Daqo New Energy Corp. Q4 FY2024 earnings call

• In 2024, the solar PV industry faced excess capacity and price declines. The company proactively curtailed polysilicon production to reduce cash burn, especially in the third and fourth quarters. - Achieved the annual polysilicon productive volume of 205,068 metric tons, meeting the guidance range. The N-type product mix significantly increased. - In the fourth quarter of 2024, the company operated at a lower utilization rate, with production volume at 34,236 metric tons and sales volume at 42,191 metric tons. Cash costs for production in Q4 2024 lowered to nearly RMB 35 per kilogram. - Discussed industry self-regulation measures led by the China Photovoltaic Industry Association, new solar PV capacity in China in December 2024, and the long-term potential of solar power in global energy transition. - Maintained a strong balance sheet and ample cash reserves at the end of 2024.

Daqo New Energy's main product segment is polysilicon. In 2024, the annual polysilicon productive volume was 205,068 metric tons, which is a 3.7% year-over-year increase from 197,831 metric tons in 2023. The N-type product mix rose from approximately 40% in 2023 to 70% in 2024. Revenue in 2024 was $1 billion, down from $2.3 billion in 2023. This was due to the polysilicon ASP decreasing from $11.48 per kilogram in 2023 to $5.66 per kilogram in 2024 and lower sales volumes. In 2024, there was a noncash provision for inventory impairment expense and a non-cash long-lived asset impairment charge of $175.6 million related to older polysilicon production lines.

• For 2024, met the polysilicon productive volume guidance of 200,000 - 210,000 metric tons. - For 2025, currently expects Q1 polysilicon production volume to be approximately 25,000 - 28,000 metric tons and full-year production volume to be around 110,000 - 140,000 metric tons, planning to keep a relatively low utilization rate until a market turning point. - Anticipates poly prices to rise in the next few months at least before the end of Q2 2025, with N-type poly price in the first half around RMB 45 and in the second half around RMB 40 - 45, and N-type around RMB 37 - 40 in the second half.

• The solar PV industry has excess capacity, leading to sharp price declines throughout the value chain. Polysilicon ASP fell below production costs, causing inventory impairment and long-lived asset impairment charges. - Uncertainties in global market demand, potential policy changes (such as in the U.S. with Trump's policies affecting renewable energy), and regional market dynamics pose risks to the company.

Q: How was the cash spend in the fourth quarter of last year broken down?

A: Roughly $80 million was related to operations or operational spend, approximately $40 million was related to capital expenditures, and the remaining was related to changes in balance sheet items between operating assets and operating liabilities.

Q: What is the pricing outlook for the next two quarters?

A: Likely to see poly prices increase in the next couple of months at least before the end of Q2 2025. N-type poly price is expected to be around RMB 45 in the first half and around RMB 40 - 45 in the second half, while N-type is around RMB 37 - 40 in the second half.

Q: What are management's thoughts on potential policy intervention to suppress industry capacity?

A: The National Energy Administration and other relevant departments are looking at ways to stem losses in the industry. It's uncertain what specific policies will be implemented, but possible measures could include capping production, setting production quotas, and retiring inefficient capacity or older technology. The timing of such policies is unclear.

Q: What is the current utilization rate in the Xinjiang and Inner Mongolia capacities? And will the company consider shutting down bases?

A: The company has decided to keep both Xinjiang and Inner Mongolia bases operational considering employee and social responsibility. Further lowering utilization rate is contingent on market development; if demand is worse than expected, utilization rate might be adjusted, but no decision has been made to shut down bases yet.

Q: Whether the company participates in poly futures trading now and what's the current inventory level?

A: The company registered for poly futures trading in the fourth quarter of last year and obtained relevant approvals, but participation willingness is currently weak. The current sellable inventory of the company is less than 20,000 metric tons per month and is decreasing rapidly.