Daqo New Energy Corp ADR

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.

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.

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.