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spk09: Good morning and welcome to the DocuNew Energy first quarter 2023 results conference call. All participants will be in listen-only mode. Should you need assistance, please signal conference specialist by pressing the start key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star at the warning telephone keypad. To withdraw your question, please press star at the two. Please note that the event is being recorded. I would like to turn the conference over to Kevin Hunt of Investor Relations for the company. Please go ahead.
spk00: Kevin Hunt Hello, everyone. I'm Kevin Hunt, the Investor Relations of Daqi New Energy. Thank you for joining our conference call today. Daqi just issued its financial results for the first quarter of 2023, which can be found on our website at www.dqsolar.com. To facilitate today's conference call, we have prepared a PPT presentation for your reference, which also you can find in our website. Today attending the conference call, we have our CEO, Mr. Longbin Zhang, and CFO, Mr. Ming Yang, and myself. So today, before we begin the formal remark, 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 including are 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 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. Now, without any further ado, I now will turn the call to our CEO, Mr. Longgang.
spk03: Thank you, Kevin. Good evening, or good morning, everyone. Our efficient operation of polysilicon facilities in the first quarter of 2023 resulted in the production volume of 33,848 metric tons. Our production cost decreased by 5.5% in lemming bee terms, primarily due to a reduction in the procurement cost of mentholurgical-grade silicon powder. For the quarter, we generated $490 million in EBITDA with strong operating cash flow and maintained a healthy balance sheet. Our cash balance further improved to $4.1 billion and our combined cash and the banking note receivable balance reached to 4.9 billion U.S. dollars. In April, we completed the construction of our Phase 5A, which is 100,000 metric tons polysilicon project in Inner Mongolia, and successfully started initial production of polysilicon. We expect to ramp up production to full capacity by the end of June 2023, bringing our total polysilicon nameplate capacity to 205,000 metric tons per annum. Therefore, we expect our total production volume to be approximately 44,000 to 46,000 metric tons of polysilicon in Q2 2023. an increase of 30 percent to 36 percent as compared to Q1 2023, and approximately 193,000 to 198,000 metric tons of polysilicon in the fall year of 2023, an increase of 44 percent to 48 percent as compared to last year. In addition, based on the schedule, Our new semiconductor-grade polysilicon project with 1,000 metric tons annual capacity is expected to be completed and start pilot production by the end of September 2023. With its new fully digitized and highly automated production system, we believe our Phase 5A in the Mongolia project will bring in the company to a new level in terms of the overall competitiveness, including its production capacity, lower cost structure, and superior product quality. Polysilicon demand was weak in January due to the seasonal slowdown in the solar PV industry. In February, lower module prices stimulated end market demand, causing a meaningful recovery in demand and price improvement across the solid value chain. In March and April, polysilicon ASPs declined gradually due to increased supplies and constraints should turn demand for weavers caused by the limited supply of high purity quartz used in silicon ingot production process. Despite the S&P decline in the quarter, in our major operational subsidiary, Xinjiang Daku, we still achieved a very strong gross margin of 71.4% and a robust net income after tax per unit of polysilicon sold of approximately 115 lemming B yuan per kg, which we believe are significantly higher than those for many of our competitors and reflect our outstanding quality and cost structure. Recently, we have seen a clear trend that the SP gap between the high quality and lower quality polysilicon has started to enlarge and the demand for high quality and type of products is increasing. We expect that this trend will enable us to differentiate ourselves from our competitors based on our high quality and lower cost polysilicon ready for the next generation N-type technology. We believe that the overall demand for solar PV will continue to grow in the coming quarters. And that continued capacity expansion by downstream manufacturers will lead to further increases in polysilicon demand. In the second quarter of 2023, our Phase 5a project will start to continue a meaningful output of approximately 10,000 metric tons to 12,000 metric tons of polysilicon. We plan to reduce our inventory to approximately 5,000 metric tons by the end of the second quarter. To achieve this, we will need to increase our shipment to 59,000 metric tons to 61,000 metric tons in Q2, an increase of 133% to 141% as compared to Q1. In November 2022, our board of directors approved a $700 million share purchase program effective until December 31st, 2023. As of now, we have already spent 85.1 million U.S. dollars and repurchased approximately 1.68 million U.S. On April 6th, 2023, our subsidiary Xinjiang Daqu's cash dividend plan for 2022 was approved by its shareholders meeting. Therefore, as a 72.7% shareholder of Xinjiang Daku, we expect Daku New Energy to receive the dividend distribution in May with an amount of approximately, let me be 4.96 billion after tax, which could be the financial resource to implement the improved share repurchase plan. We believe a new era for solar PV has just begun. The continuous cost reduction in solar PV products is expected to create substantial additional green energy demand, likely exceeding most analysis expectations. It is generally expected the solar PV will eventually become one of the most important energy to power the world. In addition, as solar PV technology keeps evolving, we believe that the increasing needs for polysilicon of very high purity will help differentiate us from our competitors. Thanks to our ability to produce the type of polysilicon required for the next generation of N-type technology. We will continue to maintain solid growth and make sure to have one of the best bond sheets in the industry in order to capture the long-term benefits of our global solar PV market. Now, let's move to the outlook and guidance. The company expects to produce approximately 44,000 to 46,000 metric tons of polysilicon during the second quarter of this year. The company expects to produce approximately 193,000 metric tons to 198,000 metric tons of polysilicon for the whole year of 2023, inclusive of the impact of the company's annual facility maintenance. Now, I will turn the call to our CFO. Ming, please.
spk06: Thank you, Longin, and good day, everyone. Thank you for joining our earnings conference call today. Let me start with a discussion on our company's balance sheet and our strong cash position. As Longin indicated, the company ended the first quarter of 2023 with cash balance of $4.1 billion, which is an increase of more than $600 million as compared to the end of 2022. Inclusive of the company's bank note receivable balance of $791 million, total cash and bank note receivable balance reached $4.9 billion at the end of the quarter. These bank note receivables are notes issued by major domestic banks used for trade financing purpose and can be either immediately redeemed for cash or used to pay suppliers for raw materials and equipment purchases. On a per share basis, reflecting DACO New Energy Corp's 72.7% ownership of our operating subsidiary, Xinjiang DACO, this equates to approximately $45.70 per share of ADS. This represents the value of the cash alone and excludes the value of our property planning equipment, which at the end of the quarter has a $2.88 billion value on the balance sheet, as represented by our two world-class polysilicon production facilities, which has combined nameplate capacity of 205,000 metric tons and continue to generate healthy operating cash flow on a quarterly basis with our leading product quality and low-cost structure. And this is witnessed by more than $800 million in cash flow from operating activities in the first quarter of this year. With regard to our capital expenditure and capacity expansion plans, for the first quarter of 2023, purchase of PP&E was approximately $277 million, which was primarily related to our polysilicon projects in Balto City, Inner Mongolia. At the end of March, approximately $1.2 billion had already been spent on the Inner Mongolia Phase I project, with total planned capex of approximately $1.4 billion. We expect the remaining $200 million will be spent by the end of this year. For Inner Mongolia Phase 2, we expect total CapEx will be approximately $1.4 billion as well. We currently expect CapEx related to this project will be approximately $800 million for this year, and the remainder will be paid in 2024 and 2025. For the Inner Mongolia Phase II project, the project construction schedule may be adjusted based on market conditions, and we may adjust both project construction schedule and project progress and capital expenditure plans accordingly. Now I will discuss the company's financial performance for the first quarter of 2023. Revenues were $709.8 million, compared to $864.3 million in the fourth quarter of 2022 and $1.28 billion in the first quarter of 2022. The decrease in revenue compared to the fourth quarter of 2022 was primarily due to a decrease in average selling prices. Growth profit was $506.7 million compared to $668 million in the fourth quarter of 2022 and $813 million in the first quarter of 2022. Gross margin was 71.4 percent compared to 77 percent in the fourth quarter of 2022 and 63.5 percent in the first quarter of 2022. Decreasing gross margin compared to the fourth quarter is primarily due to lower average selling prices mitigated by lower production costs. SG&A expenses were $41 million compared to $44 million in the fourth quarter of 2022 and $15.5 million in the first quarter of 2022. H&A expenses during the first quarter includes $28 million in non-cash share-based compensation costs related to the Company Share Incentive Plan compared to $28.4 million in the fourth quarter of 2022. R&D expenses was $1.9 million compared to $2.7 million in the fourth quarter of 2022. and $2.1 million in the first quarter of 2022. R&D expenses can vary from period to period and reflect R&D activities that take place during the quarter, which is primarily related to our quality improvement initiatives. Income from operation was $463.8 million compared to $623 million in the fourth quarter of 2022 and $796.9 million in the first quarter of 2022. Operating margin was 55.3 percent compared to 72 percent in the fourth quarter of 2022 and 62 percent in the first quarter of 2022. Net income attributable to DACA New Energy Corp. shareholder was $278.8 million compared to $332 million in the fourth quarter of 2022 and $535.8 million in the first quarter of 2022. Earnings per basic ADS was $3.56 compared to $4.26 in the fourth quarter of 2022 and $7.17 in the first quarter of 2022. Adjusted net income attributable to DACA New Energy shareholders, including non-cash share-based compensation costs, excluding non-cash share-based compensation costs, was $310 million, compared to $363 million in the fourth quarter of 2022 and $538 million in the first quarter of 2022. Adjusted earnings per basic ADS was $3.96 compared to $4.65 in the fourth quarter of 2022 and $7.20 in the first quarter of 2022. EBITDA was $490.2 million compared to $648.5 million in the fourth quarter of 2022 to $826.8 million in the first quarter of 2022. Dividend margin was 69% compared to 75% in the fourth quarter of 2022 and 64.6% in the first quarter of 2022. Now on the company's financial condition. As of March 31, 2023, the company has $4.13 billion in cash and cash equivalents in restricted cash, compared to $3.52 billion as of December 31, 2022, and $1.12 billion as of March 31, 2022. As of March 31, 2023, notes receivable balance was $791 million. compared to $1.13 billion as of December 31, 2022, and $1.5 billion as of March 31, 2022. Now on the company's cash flows. For the three months ended March 31, 2023, NACASH provided by operating activities was $807 million compared to $231 million in the same period of last year. And for the three months ended March 31, 2023, net cash used in investing activities was $268.9 million, compared to net cash provided by investing activities of $170.4 million in the same period of 2022. And for the three months ended March 31, 2023, net cash provided by financing activities was $59.9 million, and this was zero for the same period of 2022. The net cash provided by finance activities in the first quarter of 2023 was primarily related to the net proceeds of $140 million from bank borrowings offset in part by $80.1 million spent in share repurchases. And that concludes our prepared remarks. And now operator would like to open the call for Q&A from the audience.
spk09: Okay. We will now begin the question and answer session. To ask a question, you will press star then one on your telephone keypad. If using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Our first question will come from Phil Shen with Roth Capital Partners. You may now go ahead.
spk02: Hi, everyone. Thanks for taking my questions. First one is on your shipment volumes. I think why have volumes been so low as a percentage of production for two quarters in a row? We thought you might ship more than 100% of your production in Q2 because of the inventory. Sorry, in Q1, because of the inventory that you didn't ship in the prior quarter. When do you think you'll release that inventory? Thanks.
spk03: I think, Phil, I think the first quarter still is Chinese New Year. I think January, the sales really is very slow. And also, remember that the downstream, the waiver producer, the capacity, you know, in the last year, the November, starting November, December, they almost reduced the capacity to the minimum capacity, the minimum capacity we call, maybe 20, 30%. So as their capacity quickly come back, so we are starting selling actually in February and March. And some March shipments, to the end of the month, we have to move to second quarter. So basically, so far, this quarter, today, as of today, The April, we already signed contract more than 20,000 tents right now. We see second quarter, the selling volume should be high. We expect we can reduce our inventory. By the end of last quarter, it's 20,000 tents. By the end of this quarter, second quarter to the 5,000 tents, just the regular shipping goods are in the way. So basically, this month, sales volume mostly were shipping to this quarter.
spk02: Great. Thank you, Longan. And I did see your Q2 shipping guidance there, I think 59,000 to 61,000 metric tons. So that's great. Can you talk about the outlook for poly pricing for Q2, Q3, and how you're seeing 2024 change? given the supply-demand situation for Polly? Thanks.
spk03: Basically, you know, I cannot give you the projection of the future. But basically, if you look at our Q1, our selling price is $27. We see the selling prices, especially the way the prices go down. Then if you look at China, the future, Q3, Q4, the module selling price, the contract price, bidding price also is slowed down, you see. So basically, what that tell you is, if from silicon we will sell module, the cost right now today is around like 98 cents, let me be. So you're selling module, if Q4, you see, you're selling like 175 cents. You divide by the value adding tax, so the net maybe is around like 150, So your gross margin, your whole industry is around like 50 cents or even 45 cents. Compared to last year, you're selling, last year is around 74 cents. That's in the module selling price, two lemming beans per watt. So basically, we will see second quarter, definitely I think the SP will slightly go down. And how much, I cannot tell you because we see right now the price is stable around 180 lemming beans. you know, per kg. Maybe, you know, in the next two months, we'll continue to slow down. But I think, you know, still the SP will be, I think, between the U.S. dollar around 20 to 25. In the third quarter, it all depends on how many the new, I think, production come out. How big, you know, the demand pick up. So, really, we think, you know, Q3, the selling SP will be stable, maybe SQ2. Then Q4 mostly is challenging every year, okay? Not only because of holiday, Western, but also I think in China, the traditional, I think, you know, the bargain between filigree and the waiver. So basically, Q4 is the challenge quarter. So maybe I think it will go down to 150, even 120, you know, So I cannot tell you the exact figure. And if you look at 2024, as we said, the demand is continuing to grow. Of course, silicon output in China also continues to increase. So DaQ is differentiating ourselves to selling more high quality of n-type silicon to differentiate ourselves from other people. So we're hopefully OSP. can, you know, selling a little higher than our competitors in China. Today, Walker, OCI, they're still selling around like, you know, $35, $37, you know, per kg. The reason is because, you know, use their silicon outside of China can ship into, you know, U.S. market. So the differentiator is already there. You see, that's a logistic differentiator. And we are Our efforts is our quality, our cost. So even though we think 2024 is a challenging year, okay, let's say the industry maybe growth margin is around like 5%, even 10%. We hope DACU can achieve, you know, premium, 10%, 15%, a little more, so we can do 15% to 20%. That's all I can tell you. Okay. All right. That's a lot of...
spk02: Color, thank you, Logan. You talked about the pricing premium that you think you might be able to get. I think you just talked through that a little bit, but specifically, I think in Q1, I think your ASP was close to $27 per kilogram, and the average spot price was closer to $24. Can you talk about what your realized premium is due to your quality? Is it about $4 a kilogram, or is that difference in the first quarter primarily due to better timing of your polysales versus spot pricing? Thanks.
spk03: Basically, right now, N-type and P-type, we already see the difference, I think, is there, around 15 lemming B to 20 lemming B per kg. We think that difference will be enlarged maybe later. Because you see, as the top account capacity continue to come up, then the demand for end type were more. So basically, we think in the future, our selling price should be, if we can selling 70% of our products is end type. So basically, I think the price may be $5 difference. It's possible. You know, but I can tell you, you see exactly the future, how the future going, you see. Really, it's a lot of challenge, you know.
spk02: Okay.
spk03: But the most important to us, yeah, the most important to us is we have a fortress buying sheets. As Ming just said, you know, we're now today, the banking, you know, notes receivable plus cash is almost a $5 billion. We're continuing to generate, you know, the cash, operating cash. And we... try to control our capex as the market continue going. For example, if the market go into more war scenario, then in the Mongolia 5B, we can slow down capex. So we are continue to focus our, to I think straighten our balance sheets. That's the most important, I think.
spk02: Great. Okay. And given that, this is my last question here, are you planning to do additional buybacks this year beyond the $700 million approved? What are your thoughts on that, given the cash that you have? Thanks.
spk03: At this moment, I think we just declared $700 million. We already used, I think, around $85 million. So we only left $615 million. And the dividends, I think, you know, to through the foreign exchange, I think, were heated accounts, I think, you know, the early of May. So even, let's say, we still have like 650 million compared to the capital market. It's almost, you know, 18% of our total share, you know, outstanding shares. That's a lot. So basically, you know, you know that all the repurchase program we have to, you know, change to from the MMP to foreign exchange. So the only right now reliable sources is the dividend declared. So basically, I only can tell you so far, only is the, I think, you know, today, by the end of this year, which is the forecast at $700 million, a U.S. dollar precious program.
spk02: Okay. Thank you very much, Longin. I'll pass it on.
spk09: Thanks, Phil. Our next question will come from Gary Zhou with Credit Suisse. You may now go ahead.
spk04: Hello, management. Thank you for taking my question. This is from Credit Suisse. So two questions on my side. So firstly, so also to follow up on the buyback So as Longbin has mentioned, you know, basically the rest of the amount is quite a significant amount to proceed. So just wondering if the company can give us more color on the timing, how we're going to, you know, proceed all those buybacks, or if there's, you know, kind of a price range that we would think, you know, we would do more kind of share buyback. And secondly, a quick question, just wondering, you know, if measurement can give us some color on the April kind of polysilicon sales. So have we, you know, kind of started to see our inventory start to go down in April? And basically, you know, I just want to have more information. kind of an idea on how confident the management believes that our inventory can reduce quite a lot in the second quarter. Thank you.
spk03: I left Ming to answer your first question, buyback color. I'll answer your second question, Ming.
spk06: Okay. Hello, Gary. Thank you for your question. So as Lange indicated earlier, so we do have our $700 million Assured Repurchase Program of which 85 million has been used and there's 615 million left. And this program is really through the end of 2023. So we did just receive the dividend distribution from Xinjiang DACO is en route right now and needs to be transferred offshore. So in total, this will be approximately 4.96 billion RMB, or just north of $700 million. So certainly, we do anticipate that this would be the financial source that could be used to fund our sure repurchase plan. I think in terms of timing, there's really no specific timing except that it will be repurchased throughout the year. And we will definitely take opportunity to look at the share price, especially if share price is really attractive, we would look for opportunities to repurchase that.
spk03: Gary, I think, you know, I just answered, I think, a few questions about, you know, the April, the, I think, shipment movement. By the end of first quarter, we have an inventory around the 20,000 tenths. And in April, I think we sold a contract right now, so far today, is more than 20,000 tenths. So we see it's very quick, you know, right now. the move out, especially we see a lot of customers come back, book more silicon. Because today the scenario is different from the history. The history is every month we sign the contracts. Right now almost every week we sign the contract with clients because most of the clients, there's a little worry you see the fluctuation of the silicon price. But we see right now the price is stable, almost stable between 170 to 200 per kg. We hopefully, I think that price can stick on that or even gradually slow down. So basically, you know, we think, you know, in May next month we will be selling more. So all expectations, the guidance we already gave out, I think we will keep at the end of this quarter the inventory to 5,010. That is in the shipments, you know, we cannot recognize as the revenue, hopefully.
spk04: This is very clear. I'll pass on. Thank you.
spk06: Thank you, Gary.
spk09: Our next question will come from Alan Lau with Jefferies. You may now go ahead.
spk08: Thanks, management, for taking my question. I would like to ask from a more long-term perspective. So because some of the peers are having very aggressive capacity expansion plan, more than 400,000 tons next year, and also some of the peers are having very low cost with FBR technology. So I would like to know your strategy in maintaining your market share or will there be acceleration in capacity expansion or there will be a partnership with some of your peers to stabilize the price. Thanks.
spk03: Okay.
spk06: I want to thank you for your question. So we did see our peers' aggressive capacity expansion plans. I think it is subject to, for example, their funding from the A-share capital market in terms of their additional capital raising. And also, I would say a lot of these projects also more or less will be subject to market conditions, for example. So as we indicated, right, so if market condition is good, So, for example, if demand in the second half there remains strong and probably silicon pricing remains healthy, then we may decide to, for example, move our Inner Mongolia Phase II project on track and looking at additional capacity plans. But let's say if positive pricing does become less than attractive, then certainly we would delay our project expansions and we would not look to accelerate capacity expansions for us. And if that's the case, we also would think that a lot of the planned projects expansion would slow down or cancel, and actually some of the new capacities that do not reach either quality or cost targets actually might shut down or close down as the industry has seen in the past. Okay. With regard to cost, we do believe that, at least in terms of the Siemens process type of polysilicon, where we are now more than 99% of our production is model grade, and we are also one of the largest suppliers of N-type poly in the market within China right now. So I think we continue to have some of the best quality. And especially for the end time, I think our products are really accepted by customers. I think understanding is even though, you know, maybe some manufacturer with different process might have lower costs, we do believe that, you know, the product, I think what is going to end type products, especially I think the second half of this year and next year, we do believe that as quality becomes more important, when products become more available, we do think that that quality will make a big difference, especially with regard to pricing. And what we're seeing in the market already is that the lower quality product does have much lower pricing than the higher quality product. I think, in fact, what we are seeing in the past months is that a lot of the price, the gradual price decline that we saw in the market actually was the result of more of these lower quality products moving into the market, and they had to offer a lower price to the market, but that is pulling down the overall average pricing of polysilicon in the market currently.
spk08: Thanks a lot, Ming. Another question from my side is how do you see the costs going forward? Do you think our production costs can get below 50 RMB eventually with optimization and ramping up of new plants?
spk06: Hello. So actually, Alan, so for example, right, so if you compare our Q4 production costs compared to our Q1, as we indicated, actually it went down almost 6% quarter over quarter on R&B basis. So I think in terms of R&B, our Q4 cost was close to 55 R&B per kilogram. And then our Q1 cost is actually already close to 51 RMB per kilogram. So I would say we do anticipate that once we ramp up our Inner Mongolia facility, which has, I think, in terms of one single site, has a similar or even better manufacturing efficiency compared to our Xinjiang facility with less people. with an updated process. So we do think that we have a very good opportunity to see additional price reductions as this facility ramps up. I think in terms of our internal planning, we do think that it has a very good opportunity to reach the cost targets that you've indicated.
spk08: Thanks a lot. That's very key. I'll pass on and pick it.
spk06: Great. Thank you.
spk09: Our next question will come from Rajeev Chugtree with SunSara Capital. You may now go ahead.
spk07: Thank you. Good morning. And congratulations for producing a strong quarter in very challenging circumstances. I just want to follow up on the cost question. You are also beginning to produce the raw materials. internally now, or at least the capacity is being built for that. How will that shape your cost structure in the coming quarters?
spk03: I think, yes, originally we were planning to invest in silicon metal in Mongolia. So, but we're still, you know, in the process to get to the, you know, the license and, you know, the improvements, you know, the energy improvements. So hopefully right now the schedule is, you know, all those licenses we maybe got, you know, by the end of the July. So basically if we got everything smoothly, then we're starting, I think, to build up the silicon metal plant. Hopefully by the end of this year or the Q1 next year, we can produce silicon metal. I think that will reduce, you know, dramatically reduce our cost maybe. But now I think silicon powder is around like, you know, 20,000 tenths, 18,000 tenths per ton. I think we can go down to 10,000 tenths per ton. So basically I think the cash cost at least reduced, I think, you know, $7 to $8, yeah.
spk07: Okay, so $7 to $8, so that would reduce your... Let me be packaging.
spk03: Right now, for example, our cash cost right now, first quarter, is $45. So if we produce our own, I think, silicon metal, we can reduce to maybe around $37, $38. RMB, RMB per kilogram, yeah. Got it.
spk07: Thank you.
spk06: Great. Thank you.
spk09: Again, if you have a question, please press star then one. Our next question will come from Rocky Lin with AIIN Investments. You may now go ahead.
spk05: Hey. Congratulations for the good earnings. My first question is, Could you tell me our repurchase program, the pace of our repurchase program? I mean, will you repurchase all your 600 million in this year?
spk06: Yeah, I think the current plan is still to complete the program for the current year. And I think in terms of pace, it should be more or less stretched out over the year. At least that's the current plan right now.
spk05: Okay, got it. And my second question is, you know, all your competitors are expanding their capacities. But I think it may be somehow oversupply. So Is there any possible that you will stop your expanding plan for the second phase of the expanding plan in, you know, Mongolia?
spk06: Okay. So I would say overall there is no oversupply of polycycline in the market today. I think right now the supply and demand is relatively balanced overall. and there's actually a very healthy demand from the end market. What we are seeing is, because right now we're in April, right, so the peak market demand and isolation timeframe hasn't really reached. It's generally in the summer and starts from June really through October. Okay, so we think really Q2 and certainly Q3 demand should be much stronger than Q1. And what we are seeing, at least in the very near term, is as a polysilicon manufacturer, we do sell our products to wafer manufacturers. And also wafer manufacturers are running at very high utilization levels. You know, we're looking at production from industry estimates somewhere in the range of 40 to 45 gigawatts per month. But because right now their overall capacity is actually, production is actually constrained. by the availability of high quality or high purity quartz used to make these quartz crucibles. So in the very near term, that's limiting their total production and availability or their ability to utilize polysilicon to be made into a wafer. So we do estimate that the industry current consumption on a monthly basis of polysilicon is somewhere between 100,000 to 110,000 metric tons. And that's actually similar to the amount of production of polysilicon currently in the market. So I think that the demand and supply condition is relatively balanced. right now. And I think unless we see, you know, substantial, you know, let's say increase in polysilicon production or availability, but, you know, without an increase in, say, end market demand or in wafer production capacity, for example, then that might have the kind of scenario that you've indicated, but we're not seeing that currently.
spk05: Yeah, I mean, the price down really, really low, like less than maybe less than $6. I mean, less than maybe like $10 maybe. Okay. I mean, will you stop your expansion plan?
spk06: Oh, if pricing, let's say, yeah, it goes down to less than $10 per kilogram, you know, as an assumption basis. I think we will slow down our capacity expansion.
spk05: That's not my question.
spk06: Great. Thank you.
spk09: Our next question will come from Chao Ji with Goldman Sachs. You may now go ahead.
spk01: Hi. Thank you for taking my question. Can I ask if you have any guidance for the production cost for the second quarter and also whether it's possible for you to share your current and second quarter expected cash cost level? Thank you.
spk06: Okay. Thank you so much for your question. So this is Ming, the CFO. So I would say that for our Q2 costs, I think looking at the most recent trends of raw materials, especially for silicon metal, as well as for electricity, for example, we expect these to be very stable. And so overall, we believe our Q2 cost, even though we're ramping up in Mongolia currently, we do think that our Q2 cost should be fairly similar in R&B basis compared to our Q1 cost structure. And actually going to Q3, the cost should decline as Inner Mongolia starts to be close to fully ramped.
spk03: But second quarter, the cash operation, you know, operation cash should be higher than, you know, I think Q1, the reason is because the sales volume is higher. It's almost 133 to 141% increase compared to Q1.
spk01: Understood.
spk03: Thank you so much. Thank you.
spk01: Thank you.
spk09: This concludes our question and answer session. I would now like to turn it over back to Kevin Hall for any closing remarks.
spk00: Thank you everyone again for participating in today's conference call. Should we have any further questions, please don't hesitate to contact us. Thank you and bye-bye.
spk09: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
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