Aug 09, 2016
CHONGQING, China, Aug. 9, 2016 /PRNewswire/ -- Daqo New Energy Corp. (NYSE: DQ) ("Daqo New Energy", the "Company" or "we"), a leading manufacturer of high-purity polysilicon for the global solar PV industry, today announced its unaudited financial results for the second quarter of 2016.
Second Quarter 2016 Financial and Operating Highlights
Recent Corporate highlight
Three months ended
except as indicated otherwise
Jun. 30, 2016
Mar. 31, 2016
Jun. 30, 2015
Income from operations
Net income attributable to Daqo New Energy shareholders
Earnings per basic ADS ($ per ADS)
Adjusted net income (non-GAAP)(3) attributable to Daqo New Energy shareholders
Adjusted earnings per basic ADS (non-GAAP)(3) ($ per ADS)
Non-GAAP gross profit(3)
Non-GAAP gross margin(3) (%)
EBITDA margin(3) (non-GAAP)
Polysilicon external sales volume (MT)(1)
Polysilicon production cost ($/kg)(2)
Polysilicon cash cost (excl. dep'n) ($/kg)(2)
(1) Our polysilicon external sales volume excludes internal sales to our Chongqing wafer manufacturing subsidiary, which utilizes polysilicon as raw material for the production of solar wafers. The sales volume is the quantity of goods that have been accepted by customers, and thus the corresponding revenue has been recognized during the period indicated.
(2) 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 quarter. 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 quarter.
(3) Daqo New Energy provides non-GAAP gross profit, non-GAAP gross margin, EBITDA, EBITDA margin, adjusted net income (loss) attributable to our shareholders and adjusted earnings (loss) 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.
"I would like to thank our entire team for the excellent operational performance and financial results for the second quarter of 2016," said Dr. Gongda Yao, Chief Executive Officer of the Company. "During the quarter, we produced a record-high of 3,570 MT of polysilicon, which surpassed our annual name plate capacity of 12,150 MT. With our continuous effort on cost reduction, we reached our lowest ever cost structure with $9.43/kg in total cost and$7.42/kg in cash cost. Our current cost structure is 27% below Q2 2015 level, which at the time was already one of the lowest in the world. We believe we continue to be one of the lowest cost producers of polysilicon in the world in Q2 2016, and with further technology upgrades and process improvements, we believe we have a roadmap to reduce our cost even lower. "
"In the second quarter of 2016, the demand for polysilicon was very strong. We saw substantial increase in polysilicon orders and shipments across a wide range of customers. With a tight supply environment, market ASPs improved meaningfully, from $13.72/kg in the first quarter to $17.24/kg in the second quarter of 2016."
"Entering into the third quarter, we continue to see strong demand and robust orders from customers. The market for polysilicon within China remain tight supplied, with low levels of inventory across domestic suppliers and customers. Based on current market demand trends, we are seeing a stable pricing environment, and we anticipate Q3 ASP to be similar to Q2 levels. Considering several of the major Chinese polysilicon producers including Daqo plans to conduct annual facilities maintenance during the third quarter, we anticipate that the tight-supply situation for polysilicon sector within China should continue in 2016."
"For the second quarter of 2016, we not only delivered the best-ever quarter for the Company in terms of operational performance, but also excellent financial results. We achieved revenues of $71.0 million, with non-GAAP gross margin of 43.9%, and EBITDA margin of 48.9%, and GAAP earnings per basic ADS of $1.90. In particular, we generated strong cash flow from operating activities of $66.6 million in the first half of this year. With our Phase 3A polysilicon facilities expected to come online in early 2017, which will bring our annual capacity to 18,000 MT, we expect to continue to deliver compelling financial performance and results to our shareholders."
Outlook and Q3 2016 guidance
Since the ramp up of our Phase 2B capacity at the end of June 2015, we have produced a total of over 13,200 MT of polysilicon over the past four quarters, above our nameplate capacity of 12,150 MT. As our Xinjiang polysilicon manufacturing facilities have been operating continuously for more than 12 months, it is necessary that we conduct our annual scheduled maintenance during the third quarter to ensure safe and smooth operations. We also plan to take this opportunity to do preparation work for the interconnection between existing facilities and Phase 3A facilities which are expected to start pilot production early next year. The entire annual maintenance schedule is expected to result in 15 to 20 days of suspension to polysilicon production for 2016. Due to the long lead-time for procuring the specialty materials and equipment required for the annual maintenance, we anticipate that we would start the annual maintenance work in the second half of September 2016. However, the start date of the annual maintenance work depends on the scheduled delivery of such specialty materials and equipment. Therefore, it is possible that the annual maintenance start date may be delayed.
As a result of the above mentioned factors, the Company expects to sell approximately 2,550 MT to 2,600 MT of polysilicon to external customers during Q3 2016. The external sales guidance excludes shipments of polysilicon to be used internally by our Chongqing solar wafer facility, which is expected to utilize approximately 550 tons of polysilicon during the quarter for its wafer manufacturing operation. Wafer sales volume is expected to be approximately 24.0 million to 25.0 million pieces for Q3 2016.
This outlook reflects our current and preliminary view as of the date of this press release and may be subject to change. Our ability to achieve these projections is subject to risks and uncertainties. See "Safe Harbor Statement" at the end of this press release.
Second Quarter 2016 Results
Revenues were $71.0 million, representing a 23.1% increase from $57.7 million in the first quarter of 2016 and 107.0% from $34.3 million in the second quarter of 2015.
Revenues from polysilicon sales to external customers were $50.5 million, compared to $39.9 million in the first quarter of 2016 and $21.7 million in the second quarter of 2015. External sales volume was 2,931 MT in the second quarter of 2016, compared to 2,905 MT in the first quarter of 2016. ASP of polysilicon was $17.24/kg in the second quarter of 2016, increasing from $13.72/kg in the first quarter of 2016. The increase in polysilicon revenues from the first quarter of 2016 was primarily due to higher external sales volume and higher ASP.
Revenues from wafer sales were $20.5 million, compared to $17.8 million in the first quarter of 2016 and $12.6 million in the second quarter of 2015. Wafer sales volume was 25.0 million pieces, compared to 22.1 million pieces in the first quarter of 2016 and 18.3 million pieces in the second quarter of 2015. The increase in wafer revenues from the first quarter of 2016 was primarily due to higher sales volume.
Gross profit and margin
Gross profit was $29.4 million, increasing 76.0% from $16.7 million in the first quarter of 2016 and 716.7% from$3.6 million in the second quarter of 2015. Non-GAAP gross profit, which excludes costs related to the non-operational polysilicon operations in Chongqing, was approximately $31.2 million, compared to $18.8 million in the first quarter of 2016 and $6.7 million in the second quarter of 2015. Gross margin was 41.4%, compared to 29.0% in the first quarter of 2016 and 10.5% in the second quarter of 2015.
In the second quarter of 2016, total costs related to the non-operational Chongqing polysilicon plant including depreciation were $1.8 million, compared to $2.0 million in the first quarter of 2016 and $3.1 million in the second quarter of 2015. Excluding such costs, the non-GAAP gross margin was approximately 43.9%, compared to 32.6% in the first quarter of 2016 and 19.6% in the second quarter of 2015.
Selling, general and administrative expenses
Selling, general and administrative expenses were $3.7 million, compared to $4.1 million in the first quarter of 2016 and $2.8 million in the second quarter of 2015.
Research and development expenses
Research and development expenses were approximately $0.1 million, compared to $0.1 million in the first quarter of 2016 and $0.2 million in the second quarter of 2015.
Other operating income
Other operating income was $0.6 million, compared to $0.7 million in the first quarter of 2016 and $0.7 million in the second quarter of 2015. Other operating income mainly consists of unrestricted cash incentives that the Company received from local government authorities, the amount of which varies from period to period.
Income from operations and operating margin
Income from operations was $26.1 million, increasing 96.2% from $13.3 million in the first quarter of 2016 and was almost 21 times as compared to $1.2 million in the second quarter of 2015.
Operating margin was 36.8%, up from 23.1% in the first quarter of 2016 and 3.6% in the second quarter of 2015.
Interest expenses were $3.5 million, compared to $3.9 million in the first quarter of 2016 and $2.6 million in the second quarter of 2015.
EBITDA was $34.7 million, increasing 58.5% from $21.9 million in the first quarter of 2016 and 313.1% from $8.4 million in the second quarter of 2015. EBITDA margin was 48.9%, up from 38.0% in the first quarter of 2016 and 24.6% in the second quarter of 2015.
Net income / loss attributable to Daqo New Energy shareholders and earnings per ADS
Net income attributable to Daqo New Energy shareholders was $19.8 million, increasing 138.6% from $8.3 millionin the first quarter of 2016. The Company incurred net loss attributable to Daqo New Energy Corp. shareholders of$0.9 million in the second quarter of 2015.
Earnings per basic ADS were $1.90, increased 137.5% from $0.80 in the first quarter of 2016. The Company incurred loss per basic ADS of $0.09 in the second quarter of 2015.
As of June 30, 2016, the Company had $42.9 million in cash and cash equivalents and restricted cash, compared to$35.7 million as of March 31, 2016 and $95.1 million as of June 30, 2015.
As of June 30, 2016, the accounts receivable balance was $10.1 million, compared to $15.4 million as of March 31, 2016 and $7.0 million as of June 30, 2015.
As of June 30, 2016, the note receivables balance was $14.8 million, compared to $25.3 million as of March 31, 2016 and $38.3 million as of June 30, 2015.
As of June 30, 2016, total borrowings were $227.9 million, of which $118.4 million were long-term borrowings, compared to total borrowings of $241.3 million, including $114.8 million long-term borrowings, as of March 31, 2016, and total borrowings of $266.0 million, including $100.0 million long-term borrowings, as of June 30, 2015.
As of June 30, 2016, the note payables balance was $26.1 million, compared to $28.1 million as of March 31, 2016and $42.4 million as of June 30, 2015.
For the six months ended June 30, 2016, net cash provided by operating activities was $66.6 million, compared to$32.1 million in the same period of 2015.
For the six months ended June 30, 2016, net cash used in investing activities was $37.6 million, compared to $56.2 million in the same period of 2015.
For the six months ended June 30, 2016, net cash used in financing activities was $13.5 million, compared to net cash provided by financing activities of $75.7 million in the same period of 2015.
Non-GAAP Financial Measures
To supplement Daqo's consolidated financial results presented in accordance with United States Generally Accepted Accounting Principles ("US GAAP"), the Company uses certain non-GAAP financial measures that are adjusted for certain items from the most directly comparable GAAP measures including non-GAAP gross profit and non-GAAP gross margin; earnings before interest, taxes, depreciation and amortization ("EBITDA") and EBITDA margin; adjusted net income attributable to our shareholders and adjusted earnings per basic ADS. Management believes that each of these non-GAAP measures is useful to investors, enabling them to better assess changes in key element of the Company's results of operations across different reporting periods on a consistent basis, independent of certain items as described below. Thus, management believes that, used in conjunction with US GAAP financial measures, these non-GAAP financial measures provide investors with meaningful supplemental information to assess the Company's operating results in a manner that is focused on its ongoing, core operating performance. Management uses these non-GAAP measures internally to assess the business, its financial performance, current and historical results, as well as for strategic decision-making and forecasting future results. Given management's use of these non-GAAP measures, the Company believes these measures are important to investors in understanding the Company's operating results as seen through the eyes of management. These non-GAAP measures are not prepared in accordance with US GAAP or intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with US GAAP; the non-GAAP measures should be reviewed together with the US GAAP measures, and may be different from non-GAAP measures used by other companies.
Non-GAAP gross profit and non-GAAP gross margin includes adjustments for costs related to the non-operational polysilicon assets in Chongqing. Such costs mainly consist of non-cash depreciation costs, as well as utilities and maintenance costs associated with the temporarily idle polysilicon machinery and equipment, which will be or are in the process of being relocated to the Company's Xinjiang polysilicon manufacturing facility. The Company would expect a majority of these costs, such as depreciation, will continue to occur as part of the production cost at the Xinjiang facilities subsequent to the completion of the relocation plan. Once these assets are placed back in service, the Company will remove this adjustment from the non-GAAP reconciling item. The Company also uses EBITDA, which represents earnings before interest, taxes, depreciation and amortization, and EBITDA margin, which represents the proportion of EBITDA in revenue. Adjusted net income attributable to our shareholders and adjusted earnings per basic ADS exclude costs related to the non-operational polysilicon assets in Chongqing as described above. Adjusted net income attributable to our shareholders and adjusted earnings per basic ADS also exclude costs related to share-based compensation. Share-based compensation is a non-cash expense that varies from period to period. As a result, management excludes this item from its internal operating forecasts and models. Management believes that this adjustment for share-based compensation provides investors with a basis to measure the company's core performance, including compared with the performance of other companies, without the period-to-period variability created by share-based compensation.
A reconciliation of non-GAAP financial measures to comparable US GAAP measures is presented later in this document.
The Company has scheduled a conference call to discuss the results at 8:00 AM Eastern Daylight Time on August 9, 2016.
The dial-in details for the live conference call are as follows: