Daqo New Energy Corp ADR

Good day and welcome to the DACU second quarter 2022 financial 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 may press star, then one on the touchtone 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, 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 second quarter of 2022, which can be found on our website at www.bqsolar.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. Ming 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 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 conference 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 Security 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 incentives. All information provided in today's call is 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 US dollar terms. Please keep in mind that our functional currency He is the Chinese R&B. We offer these translations into US dollars solely for the convenience of the audience. Without further ado, I now turn the call to our CEO, Mr. Zhao. Hello.

Good morning. Good evening. We are very proud to deliver an excellent quarter with a record production volume and profits. Revenue reaches 1.24 billion US dollars. growth profit was $947 million, with a growth margin of 76%. Net income attributable to DACU shareholders was $628 million, an increase of 17.2% from $535.8 million in the first quarter of 2022, and an increase of 170% from $232 million in Q2 2021. Our cash position at the end of the quarter, an increase of approximately $2.2 billion from $1.1 billion at the end of Q1 2022. Reflecting our strong cash flow generation, cash and banking note receivable combined balances reached 4.6 billion US dollars. Operating cash flow was 1.1 billion for the first six months of this year. During the quarter, we operated at a full capacity and produced 35,326 metric tons of polysilicon. More than 99% of our production were high purity, monograde polysilicon products. We successfully ramped up our new Phase 4B facility to full capacity and further optimized its operational performance. Our sequential improvement in gross profit and gross margin were primarily driven by a 28% reduction in our polysilicon production costs with higher manufacturing efficiency and better economy of scale. We reduced our per unit electricity cost and depreciation cost by 7% and 13% in Lemming B, terms quarter over quarter, respectively. In addition, our metal logical grade silicon cost in the second quarter was reduced by 37% as compared to the first quarter. With our facility in optimized stable operations, we believe we will be able to maintain and possibly further improve our cost structure in Q3 and Q4 this year. We expect an even more favorable outlook for the cost as our new inner Mongolia facility. As a chemical refining facility, Safe and stable operations are extremely important for polysilicon production, and our facilities perform the best under such conditions. In order to minimize the impact on operations, we will conduct our annual maintenance in phases throughout the third and fourth quarters. During the same time, we will conduct some technology improvement projects which are expected to further save energy and optimize efficiency. As a result, we expect our polysilicon production volume in the third quarter to be in the range of 31,000 to 32,000 metric tons. With our better than expected operational performance in the first half of this year, we are increasing our guidance on annual production volume to 129,000 to 132,000 metric tons for the whole year of 2022, up from our previous guidance of 120,000 to 125,000 metric tons. In June 2022, our major operating subsidiary, Xinjiang Daqi, received a total growth per of approximately 11 billion RMB from its private offering on the Shanghai Stock Exchange. Upon completion of the private offering, Piper, Daku New Energy beneficiary owns approximately 72.68% of Xinjiang Daku, precedes from the offering will be used primarily for our Phase 5A polysilicon project of 100,000 measure tons in Inner Mongolia. This new project is currently under construction and expected to be completed by the second quarter of 2023. Driven by several favorable trends, the global solar industry saw robust demand in the first half of this year, and the demand both in China and overseas continues to exceed market expectations. According to data from the China Photovoltaic Industry Association, China's production of polysilicon and solar modules in the first half of this year was approximately 365,000 nitrate and 123.6 gigawatts, respectively, an increase of 53.4% and 54.1% compared to the same period of last year, while solar PV product supply increased significantly compared to last year. ASTs kept rising across the entire solar value chain due to stronger than expected end market demand. Despite rising ASPs, during the first half of this year, solar PV installation in China reached 30.9 gigawatts, and China exported 78.6 gigawatts of solar modules, up 137% and 74%, respectively, over the same period of 2021. Given by strong end-market demand and increased orders from waiver supplies, polysilicon SPs and profitability improved continuously during the first half of this year despite increased supply. According to the China Silicon Association, the average price included that for high-end density monograde polysilicon increased significantly by 29.3% from lemming bee 229 per kg in the first week in January 2022 to lemming bee 296 lemming bee yuan per kg in the last week of July 2022. Nevertheless, our production is sold out for August and we have a strong order for our products. We understand that many newly built waiver facilities are idle because of the shortage of polysilicon. Earth capacity expansion is much faster in downstream than in polysilicon sector. Beyond the urgency to address climate change, that is driving various supportive policies to accelerate the adoption of solar energy globally. In real, the conflict in Europe has led to an energy crisis with substantially higher natural gas and oil prices. Solar PV is easier and faster to deploy its costs, which has already reached grid parity is locked in for the next 20 to 30 years. The rise in energy costs has made solar PV increasingly attractive, especially in the countries saving energy shortages and seeking energy safety and independence. For instance, in the second quarter, European solar PPA price increased substantially. and the market saw a substantial increase in demand from Europe, with module exports to Europe greater than 50% of total module exports for China. In June, our Board of Directors authorized the company to repurchase up to $120 million worth of its own issued shares on the open market As of today, we have already repurchased approximately $50 million worth of our ADRs, and we will continue to do so as we believe our current ADR price is seriously undervalued and not reflect our position as an industry leader with strong profitability and operating cash flow. With growing global policy support and attractive We are confident that solar PV market demand and the prices will remain strong, providing sustainable and healthy profits to the solar manufacturing value chain. In the first half of this year, despite a 53.4% increase in production volume in China over the same period of last year, polysilicon was still a drug on the entire solar PV manufacturing value chain, and the capacity expansion was meaningful for a slower than in the downstream sectors. Challenges in gaining energy consumption approvals, long construction times, and delayed rental times, as well as the operational experience of new players, make polysilicon one of the sectors With the highest entry barriers and slowest expansion growth in the solar PV manufacturing value chain, we expect its imbalance to continue for a while and help our sector greatly benefit from the robust market demand. We will continue to focus on our core business and further strengthen our industry leadership by increasing capacity. reducing our cost structure, and improving product quality so as to continuously reward our shareholders. Our vision is that in the not too distant future, renewable energy will displace fossil fuels to become the primary source of energy for humans, with solar energy playing the biggest role. And our mission is to help market, to help make that vision a reality. The company expects to produce approximately 31,000 metric tons to 32,000 metric tons of polysilicon in the third quarter of 2022 and approximately 129,000 metric tons to 132,000 metric tons of polysilicon in the four year to 2022. Inclusive of the impact of the company's annual specific maintenance, now I will turn the call to our CFO, Mr. Yang.