Daqo New Energy Corp., a leading manufacturer of high-purity polysilicon for the global solar PV industry, recently announced its unaudited financial results for the fourth quarter and fiscal year of 2015.
Fourth Quarter 2015 Financial and Operating Highlights
- Polysilicon production volume of 3,547 MT in Q4 2015, an increase of 31.9% from 2,689 MT in Q3 2015
- Polysilicon external sales volume(1) of 3,092 MT in Q4 2015, an increase of 35.8% from 2,277 MT in Q3 2015
- Polysilicon average total production cost(2) of $9.74/kg in Q4 2015, a decrease of 12.7% from $11.15/kg in Q3 2015
- Polysilicon average cash cost(2) of $7.69/kg in Q4 2015, a decrease of 11.7% from $8.71/kg in Q3 2015
- Average selling price (ASP) of polysilicon was $13.86/kg in Q4 2015, a decrease of 7.5% from $14.98/kg in Q3 2015
- Solar wafer sales volume of 21.0 million pieces in Q4 2015, an increase of 9.9 % from 19.1 million pieces in Q3 2015
- Revenue of $59.3 million in Q4 2015, an increase of 27.3% from revenue of $46.6 million in Q3 2015
- Non-GAAP gross margin(3) of 31.9% in Q4 2015, up from 23.4% in Q3 2015
- EBITDA(non-GAAP)(3) of $23.4 million in Q4 2015, an increase of 56.3% from $15.0 million in Q3 2015
- EBITDA margin (non-GAAP)(3) of 39.5% in Q4 2015, compared to 32.1% in Q3 2015
- Net income attributable to Daqo New Energy shareholders of $9.6 million in Q4 2015, compared to $3.1 million in Q3 2015 and $3.6 million in Q4 2014
- Earnings per basic ADS of $0.92 in Q4 2015, compared to $0.29 in Q3 2015, and $0.40 in Q4 2014
- Adjusted net income (non-GAAP)(3) attributable to Daqo New Energy shareholders of $11.9 million in Q4 2015, compared to $6.3 million in Q3 2015 and $7.1 million in Q4 2014
- Adjusted earnings per basic ADS (non-GAAP)(3) of $1.14, compared to $0.60 in Q3 2015, and $0.79 Q4 2014
Full Year 2015 Financial and Operating Highlights
- Polysilicon production volume of 9,771 MT in 2015, an increase of 48.9% from 6,560 MT in 2014
- Polysilicon external sales volume(1) of 8,234 MT in 2015, an increase of 37.9% from 5,972 MT in 2014
- Solar wafer sales volume of 76.4 million pieces in 2015, an increase of 8.4% from 70.5 million pieces in 2014
- Revenue of $182.0 million in 2015, compared to $182.6 million in 2014
- Non-GAAP gross margin(3) of 26.5% in 2015, an decrease from 31.3% in 2014
- EBITDA(non-GAAP)(3) of $ 58.2 million in 2015, an decrease of 2.9% from $60.0 million in 2014
- EBITDA margin (non-GAAP)(3) of 32.0% in 2015, compared to 32.9% in 2014
- Net income attributable to Daqo New Energy shareholders of $13.0 million in 2015, decreased from $16.6 millionin 2014
- Earnings per basic ADS of $1.26 in 2015, decreased from $2.02 in 2014
- Adjusted net income (non-GAAP)(3) attributable to Daqo New Energy shareholders of $ 27.4 million in 2015, compared to $ 32.3 million in 2014
- Adjusted earnings per basic ADS (non-GAAP)(3) of $2.65 in 2015, compared to $3.91 in 2014
(1) Polysilicon external sales volume excludes internal sales of polysilicon 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 which has been accepted by customers and thus the corresponding revenue has been recognized during the reporting period.
(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 attributable to our shareholders and adjusted earnings (loss) per ADS on a non-GAAP basis to provide supplemental information regarding its operating 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.
“In the fourth quarter of 2015, we delivered strong operating and financial results that were beyond our internal expectations. Our polysilicon facilities were running successfully at full capacity for the entire quarter, and we are excited to report that both our external sales volume and cost structure exceeded our prior guidance. We achieved record-high quarterly polysilicon production volume of 3,547 MT, an increase of 31.9% from 2,689 MT in the third quarter of 2015 and 12% above our name plate capacity. Thanks to our technology and operations team, we made solid progress on our cost reduction efforts, and reduced our polysilicon average total production cost and cash cost even further to $9.74/kg and $7.69/kg, respectively, which is our lowest-ever cost and ahead of our cost reduction roadmap,” said Dr. Gongda Yao, CEO of Daqo New Energy.
In the fourth quarter of 2015, we generated revenue of $59.3 million, an increase of 27.3% as compared to the third quarter of 2015. We achieved EBITDA margin of 39.5%, which increased from 32.1% in the third quarter of 2015. Our income from operations was $14.3 million, an increase of 113.4% from $6.7 million in the third quarter of 2015. Despite a 7.5% reduction in polysilicon ASPs as compared to the third quarter of 2015, we were able to deliver higher gross margin, operating margin and net margin in the fourth quarter as compared to the third quarter, primarily as a result of our successful cost reduction efforts in polysilicon manufacturing.
In February 2016, we began to see recovery in polysilicon ASPs, driven by strong customer demand for our high-purity polysilicon products. Furthermore, we saw overall polysilicon channel inventory reduced to a normal level by strong end market demand. As the industry and our customers continue to add on additional wafer capacities through 2016, we anticipate continued strong demand for polysilicon. As of March 2016, the spot market price for polysilicon has rebounded by approximately 15% as compared to December of 2015, and we expect to see stable to improving polysilicon ASPs in the coming quarters supported by strong end market demand and increases in downstream solar manufacturing capacities.
Additionally, our Chongqing wafer subsidiary was operating well and contributed meaningfully to the company’s financial performance. Wafer gross margin, on a standalone basis, improved to 25.8%, a substantial increase from third quarter gross margin of 17.4%. The improvement in gross margin was driven primarily by a 9% improvement in product pricing, as well as further reductions in manufacturing costs. Currently our wafer annual capacity is approximately 87 million pieces. As we continue to execute on our technology enhancement project at our wafer manufacturing facilities to increase production volume and further reduce cost, with the goal to achieve an annual production capacity of 100 million pieces by mid-2016, we anticipate our wafer subsidiary would continue to contribute positively to the company’s financial results.
Market outlook and Q1 2016 guidance
Global solar PV installations in 2015 totaled approximately 57 GW, representing a 26.7% increase from 45 GW in 2014. China, Japan and the United States are the three largest solar PV markets globally in 2015. China installed 14.95 GW solar PV system in 2015, ranking No.1 globally in terms of volume for three consecutive years, withChina’s cumulative solar PV installation reaching 43 GW by the end of the year. In the draft version of China’s “13th Five-Year-Plan”, the cumulative solar PV installation is expected to reach 150 GW, which means China would install an additional 107 GW over the next five years from 2016 to 2020 in order to meet the target. In December 2015, the United States announced a 5-year extension for Solar Investment Tax Credit (ITC), which provides a 30 percent tax credit for solar systems on residential and commercial properties. The extension will significantly support the deployment of solar energy in the United States in the next five years. In addition, several emerging solar end markets are experiencing rapid growth, including India, Southeast Asia, Latin America and Africa. In particular,India’s solar PV installation is reported to be approximately 2 GW in 2015, which makes it the fifth largest solar PV market in the world. India’s newly added solar PV installation is expected to be approximately 4.8 GW in 2016. According to several market forecast reports, the global solar PV installations in 2016 are expected to be in the range of 62 to 65 GW. We believe the overall solar PV demand will remain strong in 2016, resulting in favorable demand for polysilicon in the year.
For the first quarter of 2016, the Company expects to sell approximately 2,800 MT to 3,000 MT of polysilicon to external customers. The above guidance reflects increased consumption of polysilicon internally by our own wafer subsidiary due to increased wafer production and wafer capacity expansion. Wafer sales volume is expected to be approximately 21.5 million to 22.0 million pieces for the quarter. 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.