Daqo New Energy Corp ADR

Good day and welcome to the DACO New Energy first quarter 2026 results conference call. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Jessie Zhao, Director of Investor Relations. Please go ahead.

Hello, everyone. I'm Jessie Zhao, the Investor Relations Director of Darko New Energy. Thank you for joining our conference for today. Darko New Energy just issued its financial results for the first quarter of 2026. which can be found on our website at www.dqsoilers.com. Today, attending the conference call, we have our Deputy CEO, Ms. Anita Xu, our CFO, Mr. Ming Yang, and myself. Our Chairman and CEO, Mr. Xiang Xu, is on a business stream now, so Ms. Anita Xu will deliver our management remarks on behalf of Mr. Xiang Xu. Today's call will begin with an update from Mr. Xu on market conditions and company operations. And then Mr. Yang will discuss the company's financial performance for the quarter. After that, we will open the floor to Q&A from the audience. Before we begin the formal remarks, I would like to remind you that certain statements on today's 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 contained in any further working statement. Further information regarding this and other risks is included in the The reports are 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 call is as of today and we undertake no duty to update such information. except as required on the 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 I will turn the call to our Deputy CEO, Ms. Anita Xu. Ms. Xu, please go ahead.

Thank you, Jesse. Hello, everyone. This is Anita. I'll now deliver our management remarks on behalf of our CEO, Mr. Xu. In the first quarter of 2026, market sentiment across the solar PV industry remained cautious amid seasonal frostness and elevated inventory levels. It was further exacerbated by rising module prices driven by higher silver, aluminum, and glass costs, which led to market slowdown in China. Geopolitical tensions in the Middle East also weighed on end-market demand in the region. Against this backdrop, persistent industry overcapacity continued to exert downward pressure on policy comprises, resulting in quarterly operating and net losses. Notwithstanding these headwinds, we continued to maintain a robust and healthy balance sheet with zero debt. As of March 31, 2026, we held a cash flow of 559.4 million U.S. dollars, Short-term investments of $288.3 million, bank notes receivable of $20.8 million, ultimate charity investment of $50.3 million, and a fixed-term bank deposit balance of $1.1 billion. In total, these assets that can be converted into cash stood at $2 billion, providing us with ample liquidity. This solid financial position gives us the confidence and strategic flexibility to navigate the current market downturn. On the operational front, we continue to take proactive measures to navigate challenging market conditions and weak selling prices, with main plate capacity utilization rate operating at approximately 57%. Total production volume at our two pulse system facilities was 43,402 metric tons for the quarter, exceeding our guidance range of 35,000 metric tons to 40,000 metric tons. With market prices for pulse system experiencing a notable decline, to be below production costs during the quarter, we adhered to the Chinese authority's self-regulation guidelines by declining to engage in below-cost sales. We adopted a disciplined wait-and-see approach pending further implementation of the national anti-involution policies we highlighted last quarter. As a result, our sales volume dropped to 4,482 Mexican tons, while our average selling price increased 2.3% sequentially to $5.96 U.S. dollar per kilogram. On the cost side, total production and cash costs increased marginally by 2% and 3% respectively on a sequential basis, primarily driven by exchange rate movements. However, despite higher silico metal costs, manufacturing costs and RMB terms actually declined slightly on a sequential basis, reflecting our continued improvements in manufacturing efficiencies. In light of the current market and the dynamics, we expect total policy and production volume in the second quarter of 2026 to be approximately 35,000 metric tons to 40,000 metric tons. For the full year of 2026, we expect production volume to remain in the range of 140,000 to 170,000 metric tons. With the solar market impacted by seasonality surrounding the Chinese New Year holidays and the absence of concrete-based capacity rationalization policies, Pulsework on transactions and shipment volumes remain low during the quarter. The tag pulsework on prices dropped from 48 to 55 RMB per kilogram at the end of 2025 to 35 to 37 RMB per kilogram by the end of the first quarter. However, pulsework on prices heading into the second quarter are showing signs of bottoming out, with weekly declines gradually easing. While producers awaited clear guidelines from authorities to tackle overcapacity, A weak demand outlook, industry inventory buildups, and financial pressure forced several peers to adjust their production pricing strategies toward a more market-oriented approach. As a result, industry-level policy on monthly supply fell to approximately 93,000 each time during the quarter, representing an industry average utilization rate of just 39%. Looking ahead, we expect government authorities to strengthen the anti-evolution policies necessary to address these industry-wide overcapacity issues. As an encouraging move, April 17th, the Ministry of Industry and Information Technology, the National Development and Reform Commission, the State Administration for Market Regulation, the National Energy Administration, and other key national departments joined the symposium on regulating market congestion within the solar PV sector. reinforcing the urgent need to address irrational competition and curb destructive evolution. Additionally, all relevant authorities are now required to deploy concerted measures to strengthen industry governance and promote the high-quality development of the solar PV industry, including in respect of capacity regulation, standards guidelines,