Daqo New Energy Corp ADR

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.

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.

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.