Daqo New Energy Corp ADR

Good day, and welcome to the DOCU New Energy Fourth Quarter and Fiscal Year 2021 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. After today's presentation, there will be an opportunity to ask questions. To ask a question, you need to press star, then one on your touch-tone button. To withdraw from the question queue, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Kevin He, Investor Relations. Please go ahead.

Hello, everyone. I'm Kevin He, the Investor Relations of DarkU New Energy. Thank you for joining our conference call today. DarkU New Energy just issued its financial results for the fourth quarter and fiscal year of 2021. which can be found on our website at www.dqsolar.com. To facilitate today's conference call, we also have prepared a PPT presentation for your reference. Today attending the conference call, we have Mr. Longgen Zhang, our Chief Executive Officer, and Mr. Ming Yang, our Chief Financial Officer. The call today will feature an update from Mr. Zhang on market and operations, and then Mr. Yang, We'll discuss the company's financial performance for the quarter and the year. 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 statement. Further information regarding these and other risks is included in the reports or documents we have filed with or furnished to the Security and Exchange Commission. These statements only reflect our current and preliminary views 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 as of today and we undertake no duty to update such information except as required in the 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. Zhao.

Thank you, Kevin. Hello, everyone. Thank you for joining our conference call today. We had an excellent year with great operational and financial performance. We produced 86,587 metric tons of polysilicon in 2021, exceeding our guidance of 83,000 to 85,000 metric tons and 12% higher than 77,288 metric tons produced in 2020. In 2021, approximately 99% of our production was monogrid polysilicon. which had the highest pricing in the market and was the product most sought after by waiver customers. The year 2021 saw strong global policies supporting carbon neutrality and the decarbonization of the energy sector that led to strong demand for solar energy products and resulted in high political prices. We delivered a strong financial performance for the full year, with a gross margin of 65 percent net income attributable to our shareholders of $756 million, representing a 485.3 percent increase compared to 2020. DaKu New Energy also achieved two additional major milestones in 2021. We successfully listed our subsidiary Xinjiang DaKu on the Shanghai Stock Exchange in China in July 2021, which will significantly amplify our future growth with access to a robust capital market in China. We also successfully completed the construction of our Phase 4B project and started the pilot production in December 2021 with better than anticipated results. As such, we believe that we will continue to be one of the world's best operators in the polysilicon industry and a market leader in many aspects, including production throughput, production quality, profit margin, cost structure, capital structure and burns heat. In the fourth quarter of 2021, we produced 23,616 metric tons of polysilicon, including 1,111 metric tons from our newly built Phase 4b facility, and we sold 11,642 metric tons. End of the year, seasonality impact Combined with downstream inventory adjustments led to a temporary reduction in demand when our customers in the waiver sector reduced their own raw material and product inventory levels and temporarily lowered their utilization rate. After extensive analysis of long-term supply and demand dynamics, we believe that the lower utilization level in the waiver sector was due to seasonality impact and temporary in nature. Therefore, we expect conditions to resume to normal once the solar value chain achieves a new balance when the market demand bounces back. In January 2022, the solar market did see a strong pickup in the end market orders, and the waiver factor utilization and demand quickly resumed normal levels. As a result, polysilicon ASP started to recover meaningfully. Our inventory also quickly returned to a normal level by the end of January. In the fourth quarter, our production cost was $14.11 per kg. The increase in production cost as compared to the third quarter was primarily due to the increase in the cost of raw material of silicon powder. The average procurement cost of silicon powder increased from $2.50 per kilogram in the third quarter to $8.68 per kg in the fourth quarter. Startup costs related to our new Phase 4b facility also had a temporary impact on our costs in the fourth quarter. Despite the strong increase in raw material cost during the fourth quarter, most of this cost increase was passed to our downstream customers, as ASPs for the fourth quarter increased to $33.91 per kg compared to $27.55 per kg in the third quarter. Moreover, the price of silicon powder started to decline quickly in January 2022, and the current market price of silicon powder is approximately $3.50 to $3.60 per kg. We expect our production cost to decrease meaningfully in the first quarter of 2022 as a result of lower silicon powder prices and a better operational efficiency in our Phase IVb facilities. In terms of our new Phase IV-B facility, we completed the project ahead of schedule despite significant difficulties and challenges resulting from the resurgence of COVID-19. We commenced the construction of Phase IV-B in 2021 and harvested in the first batch of polysilicon from the brand-new CBD furnaces in early December 2021. Within the same year, this has been a new milestone in our company's history in terms of building new capacity and has also set a new benchmark for the industry. We produced approximately 1,111 metric tons and 2,825 metric tons of polysilicon from our Phase IVb facility in December 2021 and January 2022, respectively. We expect to reach more optimized output in February and March 2022 and to produce approximately 9,500 metric tons from our Phase IVb facility in the first quarter of 2022. Polysilicon production from this new facility has already been delivered to our Mona Weaver customers and met their quality standards. Our Inner Mongolia Polysilicon project consisting of 100,000 metric tons polysilicon for the solar industry and 1,000 metric tons polysilicon for the semiconductor industry. are expected to commence in March 2022 and to be completed by the end of the second quarter of next year. We have already obtained the energy consumption approval and plan to partially use renewable energy to power these projects in the future. We also plan to expand the silicon powder production in Inner Mongolia in the future. which will allow us to further enhance our core structure and improve our supply chain stability. Global solar PV installations were approximately 160 gigawatts in 2021, representing a 23% increase compared to approximately 130 gigawatts in 2020. The 2021 global PV market size was limited by the availability of polysilicon. In addition, solar module pricing increased by more than 20 percent during 2021. The increases both in volume and the price in 2021 demonstrated a very strong market demand as solar broadly achieved great parity in major power markets around the world. And the development and the use of new energy, renewable energy, has become a global consensus to meet the urgency of global climate challenges. We believe the strong momentum in the solar PV industry will continue to provide a huge market with a significant growth potential in the future. In the solar PV industry, polysilicon production has the highest entry barrier, requiring substantial capital, complex and difficult to manage process. and equipment, stringent product quality requirements, and non-lead times. We are confident that our advantages and competitive positioning with first-class quality and competitive cost structure will enable us to continue to increase our market share and enhance our global leadership in the polysilicon industry. For the outlook and the guidance for this quarter, Q1 2020, the company expects to produce approximately 31,000 metric tons to 32,000 metric tons of polysilicon during the first quarter of 2022. The year expects to produce approximately 120,000 metric tons to 125,000 metric tons of polysilicon for the four-year of this year, inclusive of the impact of the companies and the facility maintenance. Now, I would like to turn to the call to our CFO, Mr. Min, please.