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spk08: Hey, and welcome to the DocuNewEnergy second quarter 2023 results conference call. All participants will be in listen-only mode. If you need assistance, be a single conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. I'd like to turn the call over to Ms. Anita Chu, Investor Relations Director. Please go ahead.
spk09: Hello, everyone. I'm Anita Xu, the investor relations of DocuNew Energy. Thank you for joining our conference call today. DocuNew Energy just issued its financial results for the second quarter of 2023, which can be found on our website at www.eqsolar.com. So today, attending the conference call, we have our new chairman and CEO, Mr. Xiang Xu, our former CEO, Longgen Zhang, CFO, Mr. Ming Yang, and myself. So the call today will begin with an update from Mr. Zhang on our new chairman and CEO, followed by his comments on market and operations. And then Mr. Yang will discuss the company's financial performance for the quarter and the year. And after that, we'll open the floor to Q&A from the audience. So 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 US 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 contained in 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 Securities and Exchange Commission. These statements only reflect our current and preliminary review 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 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'll 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. So now I'll pass it on to Mr. Zhang.
spk02: Thank you, Anita. Good morning, good evening. Efficient operation of our polysilicon facilities in the second quarter of 2023 resulted in the production volume of 45,306 metric tons, representing an increase of 11,458 metric tons as compared to the previous quarter. As our Phase 5A 100,000 metric tons polysilicon project in Inner Mongolia reached full production capacity in June, Our production cost decreased by 8.3% from Q1 to $6.92 per kg, primarily due to improvements in manufacturing efficiency, as well as a reduction in the cost of metallurgical-grade silicon. For the quarter, we generated $230 million in EBITDA with strong operating cash flow and a continued to maintain a strong balance sheet with no financial debt. At the end of the quarter, the company had a cash balance of $3.2 billion and a combined cash and a banking note receivable balance of $4 billion. With an addition of our new Inner Mongolia Phase 5A facility, our total annual polysilicon nameplate capacity has expanded to 205,000 measure tons. For the third quarter, we expect our total polysilicon production volume to be approximately 55,000 measure tons to 57 measure tons, representing an increase of 21% to 26% as compared to Q2 2023. four-year production is expected to be approximately 193,000 metric tons to 198,000 metric tons of polysilicon, representing an increase of 44% to 48% as compared to 2022. In addition, based on our schedule, our new semiconductor-grade polysilicon project with 1,000 metric tons annual capacity is expected to start pilot production by the end of September of this year. With our fully digitized and highly automated production system that optimizes operational efficiency, improves cost structure, and further enhances production product quality for the M-type polysilicon product, we are confident that our Inner Mongolia project will further enhance the company's competitive edge. The polysilicon industry experienced increased challenges and substantial price volatility during the second quarter. Several new polysilicon facilities and new entrants finally started production with some reaching full production capacity in the first half of this year. The shortage of polysilicon of the past two years came to an end. The increased supply ultimately led to relatively oversupply and excess industry inventory. In an effort to gain market shares with inferior quality products, new entrants and some established industry players engaged in aggressive pricing. Expectations of lower future pricing in the market led to delays and reductions of downstream customer orders, as well as aggressive pricing required by customers. The situation wasn't significantly in the second half of May as inventory reduction efforts by leading producers led to raise to the button that saw polysilicon prices decline by approximately 70% at the end of the second quarter compared to Q1 levels. In the second half of June, Polysilicon prices reached button and customers began ordering aggressively at the lower prices. By middle July, we saw an approximately 15 to 20% price recovery compared to the button reached in June. Recently, we have also seen an increase in the ASP premium for M-type Polysilicon with a meaningful increase in demand volume. We expect that these trends will further benefit us as the industry transitions to next generation M-type technology. We shipped 53,502 metric tons of polysilicon in Q2, meaningfully more than our production level and a substantial increase over Q1 shipments. Polysilicon inventory at our original Xinjiang facility decreased to less than a week's production volume. As our facility in Inner Mongolia is newly established, its products require customer qualification before we can ship meaningful volumes to customers, and the qualification process took longer than anticipated due to market volatility during the period. At the end of the quarter, With customer orders on hand that covered all our inventory, we had practically sold all shippable products. The customer qualification process for the products of our Inner Mongolia facility completed successfully in July. And at the end of July, with brisk customer orders and demand, we had further reduced our polycythic inventory to a very healthy level of approximately one week of production across our two facilities. For the second quarter, we recorded approximately $19.7 million in foreign exchange loss, or approximately $0.26 per ADS. Near the end of April, the company received approximately, let me be, $4.96 billion in cash dividends from its subsidiary, Xinjiang Daku, which was approximately $716.7 million US dollar based on the exchange rate on the date the dividend funds were received. During the quarter, the company converted approximately 1.85 billion renminbi to U.S. dollar to fund our share repurchase program. As the USD to renminbi currency, Chinese currency, exchange rate fluctuated significantly during the month of May and June, and as required by accounting standards, we recorded an unrealized foreign exchange loss primarily related to our quarter-end cash balance. of 3.1 billion held by the company in an offshore account. Regarding the company's share buyback program, at the end of July, the company had already repurchased 4.16 million ADS, so approximately $188.7 million under the current program. with average cost of approximately $45.32 per ADS. Combined with the program completed in 2022, in aggregate, the company has already repurchased 6 million ADS for approximately $308.6 million. The continuous cost reduction in solar PV products and the associated reduction in solar energy generation costs are expected to create substantial additional green energy demand, which is likely to exceed most analysis expectations. It is generally expected that solar PV will eventually become one of the most important energies to power the world In addition, as the solar PV technology keeps evolving, we believe that the increasing needs for polysilicon of very high purity, such as anti-polysilicon, will help differentiate us from our competitors. While most of our competitors will likely struggle with the current market environment, Dark New Energy has one of the best balance sheets in the industry with no financial debt. and this will help us with the current market environmental success rate. We are optimistic that as the solar end market continues to grow and as our customers continue to expand capacity, particularly for end-type solar products, prices will improve. We will continue to maintain solid growth and capture the long-term benefits of growing global solar PV market. Moving to outlook and guidance. The company expects to produce approximately 55,000 metric tons to 57 metric tons of polysilicon during the third quarter of 2023. The company expects to produce approximately 193,000 metric tons to 198,000 metric tons of polysilicon for the full year of 2023. Inclusive of the impact of the company, company's annual facility maintenance. This outlook reflects Dr. Nualegi's current and preliminary view as of the date and this press release and may be subject to change. The company's ability to achieve these projections is subject to risks and uncertainties. See safe harbor statement at the end of this press release. Now, I'm going to turn to the call to our CFO. Ming, please go ahead.
spk05: Thank you, Longan, and hello, everyone. Thank you for joining our earnings conference call today. Now I will discuss our financial results for the second quarter of 2023. The news was $636.7 million compared to $709.8 million in the first quarter of 2023 and $1.24 billion in the second quarter of 2022. The decrease in revenue compared to the first quarter of 2023 was primarily due to a decrease in average selling prices mitigated by increasing sales volume. Gross profit was $258.9 million compared to $506.7 million in the first quarter of 2023 and $947 million in the second quarter of 2022. The growth margin was 40.7% compared to 71.4% in the first quarter of 2023 and 76% in the second quarter of 2022. The decrease in growth margin compared to the first quarter of 2023 was primarily due to lower average selling prices, which was partially mitigated by lower production costs. Selling general and administrative expenses were $43.3 million compared to $41.3 million in the first quarter of 2023 and $14.4 million in the second quarter of 2022. The slightly higher SG&A expenses compared to the previous quarter was due to higher shipping volume that resulted in higher shipping expenses. SG&A expenses during the second quarter also includes and non-cash share-based competition costs related to the company's sharing incentive plans compared to $28 million in the first quarter of 2023. R&D expenses were $2.2 million compared to $1.9 million in the first quarter of 2023 and $2.7 million in the same quarter of 2022. R&D expenses vary from period to period and reflect R&D activities that take place during the quarter, and most of our R&D for the quarter related to product purity improvement related activities. Foreign exchange losses were 19.7 million compared to nil in the first quarter of 2023 and also in the second quarter of 2022. The significant volatility and fluctuation in the U.S. dollar to Chinese exchange rate during this quarter resulted in primarily unrealized foreign exchange loss related to our quarter end cash balance of RMB 3.1 billion held by the company in an offshore account. And as a result of the above mentioned, income from operations was 214 million compared to 463.8 million in the first quarter of 2023 and 927.6 million in the second quarter of 2022. Our burning margin was 33.6% compared to 65.3% in the first quarter of 2023 and 74.6% in the same quarter of 2022. Net income attributable to DACA New Energy shareholders was $103.7 million compared to $278.8 million in the first quarter of 2023 and $627.8 million in the second quarter of 2022. Earnings per basic ADS was $1.35 compared to $3.56 in the first quarter of 2023 and $8.36 in the second quarter of 2022. Adjusted net income, non-GAAP attributable to DACA New Energy shareholders, including non-cashier-based compensation costs, was $134.5 million compared to $310 million in the first quarter of 2023 and $630 million in the second quarter of 2022. Adjusted earnings for basic ADS was $1.75 compared to $3.96 in the first quarter of 2023 and $8.39 in the second quarter of 2022. A dividend was $230 million for the quarter compared to $490 million in the first quarter of 2023 and $955 million in the second quarter of 2022. The dividend margin was 36% compared to 69% in the first quarter of 2023 and 76.8% in the second quarter of 2022. Now on the company's financial condition. As of June 30, 2023, the company had $3.169 billion in cash, cash equivalents and restricted cash compared to $4.1 billion as of March 31, 2023. and $3.3 billion as of June 30th, 2022. And as of June 30th, 2023, the note receivable balance was $798.5 million, compared to $791 million as of March 31st, 2023, and $1.27 billion as of June 30th, 2022. Note receivables represent bank notes with maturity within six months. And now on the company's cash flow. For the six months ended June 30, 2023, net cash provided by operating activities was $786 million, compared to $1.13 billion in the same period of last year. And for the six months ended June 30, 2023, net cash using investing activities was $495.7 million, compared to net cash using investing activities of $80 million in the same period of 2022. The net cash used in investing activities in the first half of 2023 was primarily related to the capital expenditures on the company's projects in Baldo City, Inner Mongolia. And for the six months ended June 30, 2023, net cash using finance activities was $477.5 million, compared to net cash provided by financing activities of $1.5 million. 5.8 billion in the same period of 2022. The net cash using financing activity in the first half of 2023 was primarily related to $174 million in the company's share repurchases and $306.6 million in dividend payments made by the company Xinjiang Daco subsidiary to its minority shareholders. And that concludes our preferred remarks. And operator, we will now open the floor for questions.
spk08: Thank you. We'll now begin the question and answer session. To ask a question, you may press star then 1 on your touch-tone phone. If you're using a speakerphone, please pick up your handset before pressing the key. To withdraw your question, please press star then 2. This time, we'll pause momentarily to assemble the roster. First question will be from Phyllis Shen of Roth MKM. Please go ahead.
spk00: Hi everyone, thanks for taking the questions. Logan, sorry to see you leave and was wondering if you could touch on your personal situation and give us some color as to timing and detail around what you might do next. It sounds like from the release that you're leaving effective immediately, but you're on the call today, so just curious, if there's any more you can share. Thanks.
spk02: Thank you, Philip. I think, you know, I'm working for the company more than five years and know everybody well. And then also, remember, our new CEO and chairman, he stays longer than me. Basically, he also knows this industry very well. Even during the past five years, we're working together and, uh, So I think, you know, during personal, I think family personal reason, I'm leaving. But I think, you know, still I turn over the control to Mr. Xu. I think, you know, I hope, I think he will, you know, direct the company to the next, you know, high step. Did I answer your question, Philip?
spk00: Yeah. Thank you, Logan. Shifting over to pricing, you talked about the dynamics of how pricing fell in Q2, and then there was a bit of a recovery. Can you talk about what you see for polysilicon pricing in Q3, Q4, and also 2024? How much higher or lower could poly pricing go in 2024? Thanks.
spk02: I think in last year Q4, during the seasonal and also some downstream clients, I think the planning to stop demand shut down the capacity. So almost the five biggest polysilicon plants have the inventory by the end of last year. But as the Q1, because Chinese New Year is coming in February, so demand immediately come out. So in Q1, the price continued to go up back from, I think, Q4, the button, almost $80, lemming B yuan per kg, to 240. But really, because I think a new entrance, the inventory, I think, digested. So immediately, I think, you know, to buy, I think, in May and June, the price continued to go down. Especially, I think, in June, the price almost go down to the button. Basically, I think break even, even. I can call. Let me go to 55 to 60. Then, for some reason, as you know that, by the end of last month, I think two company, I'm not mentioning, okay, they have, I think the facilities have some problem, the bomb, you see. Almost one of big player, almost stop Xinjiang oil production. So I think right now, beside that, I think the market come back, the order is coming, I think, you know, in the pipeline, especially some order is continuing. We see in Q3, Q4, so the demand right now is little hot. So the price right now back, like M-type is around 83 to 85 lemony per kg. The P-type, I think, is around like 65, six three six five you know per kg let me be so we think you know in q3 we feel is very profitable i think this situation will continue lasting to october then during november and december another i think you know come come up the winter is coming the western country is maybe you know the christmas day then chinese new year is coming so i think you know during november December or January and February, the price definitely go to deep again. Also, I think as other, you see like Daku, Mongolia, we are full capacity running. Then like TBEA, they also, the first project in Mongolia is not very successful. Okay, last year they started trial production. Still not full capacity running. But they will now tell the market they were full capacity running by next month. So we see, you know, the supply is continue to go up. So I think, you know, the next year, the polysilicon price, even next two years, especially I think, you know, very clear, the polysilicon produced in China right now is a different price from polysilicon produced outside of China. For example, like a WACA, OCI, because they can easily to traceability to export you know, use their silicon, produce final products, export to U.S. So right now, I think, you know, next two years, Chinese part of silicon maybe will, you know, stable maybe between, I think, around 60 lemming bean to around 70, between 75, you know, I think, like that, you know, channel. That's what I'm thinking, okay? Then I think these also will push, I think, some Chinese producer, silicon producer will move outside to China to other location outside of China to produce silicon. As you can see that like US IRA already attract a lot of company when the Chinese company to do the module, I think sell even waiver. So I think that trend will continue to coming. So I think, you know, globally I think, you know, after two to three years I think the Chinese maybe right now, the capacity is not only silicon, maybe weaver cell oil is oversupply right now. So that's why it cost the module price right now from two 11b towa down to right now 1.4 per towa. That's maybe the good thing because the returns on projects is higher. But that maybe stimulates, you know, the installation. But also a lot of installation continue going on in the market demand and install then go to the grids also have come, you know, have problems, especially in China. So it's all trade-off, you know. You're thinking, you see, the modular price go down, maybe you will increase the IRI on the project. But meantime, you see, the connects to the grids, delay also will affect the returns on IRI. So, but China right now, the market is so hot, we think, you know, the rooftop, The SOE, I think it's all going on. So I don't think any problem within two years. I think Europeans continue to grow. The only thing is that all the labor force action in Europe is starting 2025 Q2. So I think let's give time to the Chinese producer to move the production outside of China. what I'm thinking to the whole market in the future. But remember, Daku is the only one in China right now, no doubt, produce the high quality product can compete with Walker. So especially I think as the M type silicon continue to grow, we already see the price difference between M type and P. is a runner right now, 8 to 10, let me be, per kg. So our advantage is very clear. If you look at our Q2, I think the growth margin is almost more than 50%. I think we still can keep our growth margin, even let's say in Q3, Q4, even Q4, still we're about 30%. I think 20% is our premium compared with other players, competitors, based on the quality, on the cost effective, on the scale.
spk00: Great. Thank you, Longin. That was a lot of color. You said something very interesting just now about how Chinese producers could launch and ramp capacity outside of China to serve the U.S. and maybe even Europe. So I was wondering if you could highlight... Right. So can you talk about, like, do you guys have plans to ramp up facilities outside of China? And then how many... metric tons do you see? Are there announcements already of who could be ramping and which countries and what's the timing of when those facilities could ramp? And then also, you talked about this price delta between Chinese and non-Chinese polysilicon pricing. Can you talk about what the magnitude of that premium is? A couple of months ago, I think it was something around $10 delta. What is the non-China poly price now, and do you expect that difference to maintain, or do you think that could get closer over time? Thanks.
spk02: Basically, if you look at the figure today, outside of China, Silicon, the majority is Locker, OCI, and HomeLock. I think added together, it's around $80,000. That cannot meet, I think, even U.S. market, $50,000. 50 GW, let's say. 50 GW, I think, need at least, I think, 120,000 metric tons, right? Of course, I think U.S. is not only just a polysilicon module. There may be also other stuff. So we see, basically, I think, you know, Europe, U.S. U.S. is a typical market. It's not only besides, you see, the, I think, RIA stimulus, because also the political issue, you see, for example, the anti-dumping, the tariff, all those stuff, CBD, AD, then plus, I think, over labor force reaction, all these, I think, you know, you can see today, for example, like Trina, I think they use the water materials produced in Vietnam from weaver sand module. This can easily be selling, I think, you know, the module to U.S. around 40 cents per watt. Also, I think Maxon do the same thing. So I think the U.S. market right now, the market can absorb high module price. It's already there, I think. Then, as I think the U.S. market continues asking for, from, I think, module to cell and waiver, step-by-step require localization materials. I think that's what push the capacity from module, cell, and silicon. The same situation, I think, will happen in Europe. So Europe, I think in the future, I'm not going to remember that, maybe 85% or 65% you have localization. So that's why I think a lot of Chinese players will move to Europe. But today, you see, I think of the production ecosystem, I think of the environmental, I think of Middle East, Southern Asia, maybe same as China, I think it can produce I think a lowest the cost effective in a module products So it's a lot of right now company right now because I think go to the Middle East like a Saudi UEE and Oman, you know Qatar because they have 2030 version, you know in the Middle East and also the strong relationship right now political relation with China and So we see a lot of trends. You see also a lot of news come out. You can see PCL, the news with the volume industry, right? You can see that. And also U.S., you also can see, I think, Longgi, Jinko, the expansion in U.S. And Europe, then, a lot of right now, I think, not only module, but also, I think, waiver. capacity right now is moving to Europe. So I think this is happening. I think, you know, become global production, global products. That's a good thing, I think. That's also very easy. I think the market demand and supply and become more healthy. But I cannot tell you.
spk00: Yeah. Sorry to interrupt you. Just to kind of focus the conversation a little bit. I thought you were referring to Chinese polysilicon producers ramping facilities outside of China. Are you aware of any of those activities, and do you think you might ramp polysilicon production facilities outside of China, and if so, where? Would that still be the Middle East and maybe Southeast Asia, or would that be some other locations? Thanks.
spk02: I think it definitely is the economic stimulus to attract Chinese producers to move outside of China to produce the silicon. But you should remember that silicon plant is a capital intensive, also environmental, and also is a chemical industry. So the design, the permits, all these I think is very high. Daku also did a lot of research. For example, if we go to US, maybe taking five years to finish the construction, then 10 times the total investment. So it's impossible for us to set the plans in any Chinese, I think, producer to set the plans in US. Then if you go to other place like Middle East, you have to considering. If you set the plans outside of China, what's the competitive edge, right? If the cost, the final product is still used in the local, then it's no competitive age. The only thing is traceability. The product can go to Europe, go to the U.S., then meeting some. Today, if you look at the PV link, I think, I didn't look. Last week, I think Walker, I think international policy is $27 to, I think, $35 or whatever. And China right now is around like $10 to $10. So the difference is there. I think that will continue to exist. The reason is because the, I just mentioned that outside of China, silicon only 80,000 tons. There's no way within two years can increase. We also didn't see any existing player, for example, OCI, WACA, Homelocker, their extension. So we also didn't see any Chinese producer is going to planning to plans outside of China. At least right now, we didn't see any news. DaKu is a little different because we are now, I think, listing U.S., then also listing A shares. So for a U.S. company, we cannot compete the business with, I think, an A share company. So the silicon, we only can do the A share. So that's why we be careful. I think with the new chairman and the CEO, I think Mr. Xu, I think he has the future planning. I think, yes, we are looking at study any time if possible.
spk00: Okay, Longji, that's really a very good color. Thank you. One last question for me. You know, we recently wrote that Longji's detained products in the U.S. using... Tongwei Poly from maybe four or five months ago, that was detained, was denied entry into the U.S. I know you're ramping your Inner Mongolia facilities now. What do you think your ability is to import your poly through Southeast Asia into the U.S. now? Are you a little bit more pessimistic given the Longji situation, or are you still optimistic because you... you have traceability to the court side. Thank you.
spk02: Frankly speaking, you know, I'm very pessimistic. The reason is because Tongwei, of course, Tongwei situation is maybe a little different. At least, you know, they are, I think, have a different location. I think the U.S. custom, I think, detained Longki. The reason is because Tongwei, on the whole global, They maybe use Xinjiang, I think, silicon store. They cannot improve. They didn't use, right? So yes, we have to see. Because at this moment, because of political conflicts, I think what I want to say is difficult to clear. Any clear right now can be traceability. Any silicon produced in China can be passed the traceability to export to US. If we can do to show in Mongolia, starting from oil to industrial silicon to silicon powder to silicon producer, the whole value chain to show, I think we don't know, all right? We have to try, all right? So I can't tell you, but we will make our efforts.
spk00: Great, Longyan. Thank you for taking all the questions. I'll pass it on. Great.
spk08: Thank you, Phil. Thank you. Our next question will be from Alileo. Jefferies, please go ahead.
spk07: Thanks a lot for management for taking my questions and also happy to hear Longan is moving on. And thanks for the contribution to the company as well in the past year. So my first question is what is the CAPEX plan for the remaining of this year and next year?
spk05: Okay, so if you look at the CAPEX plan, okay, so I would say in the first half, right, so I think from our financial statements, right, approximately $495.7 million was used in investing activities, and that's pretty much all used for CAPEX, mostly related to our Inner Mongolia Phase II, and some of it is for Inner Mongolia Phase I. And then for the second half, we're currently planning an additional $750 million in CapEx. In aggregate, this is mostly used for Inner Mongolia Phase 2, which is under construction right now. And then a list of the $100 million will be in the final payments related to Inner Mongolia Phase 1. So I think in aggregate for the full year, we were planning roughly $1.25 billion in CapEx. So that's the current CapEx plan right now.
spk07: Thank you. So another question is, since the average selling price in Q2 is lower than the average market price in Q3, in the market. So we'd like to ask, is the company selling more in June instead of April? And what is the space between the different markets? Because the prices have been declining over the years.
spk02: First of all, I don't know where you got the ASP, market ASP. Then you can make a decision where below the ASP. But I can tell you because we, you see, we are the company digest all the inventory. So basically, yes, we sliding our price is very competitive. But compare our quality, I still think it's challenging. We still is very profitable. So if you look at, you know, Tongwei, I think their whole industry together, I think the profit in the second quarter almost cutting half, less than half. we still have more than 50% increase. Half cut to half, more high than the half. So I don't think, you know, it's an apple to apple, you know. I still think we're selling pretty good, I think, SP, you know, to the good clients, yeah.
spk07: Because they are guiding that they are selling at around 120 RMB per kilogram. So I saw our numbers around 97 or 98. including tax. So that's why there's a question. Maybe there's some timing difference. I'm not sure.
spk02: Yeah. It's maybe not Apple to Apple, you know, uh, really, you know, the, we, we, we're not a common to other companies, but, uh, that's a factor. We, we, we are the, I think the figure would tell you.
spk07: I understand. So, uh, uh, how about, uh, the, uh, share buyback, uh, pays because, uh, uh, uh, Since the buyback in Q2 was not very aggressive, so can I assume the company will accelerate the buyback in Q3 because there's more than $500 million left?
spk05: So, yes, I think we still have more than $500 million left on the parent company's balance sheet in the offshore account, which we will use for the share buybacks. program. And the share buyback program continues to be in place. It has not been changed. And certainly, we will look forward to support the share price, especially now with the new chairman and CEO on board. I think there's a lot of new plans for the company. And certainly, I think, you know, it's subject to some market conditions, our share price and other factors, things like that. But we will continue to execute on our share by that program.
spk02: But we are sure that I think we're going to finish the $700 million purchase program, right, by the end of the year? That's the current expectation, yes. Anita, right?
spk07: Thank you. Thank you. So, yeah, that's quite positive. And I think my last question is, what is the view on... on aggressive expansion by others because some of the peers are actually having concrete due diligence in Saudi. So I wonder if we are also investigating the expansion plan in Saudi or other places will seem more relevant or more feasible for us.
spk05: Okay. We did investigate in overseas expansion in the past, actually quite actively, and we did actually even send our teams overseas to do due diligence. And we continue to think there are a lot of challenges related to overseas expansions, particularly, for example, around the higher production costs. and the sustainability of the price premium and as well as the market opportunities. So we certainly are continuing to monitor the various opportunities. But I think as of now, the company has no plan to do overseas expansion right now.
spk07: Understood. Understood. Thanks a lot, Ming. I'll pass on. Thanks a lot. Okay.
spk05: Thank you, Albert. Thank you.
spk07: Thank you.
spk08: Thank you. The next question will come from . Oh, Goldman Sachs. Please go ahead.
spk01: Hi. Thank you for taking my question. Can I ask what's the portion of the anti-poly for the first half this year, and what kind of a portion would you expect for the full year? And also, we know that the second quarter operating cash flow is actually negative. Can you also share why is that? Thank you.
spk05: Okay. Hello, Tito. Thank you so much for your question. So with regard to N type, so the percentage keeps improving. So in Q1, it was roughly in the range of 10 to 20%. Actually, for Q2, we've already increased it to the range of 20% to 30%. I think based on the company, both in the market conditions and the market demand from the customers, and also the price premium, and that's afforded in the market. So I think towards the end of Q2, now that price premium is in the 10 to 15 RMB per kilogram range for N-type relative to P-type, we are actually modifying our process and optimizing our process to produce more N-type. I think in the second half, right now our expectation is that N-type will constitute somewhere between 30 to 50%. of our production. So obviously, Xinjiang is a more mature process, but the equipment has a little bit more limitation on the anti-percentage, but we think we can improve it further. While Inner Mongolia is in the process of improving its quality and ramping up, so we're very optimistic that over time the Inner Mongolia anti-percentage will increase meaningfully. Let me follow up on the second Can you repeat your second question again?
spk01: Sure. The second quarter operating cash flow seems to be negative. Can I ask why is that?
spk05: Is it negative? Because for the first month we had $786 million, I think, of operating cash flow.
spk01: Right, right. But it seems that the first quarter cash flow is like more than $800 million, so it seems like the second quarter is slightly negative. Thank you, Miller.
spk05: It's probably related to our bank note balance, but let me follow up with you on that topic.
spk01: Oh, sure, sure. Great. Thank you so much.
spk05: Okay, thank you.
spk01: Thank you.
spk08: Thank you. Next question will be from Rocky Wen of AIM Investments.
spk04: Please go ahead. Hi. Thanks for the talk to you about the management team. So my question is, so we have changes in our management team, and I want to ask, Due to our changing our management, do we have plans to launch new business or do new investments?
spk02: I think, you know, the change of the new management team, I think Mr. Xu is the chairman and the CEO new. I think he also is a big shareholder and the controller. And the Asia controller, I think, yes, maybe, I think, you know, in the future, definitely we were looking to do some study. But we still, I think, were focused on our existing business. And as we laid down three to five-year strategy, you see, upstreamly doing the industrial silicon metal, then also we were the pilot, I think, of 1,000 semiconductor products. We'll come out of tri-production starting, I think, Q3. So our strategy didn't change. Of course, we're looking at other opportunities, maybe overseas, you know, maybe downstream, you know, but not right now. We will announce that already.
spk04: Okay. And my next question is, do we consider to go in private because we have a lot of cash and the this cash maybe somehow cover our market cap. So do we consider to go private?
spk02: I think privatization, we are going to privatization is not, you know, many maintain to make the same. And we have to go through the whole share orders. But definitely one thing is clear. I think the valuation between A share and U.S. share is the difference is higher. So right now, we only have a channel is going to throw Asia to declare dividends to buy back the US shares. So it's empty diluted, as you can see, right? So I think that we think that the price can continue, the valuation in US market can continue to go up. But I want to remind you, by the June 23rd, July 23rd next year, that means after we IPO in Asia after three years, the U.S. company holding 73% of A share, we can sell it, starting to sell it. So that means we have another channel. We can sell the A share to government money, then back to U.S. market to buy back the U.S. shares. So basically, we think in the future, if the valuation is so different, you see, we can throw that to arbitrage. Therefore, we will reduce the circulating shares, you see, And that's, I think, you know, to push the market, right? But with privatization, I don't think so, you know, for long-term because, you know, we also want the U.S. shareholders to get, you know, to share our benefits, you know.
spk04: Okay, okay, okay, okay. Thank you, thank you. That's all my questions.
spk08: Thank you. Our next question will be from Leo Ho, the WIA. Please go ahead.
spk06: Thanks, management, for taking my question. This is Leo Ho from Dow Capital Markets. A couple of questions I would like to ask one by one, if I may. The first question is regarding share buyback. I just would like to confirm that so our current plan is that we are going to spend the entirety of the $700 million within this year. Am I correct? Thank you.
spk05: I would say, let me just say that I think the $700 million program is in place. I think there has been no changes to that. I think certainly, you know, the company and the management team will continue to monitor the market and repurchase the shares, you know. Yeah, I think based on the share repurchase program, yeah.
spk06: My second question is regarding the second quarter production number. I noticed that we have produced 45,000 tons eventually, that according to your first quarters of guidance, we should be producing, you know, around 55,000 tons in the second quarter. May I know what is the reason behind 10,000 ton discrepancy? Are we doing, like, any retrofit for our old or new capacity? What's the reason behind? And, you know, if we are doing retrofit, can you briefly tell us, you know, what capacity or in which provinces that we are doing it? Thank you.
spk05: I think I'm just looking at our previous guidance. I think we guided to 44,000 to 46,000 tons of production for Q2. So we actually produced more, pretty much in line with our previous guidance. So it is basically in line. I think as we ramp up our Inner Mongolia as we expected. And then it's for the Q2 that we were expecting in, I think, 55,000 to 57,000 metric tons. So that's reflecting the full ramp-up in the Mongolia facility.
spk06: So are we doing any, like, retrofit in the same quarter?
spk02: I think if you look at the end of the Q1, we have inventory almost, I think, 25,000 tons. So in Q2, we produced 45,000 tents. So then we're selling 51,000 tents, almost 52,000 tents. So we still have some inventory in Q2. It's 10,450,000. It's 10,550 tents. So I think the figure is correct.
spk06: Okay. Okay. Thanks. Thank you. Just a few more questions. I just want to know, do we have any forecast for the N-type product within our total production mix for 2024? And also, I would like to know, at this point in time, aside from us, how many producers in the market do you see are capable of manufacturing N-type policy at large scale?
spk05: So I think for 2024, we expect N-Type to be greater than 50%. I think, in fact, I think once we're fully ramped up in terms of our updates to our optimization of our process, we should have the N-Type in the range of 70% to 90% for the company, especially for next year. In terms of number of producers, I think right now we are one of the largest producer of N-type and supplier of N-type in the market. I think the other main producers include Wacker and then some from HF Silicon and then some from Conway. But I think these are the main ones.
spk06: Thank you so much. My last question is on John Pencher. I think for a mass-large Paul, second producer in China, seems like we are the only one without any joint venture with downstream customers. Are we planning to form any joint venture in the future and why we didn't form any of them in the past?
spk05: Thank you. I mean, we won't rule this possibility out. I think in the past we wanted to be kind of a pure play and really the primary merchant supplier. of polysilicon, and I think that benefited us very well, especially last year, where I think some of our peers that had JV partners or minority investors, you know, have to share a lot of their proper income with the shareholders. So, obviously, I think with the recent market trends, actually, a number of customers have approached us and indicated their interest in, you know, doing minority or JV investments. So that is something that we are in discussion, but there's nothing concrete to report.
spk06: Okay. Thanks so much for taking my question. That's all for me. Thank you.
spk08: Great. Thank you. Thank you. And again, if you have a question, please press star then one. Our next question comes from Frank Vaughn of Nomura. Please go ahead. Thanks for taking my question. My question actually was raised earlier. It's about the prioritization plan, so no further questions from me. Thank you.
spk05: Great, great. Thank you. Thanks for joining our call.
spk08: Thank you. This concludes our question and answer session. I'd like to turn the conference back over to Ms. Anita Hsu for closing remarks.
spk09: Yeah, thank you everyone again for participating in today's conference call. Should you have any further questions, please do not hesitate to contact us. Thank you and have an awesome day. Goodbye.
spk08: Okay. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
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