CHONGQING, China—November 14, 2011—Daqo New Energy Corp. (NYSE: DQ) (“Daqo New Energy”or the “Company”), a leading polysilicon manufacturer based in China, today announced its unaudited financial results for the third quarter ended September 30, 2011.
Third Quarter 2011 Financial and Operating Highlights
Polysilicon shipments were approximately 1,022 metric tons, or MT. Photovoltaic (PV) module shipments were 1.9 Mega watts, or MW. In addition, the Company provided 9.4 MW PV modules manufacturing outsourcing service to its customers. Wafer shipments were 6.5 MW.
Revenues were $59.6 million, compared with $70.7 million in the second quarter of 2011 and $63.2 million in the third quarter of 2010.
Gross profit was $19.9 million, compared with $33.0 million in the second quarter of 2011 and $26.9 million in the third quarter of 2010.
Gross margin was 33.3%, compared with 46.6% in the second quarter of 2011 and 42.5% in the third quarter of 2010.
Operating income was $17.1 million, compared with $32.6 million in the second quarter of 2011 and $24.0 million in the third quarter of 2010.
Operating margin was 28.8%, compared with 46.2% in the second quarter of 2011 and 38.0% in the third quarter of 2010.
Net income attributable to Daqo New Energy Corp. shareholders was $12.1million, compared with $25.7 million in the second quarter of 2011 and $17.7 million in the third quarter of 2010.
Earnings per fully diluted ADS were $0.34, compared with $0.73 in the second quarter of 2011, and $0.65 in the third quarter of 2010.
“The global solar PV market remained challenging in the third quarter due to the weak demand and industry oversupply. The average selling prices throughout the whole supply chain continued to decline, which impacted our performance in the quarter. The weak market is expected to continue in the near term and the pricing environment for our core business, polysilicon could continue to decline.”Commented, Gongda Yao, Chief Executive Officer of the company “However, we believe our low cost and high quality polysilicon product is better positioned to weather through the stormy market environment and we should come out stronger once the market environment improves. Also, we have one of the best balance structures among China solar companies, as well as un-used bank facility, which will help us to endure during the down turn. We will continue to execute our Xinjiang expansion project and Wanzhou hydrochlorination project, which should further lower our production cost in the future.”
Third Quarter 2011 Results
Revenues
Revenues were $59.6 million, compared to $70.7 million in the second quarter of 2011 and $63.2 million in the third quarter of 2010.The change was primarily attributable to revenues generated from sales of polysilicon. The Company generated revenues of $53.0 million from 1,022 MT polysilicon sold, compared to revenues of $63.0 million for 1,001 MT of polysilicon sold in the second quarter of 2011, and revenues of $55.2 million for 973 MT of polysilicon sold in the third quarter of 2010. The shipment volume of polysilicon in the third quarter of 2011 increased by 2.1% and 5.0% compared to that in the second quarter of 2011 and the third quarter of 2010, respectively. The difference in revenues from polysilicon sold was primarily due to a relatively lower average selling price of the polysilicon in the third quarter of 2011.
In the third quarter of 2011, the Company also generated $0.7 million, $2.8 million and $3.0 million for module processing service fee, sales of PV modules and sales of wafers, respectively.
Gross profit and margin
Gross profit was $19.9 million, compared to $33.0 million in the second quarter of 2011 and $26.9 million in the third quarter of 2010.
Gross margin was 33.3%, compared to 46.6% in the second quarter of 2011 and 42.5% in the third quarter of 2010. The fluctuation from the second quarter of 2011 and the third quarter 2010 in gross profit and gross margin was primarily due to the lower average selling price of the polysilicon product combined with the impact of inventory charge in the third quarter of 2011. The total inventory write-down for wafer and modules in the third quarter of 2011 was due to lower of cost or market valuation (LCM) amounted to $3.7 million.
Selling, general and administrative expenses
Selling, general and administrative expenses were $4.3 million in the third quarter of 2011, compared to $3.9 million in second quarter of 2011 and $2.7 million in the third quarter of 2010. The increase of $0.4 million in this quarter from that of the second quarter of 2011 was primarily due to operating expense associated with Xinjiang expansion project. The increase of $1.6 million in this quarter from that of the third quarter of 2010 was primarily due to the operating expense associated with Xinjiang expansion project.
Research and development expenses
Research and development expense was $152 thousand in the third quarter of 2011, compared to $165 thousand in the second quarter of 2011 and $318 thousand in the third quarter of 2010.
Other operating income
Other operating income $1.8 million in the third quarter of 2011, compared to $3.8 million in the second quarter of 2011 and $131 thousand in the third quarter of 2010. Other operating income mainly composed of unrestricted cash incentives that the Company received from local government authorities, which contributed the fluctuations from period to period.
Operating income and margin
As a result of foregoing, operating income in the third quarter of 2011 was $17.1 million, compared to $32.6 million in the second quarter of 2011 and $24.0 million in the third quarter of 2010. Operating margin was 28.8%, compared to 46.2% in the second quarter of 2011 and 38.0% in the third quarter of 2010.
Net Interest expense
Net interest expense in the third quarter of 2011 was $1.9 million, compared to $1.7 million in the second quarter of 2011 and $2.3 million in the third quarter of 2010.
Income tax expense
Income tax expense in the third quarter of 2011 was $2.9 million, compared to $4.5 million in the second quarter of 2011 and $3.0 million in the third quarter of 2010. The change from the second quarter of 2011 and the third quarter of 2010 was primarily due to the lower income before tax in the third quarter of 2011 combined with $970 thousand valuation allowence of deferred tax assets of modules business in the third quarter of 2011.
Net Income attributable to our shareholders, net margin and earnings per share
As a result of the aforementioned, net income attributable to Daqo New Energy Corp. shareholders was $12.1million, compared with $25.7 million in the second quarter of 2011 and $17.7 million in the third quarter of 2010.
Net margin was 20.3% in the third quarter of 2011, compared to 36.3% in the second quarter of 2011 and 28.0% in the third quarter of 2010.
Financial Condition
As of September 30, 2011, Daqo New Energy Corp. had $66.8 million in cash and cash equivalents and restricted cash, compared with $147.5 million as of June 30, 2011. The change in cash position was primarily due to capital expenditures for business expansion in Xinjiang. As of September 30, 2011, the Company’s accounts receivable balance was $29.1 million, compared to $31.8 million as of June 30, 2011. As of September 30, 2011, total borrowings were $157.6 million, of which $63.1 million were long-term borrowings, compared to total borrowings of $162.7 million, including $67.8 million long-term borrowings as of June 30, 2011.
Outlook for Fourth Quarter 2011
For the fourth quarter of 2011, the Company plans to shut down the polysilicon production facility for approximately two weeks in December for periodical maintenance. For the fourth quarter of 2011, the Company expects to ship 800-850 MT of polysilicon. The company also expects to ship approximately 16 MW of wafer as well as 14 MW of modules. For the module shipment, the company further expects 8 MW will come from its brand name module and expects to provide 6 MW PV modules manufacturing outsourcing service to its customers. This outlook reflects our current and preliminary view and may be subject to change. Our ability to achieve this projection is subject to risks and uncertainties. See “Safe Harbor Statement” at the end of this press release.
Conference Call
Daqo New Energy will host a conference call at 7:00 am, Eastern Standard Time on November 14, 2011, which is 8:00 pm, Beijing Time on November 14, 2011, to discuss the results for the quarter. Joining the call will be Dr. Gongda Yao, the Company’s Chief Executive Officer and Mr. Jimmy Lai, the Chief Financial Officer.
The dial-in details for the live conference call are as follows:
U.S. Toll Free Number: 18665194004
International dial-in number: + 6567239381
Hong Kong Toll Free: 800930346
Conference ID # 22969909
A replay will be available shortly after the call until December 14, 2011 on the Company website or by dialing:
U.S. dial-in number: 18662145335International dial-in number: +61 2 8235 5000Conference ID # 22969909
This conference call will be broadcast live over the Internet and can be accessed on Daqo New Energy’s website at http://www.gzmbl.com. To listen to the live webcast, please go to Daqo New Energy’s website at least fifteen minutes prior to the start of the call to register, download and install any necessary audio software.
About Daqo New Energy Corp.
Daqo New Energy Corp. (NYSE: DQ) is a leading polysilicon manufacturer based in China that aims to become a vertically integrated photovoltaic product manufacturer. Daqo New Energy primarily manufactures and sells high-quality polysilicon to photovoltaic product manufacturers. It also manufactures and sells photovoltaic wafers and modules. For more information about Daqo New Energy, please visit www.gzmbl.com.
Safe Harbor Statement
This announcement contains forward-looking statements. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as “will”, “expects”, “anticipates”, “future”, “intends”, “plans”, “believes”, “estimates” and similar statements. Among other things, the outlook for the first quarter of 2011 and quotations from management in this announcement, as well as Daqo New Energy’s strategic and operational plans, contain forward-looking statements. The Company may also make written or oral for-ward-looking statements in its reports filed or furnished to the U.S. Securities and Exchange Commission, in its annual reports to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about the Company’s beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: the demand for photovoltaic products and the development of photovoltaic technologies; global supply and demand for polysilicon; alternative technologies in cell manufacturing; our ability to significantly expand our polysilicon production capacity and output; the reduction in or elimination of government subsidies and economic incentives for solar energy applications; and our ability to successfully implement our vertical integration strategy. Further information regarding these and other risks is included in the reports or documents we have filed with, or furnished to, the Securities and Exchange Commission. Daqo New Energy does not undertake any obligation to update any forward-looking statement, except as required under applicable law. All information provided in this press release and in the attachments is as of the date of this press release, and Daqo New Energy undertakes no duty to update such information, except as required under applicable law.
Daqo New Energy Corp.
Unaudited Condensed Consolidated Statement of Operations
(US dollars in thousands, except ADS and per ADS data)
Three months Ended
Sep 30,2011
June 30,2011
Sep 30,2010
$59,564
$70,721
$63,212
Cost of revenues
(39,712)
(37,765)
(36,321)
Gross profit
19,852
32,956
26,891
Operating expenses
(4,326)
(3,906)
(2,677)
Research and development
expenses
(153)
(165)
(318)
1,765
3,758
131
Total operating expenses
(2,714)
(313)
(2,864)
Income from operations
17,138
32,643
24,027
Interest expense
(2,777)
(2,193)
(2,484)
Interest income
924
450
136
Foreign exchange gain (loss)
(27)
42
(709)
Income before income taxes
15,258
30,942
20,970
(2,878)
(4,513)
(3,016)
Net income
12,380
26,429
17,954
Net income attributable to
noncontrolling interest
314
744
241
Net income attributable to Daqo New Energy Corp. shareholders
12,066
25,685
17,713
Deemed dividend on Series A convertible redeemable preferred shares
-
(1,100)
Net income attributable to Daqo New Energy Corp. ordinary shareholders
$12,066
$25,685
$16,613
Earnings per ADS
Basic and diluted
$0.34
$0.73
$0.65
Weighted average ADS outstanding
Basic
35,142,821
20,000,000
Diluted
25,942,821
Unaudited Condensed Consolidated Balance Sheet
(US dollars in thousands)
Sep 30,
2011
June 30,
2010
ASSETS:
Current Assets:
Cash and cash equivalents
$59,241
$126,079
$73,574
Restricted cash
7,514
21,432
1,656
Accounts receivable, net
29,086
31,826
31,344
Prepaid expenses and other current assets
8,977
6,935
3,677
Advances to suppliers
3,057
2,625
4,248
Inventories
28,506
15,016
11,711
Amount due from related party
-Advance to related party supplier
5,578
5,590
- others
2,268
440
22,651
Deferred tax assets-current
1,174
1,243
Total current assets
145,401
211,186
148,861
Property, plant and equipment, net
599,842
501,787
377,207
Prepaid land use right
8,774
8,714
6,493
Deferred tax assets
1,445
1,062
1,640
Other non-current assets
165
162
157
TOTAL ASSETS
755,627
722,911
534,358
LIABILITIES:
Current liabilities:
Short-term borrowings, including current portion of long-term borrowings
94,482
94,970
59,843
Accounts payable
12,632
13,181
6,719
Advances from customers
37,664
24,808
36,426
Payables for purchases of property, plant and equipment
24,100
14,709
20,612
Accrued expenses and other current liabilities
13,999
10,761
17,071
Income tax payable
10,428
9,756
7,333
Total current liabilities
193,305
168,185
148,004
Long-term borrowings
63,124
67,766
106,915
Accrued warranty cost
362
302
Long Term Liability
9,093
14,646
Amount due to related party
2,935
4,005
492
Total liabilities
268,819
254,904
255,411
Mezzanine equity
58,903
EQUITY:
Daqo New Energy Corp. shareholders’ equity:
Ordinary shares
18
10
Additional paid-in capital
141,993
141,455
1,422
Retained earnings
189,627
177,561
84,055
Accumulated other comprehensive income
16,317
12,166
3,598
Total Daqo New Energy Corp.’s shareholders’ equity
347,955
331,200
89,085
Noncontrolling interest
138,853
136,807
130,959
Total equity
486,808
468,007
220,044
TOTAL LIABILITIES & EQUITY
$755,627
$722,911
$534,358
For further information, please contact:
Kevin He, Investor Relations
Phone: +86-23-6486-6556
Email: Kevin.he@daqo.com
SOURCE: Daqo New Energy Corp.