Daqo New Energy Corp ADR

Good day and welcome to the DocuNew Energy third quarter 2021 results conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Kevin He. Please go ahead.

Kevin He Hello, everyone. I'm Kevin He, the investor relations of DarkQ New Energy. Thank you for joining our conference call today. DarkQ New Energy just issued its financial results for the third quarter of 2021, which can be found on our website at www.dqsolar.com. To facilitate today's conference call, we have also prepared a PPT presentation for your reference. Today, attending the conference call, we have Mr. Longgeng Zhang, our Chief Executive Officer, and Mr. Min Yang, our Chief Financial Officer. The call today will feature an update from Mr. Zhang on market and operations, and then Mr. Yang will discuss the company's financial performance for the quarter. After that, we will open the floor to Q&A from the audience. Before we begin the formal remarks, I would like to remind you that certain statements on today's call, including expected future operational and financial performance 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. These statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those containing any forward-looking statements. 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. 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 risks and uncertainties. All information provided in today's conference call is also as of today and we undertake no duty to update such information except as required under applicable law. 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. Without further ado, I now turn the call over to our CEO, Mr. Zhang.

Thank you, Kevin. Hello, everyone. Thank you for joining our conference call today. We are very excited to report an excellent quarter with a record high production volume and net profit in the company's history. The strong end market environmental supported by favorable global policies to address climate change and a rapidly increasing use of green energy resulted in strong then expected downstream demand that continued to push up polysilicon market prices. Our third quarter polysilicon ASP was $27.55 per kg, a significant sequential improvement of more than 30% from $20.81 per kg in the second quarter. The end market demand continues to be strong, even under today's high price module environmental, and this has further raised the polysilicon market prices to the current level of $33 to $35 per kg. Our production cost increased 8.4 percent quarter-over-quarter, primarily due to the increase in silicon powder's cost. Excluding this impact, our production cost actually decreased by approximately 1 percent quarter-over-quarter. The increasing silicon powder cost will continue to impact our cost structure in the fourth quarter. However, with the strong market demand, so far, we have been able to transfer the majority of such cost increase to our customers. Over the past three weeks, we have seen silicon powder prices stabilizing, and we expect they will gradually normalize in the first half of next year. as the energy and emission controls could be somewhat relaxed compared to the fourth quarter of this year. A new supply of silicon powder will start to enter the market. During the first three quarters of 2021, we generated $653 million in cash flow from operations. we repaid all our banking loans in the third quarter and reduced our debt-to-asset ratio to 18.2%. At the end of third quarter, we had $661 million in cash and cash equivalents, $440 million in short-term investments, which are lower-risk financial products, and $353.3 million in banking equivalents, notes receivables which were matured in the next three to six months. This total liquidation of $1.4 billion is a strong foundation to support our expansion projects and further plans to reward our investors. The construction of our Phase IV-B capacity expansion project is going smoothly according to schedule. We expect to complete the construction by the end of 2021 and ramp up the full capacity by the end of the first quarter of 2022. In the third and fourth quarter of this year, we have observed some volatility in the global energy market. Prices of almost all energy resources are going up quickly and significantly, including the prices of natural gas, oil, and coal. In many regions in China, many companies are required to shut down production from time to time due to the shortage of electricity supply and carbon emissions control. Fortunately, the Chinese government quickly responded to the challenging situation by accelerating cost of production and allowing electricity prices for industrial users to float according to markets. resulting in rising electricity prices. We expect these measures will further stimulate the solar end market for electricity generation in the near term. With solar already at a great parity broadly, higher fossil fuels market solar projects more competitive. In addition, According to the newly released policies, the usage of renewable energy will not be continued towards the energy usage quarter, which will further promote renewable energy in the future. This also explains why the demand from industry users for solid distributed generation is strong even in the current high-priced module environment. On the other hand, Because of the strong energy quarter and the carbon emission control, the overall expansion pace of the polysilicon industry will inevitably slow down. For example, as we are now in the process of identifying the location for the next expansion project, the energy quarter issues becomes more and more challenging. We will be committed to using more renewable energy in our new polysilicon project according to secure the energy quarter, which will allow us to gradually realize the idea of green poly and solar for solar, or solar for solar. This October, at the United Nations Biodiversity Conference in Kunming, Chinese President Xi Jinping announced that the first step had been taken towards the construction of a huge 400 gigawatts wind and solar pack. Construction on the first phase comprising 100 gigawatts of wind and solar in deserts in China is already underway. Four 400 gigawatts projects would be half finished by 2025. The Chinese government has also released the policies to promote energy shortage systems, especially for storage systems, especially for water reservoir storage in the new term. With all these plans and the policies in place, it's very clear that China has made a strong determination supported by initial and detailed plans to build a new national energy infrastructure in which renewable energy will play a critical role. The newly announced policies and evolving energy market environment amend illustrate a vast potential market for solar in China, which is much higher and much larger than previously anticipated. Therefore, we are very optimistic about solar PV's demand in the future. and expect the polysilicon sector will continue to be one of the most favorable sectors in the foreseeable future, as polysilicon availability will remain as the main constraint and determinant for the future size of solar in the markets. Let's move to outlook and guidance. The company produced 62,970 metric tons of polysilicon and sold approximately 63,714 metric tons of polysilicon in the first three quarters of 2021. Representing full utilization level of the company's production facilities for the full year of 2021, the company's guidance and annual policy production volume is at the level of approximately 83,000 to 85,000 metric tons inclusive of impact of company's annual facility maintenance. Now, let's move to our financial CFO, Min Yang, explain the financial results.