Daqo New Energy Corp. Q2 FY2025 earnings call

• The solar PV industry faced challenges in 2025 with prices below cash cost, leading to operating and net losses for Daqo. - The company had a strong balance sheet with no financial debt, including a cash balance of CNY599 million, short-term investments of CNY490 million, etc. - Production volume in Q2 was within guidance, but sales were scaled back due to market conditions. - Cash cost and production cost decreased due to factors like lower silicon metal costs and reduced energy consumption. - Anticipated 2025 production volume range is 110,000 - 130,000 metric tons. - Chinese authorities are addressing competition and overcapacity, with prices rebounding in July. - The company is well-positioned to capitalize on long-term solar PV industry growth through technology enhancement and cost optimization.

In the second quarter of 2025, Daqo New Energy Corp. had revenues of $75.2 million, a gross loss of $81.4 million, and a negative gross margin of 108%. Total production volume at the company's hot water facilities was 29,012 metric tons, within the guidance range of 25,000 - 28,000 metric tons. Sales volume for the quarter was 18,126 metric tons, down from 28,008 metric tons in the first quarter. Cash cost per kilogram decreased by 4% to $5.12, and polysilicon unit production cost decreased by 4% to an average of $7.26 per kilogram.

• Expected 2025 production volume range is 110,000 - 130,000 metric tons. - Prices rebounded in July influenced by government actions and industry initiatives. - Anticipated production volume to increase in Q3 and Q4 based on market conditions and policy developments.

• Market prices below cash cost leading to losses. - Industry overcapacity and inventory issues. - Uncertainty in the implementation of government policies and their impact on prices and production.

Q: Alan Hon asked about the latest policy developments and product price outlook in the next three months.

A: Anita Xu mentioned a symposium on the solar PV industry where curbing irrational competition below cost, strengthening regulation, and standardizing quality were discussed. Prices have increased recently, but details of a buyout SPV affect future price development.

Q: Philip Shen's question was about the sustainability of higher pricing with anti-involution initiatives and industry production volumes.

A: Anita Xu stated selling below cash cost is unsustainable, and industry production volume is expected to be around 100,000 - 110,000 metric tons in the next couple of months. Progress on acquiring surplus capacity is ongoing but not finalized yet.

Q: Allen Yong inquired about the $100 million share repurchase program and its timeline.

A: Anita Xu said the share repurchase program is authorized until the end of next year, driven by optimism in the industry's future. Selling shares in Asia to fund repurchases in the US is a consideration.

Q: Mengwen Wang asked about polyprice outlook and balancing price and inventory.

A: Ming Yang said the industry needs to sell above production costs, with recent prices in the high 40s to low 50s RMB per kg. Inventory management will depend on industry and government policies to balance supply and demand.

Q: Shiwa Xu asked about sales volume plan and cost reduction methods.

A: Anita Xu explained sales volume was reduced due to prices below cash cost, and cost reduction includes manufacturing efficiency improvements and lower energy usage. Utilization rate is maintained at 30%-35%.

Q: Gordon Johnson asked about sales intentions in Q3 and Q4 based on production guidance.

A: Anita Xu said sales will adjust based on price levels and regulatory developments. Prices rebounding above cost make selling more feasible, but timing depends on policy implementation.