base alone is more than enough, right, to meet the production target.
Thank you for watching!
Speaker Change: We have decided to open both our Xinjiang and our Inner Mongolia based on strategies of course because we also have to take into account our employees in both facilities as well as our obligation for in order to fulfill our social responsibility to the community.
but I guess you're correct in terms of
Speaker Change: further lowering our utilization rate, but that will be contingent upon market development.
Speaker Change: If demand is worse than we expected, then we might consider to further drop our utilization rate. But also considering, we need to see the balance between fixed cost, variable cost, and a number of factors.
before we continue to lower our utilization of the internet.
Yeah, sure. That's very clear. Thanks. That's all from me.
Ethereal Sound
Speaker Change: The next question comes from Phil Shen with Roth Capital. Please go ahead.
Phil Shen: Hey guys, hopefully this is better now. Can you hear me okay?
Yeah, now it's great, yeah.
Okay, great. Thanks, Ming.
Speaker Change: So, you know, the audio was a little bit unclear for me earlier, so apologies if some of these questions have been asked. As a follow-up to the first questionnaire on the supply-side reform, I heard your answer that there could be some kind of policy put in place.
Speaker Change: but you don't know what it looks like yet. Do you have a sense of the timing of when the policy could be released? Is it soon or is it maybe much later in the year? Thanks.
Thank you for watching!
Thank you for watching!
Obviously, you know, it's uncertain with regard to...
Speaker Change: timing of the policy. China will have its high-level central government committee meeting coming up in early March.
Speaker Change: We believe, from what we heard, it could be around that time, because that's the time when the government announces a lot of their policy, for example, economic policy.
and government policy, so that's one possible timeline.
Speaker Change: in early March or it could be later. We don't know yet, yeah.
Speaker Change: But all we know is that they are in discussion and they are coordinating.
Speaker Change: Great, and so they would release the supply side framework for not just poly, right, but also every step in the supply chain.
Speaker Change: Okay, great. Thanks. And then from a pricing standpoint, I may have missed this, but can you share what kind of pricing you expect for Q1? Should it be similar to Q4? And then do you expect poly pricing to be similar to Q4?
Speaker Change: adjust slightly higher as we get into the back half of 2025. What's the cadence of price for polysilicon Q1 through 4? Thanks.
Thank you for watching!
Phil Shen: Thank you, Phil. So, like I mentioned about in the beginning of the Q&A session, we believe that in the near term, polling prices will somewhat pick up slightly. So, end time will be more on the higher range of the 40 to 45 RMB.
Phil Shen: but going to the second half of the quarter because we're likely to see some front-loading before June 1st, prevented by the Renewable Power Transit Reform and the new policies on Distributed Power Distillation.
The only certainty is...
Phil Shen: to get installed before June 1st, so we believe that we might see a stronger demand in the first half compared to the second half.
Phil Shen: And hence, overall, in the second half of the year, price for untyped would be in the range of $42.
What do you like? Maybe more on the lower end?
and 37 to 40.
Thanks for watching!
Speaker Change: Okay, Anita, it was a little hard to hear you. Can you speak closer to the microphone? Did you say in the first half it's 40 to 45 and in the back half might be 37 to...
Yeah, that's much better.
Speaker Change: So I was saying the first half it's more on the higher range of 45, but in the second half will be more on the lower range.
Speaker Change: okay got it and you're much you're much clearer now okay yeah okay and p-type will be around 37 to 40
Speaker Change: But of course, that would also be contingent upon whether there would be additional supply coming out after May.
right
meaning more production from other players.
Speaker Change: Yeah, especially because we're going to the rain season. So the hydro electricity power tariff would drop significantly compared to where it is right now.
Thank you for watching!
Speaker Change: Got it. Okay, thank you. It's much clearer now. Thank you.
Speaker Change: Okay, so we have a sense for pricing now. We've talked about supply side reform. What about on the demand side? You know, we've seen some changes recently to the feed-in tariff outlook and that's going away.
Speaker Change: Are you seeing that yet with the potential for that? And if so, how do you expect that to play out? Through the year. Thanks
Thank you for watching!
Speaker Change: So, like I talked about previously, we think that, based on industry forecasts, we have also seen global demand to be in the range of 550 to 600 gigawatts. And from that, we expect China's solar installation to be in the range of 250 to 300 gigawatts.
Speaker Change: and that would be relatively stable in terms of year-over-year growth compared to 2077 year-over-year loss in 2024 primarily because we think the inflation of the utility scale has peaked in the short run.
Speaker Change: We will need to see a more structural reform either in the grid system or a frequency modulation control to optimize the system such as the development of energy storage before demand can further boost.
Speaker Change: And for distributed installations, we think that the market-oriented reform poses the biggest uncertainty to the yield of new projects, and hence the pace of installation would somewhat slow down after June 4th.
Speaker Change: before we see more transparency on the regulation of course because although it has been released by NDRC and the NEA for the new regulation they actually delegated these specific details to provincial levels.
Speaker Change: So, we will need to see from that level what the local government, what the specific plans will look like from the provincial levels before end of 2025.
Speaker Change: And we think that besides the Chinese market, international demand will primarily come from emerging markets. So, for instance, like Latin America, Middle East.
Speaker Change: Africa, et cetera, because they have the big potential for renewable energy due to the rapid growth in electricity demand. So for instance, Saudi Arabia's goal is...
Speaker Change: to have renewable account for 50% of energy composition by 2030. So they plan to have a newly installed 20 gigawatts of solar from 2024 onwards.
Speaker Change: stagnant primarily because after Trump has been elected he has signed several executive orders for instance
Speaker Change: delaying or suspended the IRA subsidy and also exiting the Paris Agreement. So we think that in the U.S., the renewable energy would be pivoted towards supporting the fossil fuel.
Thank you.
Speaker Change: Okay, thank you for the color and I'll pass it on.
Great. Thanks, Phil.
Speaker Change: The next question comes from Allen Lau with Jeffries. Please go ahead.
Thanks a lot.
Speaker Change: I would like to come to some of the details in the financials. So actually, the cash cost of the...
Speaker Change: production in 4Q has lowered to almost RMB 35 per kilogram.
would like to know if there's any further room.
of China.
Speaker Change: Hello Alan, this is Ming. I would say that the current 35 RMB per kilogram is reflective of the company's current
Cash cost?
Speaker Change: Okay, I think cash cost reduction comes from a number of points, including...
a better manufacturer efficiency and then cost savings on materials.
Speaker Change: procurement, but in particular, right, why us reduce production. I think now the productions are primarily focused in our most efficient.
Speaker Change: manufacturing facility both in Xinjiang and in Mongolia. So these have lower electricity usage per unit of production for example. So I think that's why we
saw the tax cost reduction.
Speaker Change: I think right now our outlook for Q1 is cash costs should remain at the current level or maybe just slightly lower but not not too much lower. That's our current expectation.
Thank you for watching!
I see, that's clear. And another question. Sorry.
Speaker Change: So yeah, I think similar to Q4, maybe just slightly lower than Q5.
Thank you.
I see, I see.
Speaker Change: Another question is in regards to FDR, because one of the major peers has also got around 10...
Speaker Change: thousand tons of kind of pilot lines got the environmental approvals.
Speaker Change: So would like to listen on your views on the technology and would you also explore into
Speaker Change: certain lines for FDR, and what's your view on their guest course of R&B 28?
Speaker Change: So first of all, it's hard for us to comment on our competitors' cash costs, but I could give more color on our own strategy, of course.
So, I think that we definitely respect innovation and industry.
but modified Siemens process has been refined.
over decades.
Speaker Change: and have delivered proven cost-efficiency, scalability, and high-quality high-quality polysilicon, which is critical to meeting our customer specifications.
Speaker Change: And we have also consistently worked toward further lowering our costs through technology improvements.
Speaker Change: such as lowering our energy consumption, our silicone powder consumption, etc, so we can position competitively in this cocoa market.
Speaker Change: and we definitely acknowledge the clear advantage of SDR which would be low energy consumption and I guess hence lower cost which makes it easier to get relevant carbon footprint certifications in the future.
Speaker Change: But we still believe that FBR has its inherent risks, such as its purity challenges.
Speaker Change: It's still not possible to use 100% FBR in downstream production. So there is a maximum blend percentage when you are trying to produce in the downstream sectors.
Speaker Change: There is also a challenge associated with hydrogen displacement during the deposition process and also hydrogen retention leading to potential defects.
for Degraded Risks.
Speaker Change: And also the process instability caused by things like the reactor clogging, maybe the uneven silicon deposition can also lead to increased downtime.
Speaker Change: I would like to highlight that we also established our research center.
Speaker Change: in Inner Mongolia last quarter in 2024, which will continue to evaluate.
Speaker Change: all innovations and maybe more on the emerging technologies that could potentially be transformative in the future including the FBR in order to assess the long-term viability of different technologies.
Speaker Change: and I think, I believe that there should be other technologies.
OFER that demonstrate clear sustainable
Speaker Change: without compromising the product quality. We will consider the different process as well, but for now our strategy remains
Speaker Change: centered on leveraging our existing strengths, so our operational excellence, our customer trust, and also our financial strength to navigate this market dynamics amid this market down cycle.
Thank you for watching!
Thank you for watching!
Speaker Change: Thanks a lot for the detailed answers. So basically there's no concrete plans in pursuing FBR for now, right?
Speaker Change: There's no concrete plans but we are also doing our research of course. We are keeping an eye on all sorts of technologies that could be potentially transformative in the future.
Speaker Change: Understood. So another question is, I recall there was 100 million buyback announced last year. I wonder if when the company thinks it would be appropriate to start the buyback?
Speaker Change: Is there any consideration in selling down your A-share platform as well in order to fund the buyback in the U.S. platform?
Thank you for watching!
So I think for the 100 million share buyback
Speaker Change: We are still keeping an eye and closely monitoring the market dynamics. I think like we mentioned before, we were more conservative and waiting to see when a turning point would emerge.
Speaker Change: But I think based on the recent news and our assessment of the market environment, we would like to...
Speaker Change: We are still closely monitoring when would be a good timing to start repurchasing, but for selling down our A-shares
Speaker Change: and potentially buying back on the U.S. ADRs to close down this gap in terms of the huge...
Speaker Change: differences evaluation. We have definitely considered such plans. However, after the new regulation rolled out on selling down on A-shares,
which was announced in May last year.
Speaker Change: Should your share price be trading below your issue price, which would be $21.49 for us?
It's somewhat more difficult.
Our lockout, yes, in January.
Thank you for watching!
Speaker Change: I see. So, but I think from an industry perspective you would still like to see there's a turning point before you commit for the buyback, right?
Thank you for watching!
Speaker Change: Yes, yes, because I think the cycle will somewhat be prolonged as our competitors are also
have
strength in terms of
Speaker Change: stronger I guess shareholder backgrounds and also we haven't heard things like we're calling back the loan so I think it's still early stage right now but we're definitely keeping an eye and monitoring the market dynamics
Speaker Change: and decide when would be the good timing to start with the agency.
Speaker Change: And my last question is about the 2025 production guidance. It appears to be less than 50% of utilization rate if you think about
Speaker Change: the capacity of the company is close to 300,000 and seems slightly lower than the numbers after the December CPIA meeting. So we'd like to know if it is coherent with the supply side self-discipline.
Speaker Change: initiative because there's a lower estimated demand in 1Q, so the proportion is lower in 1Q, but like is this basically the number you have in the self-discipline agreement?
I think from the self-discipline measures, they basically...
Speaker Change: Overall, they would have a quota for the company based on your path shipping volume as well as your nameplate capacity.
Speaker Change: as of now, and that's more like a maximum cap of the level of production that you can produce for the entire year. We haven't heard anything such as punishment associated with it.
Speaker Change: producing lower than the quota and we have actually made our target for 2025 based on our own company strategy while complying to the self-regulation measures.
Speaker Change: I think our primary goal in 2025 is to maintain a level that would meet our customer demand while...
tapping or reducing our cash for an entire year.
Thank you for watching!
I see, I see. So basically...
Speaker Change: It's like, it's poison. I could quite say that it's empty magic.
Speaker Change: there's a possibility to further increase a bit on the production if the demand really beats expectation.
Speaker Change: Yes, that's the guidance as we assess the market conditions right now. But there is a possibility of potentially...
Thank you.
Speaker Change: increasing our utilization rates should the market demand become stronger than we expect.
Speaker Change: I see, that's very clear. Thanks a lot for taking my question.
Thank you.
Thanks for watching!
Speaker Change: The next question comes from Zihui Hu with CICC. Please go ahead.
Zihui Hu: Thanks, management. This is Zihui from CICC. My first question is whether we participate in Polyfutures Trading Now and how to plan on it. And my second question is what's the current inventory level of company? Thanks.
Thank you for watching!
Zihui Hu: Thank you, I'll answer the first question and then answer the second.
Zihui Hu: So, in terms of the futures market, in the fourth quarter last year, we've already registered our label for the futures market and obtained relevant approvals, and so we are among the first batch of manufacturers to be able to participate in the futures market.
Zihui Hu: But after the Futures Market comes online in December last year, the registered brands generally quoted above 45 RMB, but the listing price was relatively low at 38.6.
when it just opened.
Zihui Hu: capital game right now and the main contract which is the June 25th has an average daily trading volume of about 10,000 lots which is not a lot so the overall market pool is still relatively small right now.
Zihui Hu: And as of trading at around 43 to 44.5, I believe, it has not yet met our expectations.
Zihui Hu: And I would say the willingness for us to participate is still relatively weak at the moment. And in fact, I believe for other players,
I think right now it's more preferable to
transact with futures merchants to indirectly exploit the hedging opportunities.
Zihui Hu: But that being said, we're definitely monitoring the progress of the market.
Zihui Hu: and waiting to see a more detailed guidelines on how to participate and see whether it would be a good strategy that fits our overall company strategy to take advantage of the future hedging.
Thank you for watching!
Sure. Thanks, Andy.
Thank you for watching!
Speaker Change: On top of that, the current sellable inventory for polyethylene for the company is less than 20,000 metric tons.
Speaker Change: per month, and there is a decline of close to 10,000 metric tons compared to the end of last quarter.
Speaker Change: So this is improving rapidly, I would say. Yeah, and it's continuing to come down as well.
Sure, that's all my questions. Thanks.
Okay, thank you.
Thank you for watching!
Speaker Change: This concludes our question and answer session. I'd like to turn the conference back over to management for any closing remarks.
Speaker Change: Thank you everyone again for participating in today's conference call. Should you have any further questions, please don't hesitate to contact us. Thank you and have an awesome day. Goodbye.
Speaker Change: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.