NYSE:DQ Daqo New Energy Q1 2025 Earnings Report $12.75 -0.02 (-0.16%) As of 03:59 PM Eastern Earnings HistoryForecast Daqo New Energy EPS ResultsActual EPS-$1.07Consensus EPS -$1.02Beat/MissMissed by -$0.05One Year Ago EPSN/ADaqo New Energy Revenue ResultsActual Revenue$123.91 millionExpected Revenue$176.81 millionBeat/MissMissed by -$52.90 millionYoY Revenue GrowthN/ADaqo New Energy Announcement DetailsQuarterQ1 2025Date4/29/2025TimeBefore Market OpensConference Call DateTuesday, April 29, 2025Conference Call Time8:00AM ETConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (6-K)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Daqo New Energy Q1 2025 Earnings Call TranscriptProvided by QuartrApril 29, 2025 ShareLink copied to clipboard.There are 6 speakers on the call. Operator00:00:00Good day, and welcome to the Dakot New Energy First Quarter twenty twenty five Results Conference Call. All participants will be in a listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Jessie Zhao, Investor Relations Director. Operator00:00:37Please go ahead. Speaker 100:00:39Hello, everyone. I'm Jessie Zhao, the Investor Relations Director of Jaco New Energy. Thank you for joining our conference call today. Jaco New Energy just issued its financial results for the first quarter of twenty twenty five, which can be found on our website at wwwdqsolar.com. Today, attending the conference call, we have our Chairman and CEO, Mr. Speaker 100:01:04Zhang Xu our Deputy CEO, Mr. Nita Xu our CFO, Mr. Min Yang and myself. Today's call will begin with an update from Mr. Zhu on market conditions and company operations, followed by a translation from Ms. Speaker 100:01:21Zhu for Mr. Zhu and then Mr. Yang will discuss the company's financial performance for the quarter. After that, we will open the floor to Jenny 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 the industry growth, are forward looking statements that are made under the Safe Harbor provisions of The U. Speaker 100:01:49S. 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 statements. Further information regarding these and other risks is included in the report or documents we have filed with or furnished to the Securities and Exchange Commission. Speaker 100:02:16These 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 will undertake no duty to update such information except as required under applicable law. Also during the call, we will occasionally reference monetary amounts in U. S. Speaker 100:02:44Dollar 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. Speaker 100:02:55Now I will turn the call to our Chairman and CEO, Mr. Jiang Xu. Mr. Xu, please go ahead. Speaker 200:03:26Hello, everyone. This is Anita. So thank you for joining our conference today. And I'll now deliver the management remarks on behalf of Mr. Xu. Speaker 200:03:34In the first quarter of twenty twenty five, the solar PV industry continued to face significant challenges. Overcapacity persisted and polysilicon prices stayed below cash cost levels. Although this caused Aqua New Energy to sustain quarterly operating and net losses, our losses narrowed sequentially and we continue to maintain a strong and healthy balance sheet with our financial debt. As of 03/31/2025, the company had a cash balance of US792 million dollars short term investment of US168 million dollars bank notes receivable of US63 million dollars and a fixed term bank deposit balance of US1.1 billion dollars In total, our quick assets, readily convertible into cash as needed, stood at USD 2,150,000,000.00, providing us with ample liquidity. With no financial debt, our solid financial position gives us the confidence that we'll remain strategically resilient and well positioned to overcome the current market downturn. Speaker 200:04:30On the operational front, the company operated at a reduced utilization rate of approximately 33% of our nameplate capacity in response to challenging market conditions and weak selling prices. Total production volume at two polysilicon facilities for the quarter was 24,810 metric tons, slightly below our guidance range of 25,000 metric tons to 28,000. However, volume reached 28,008 metric tons, exceeding production and enabling us to reduce inventory to a healthier level. As a result of lower utilization across our factories, idle facility related costs for the quarter was approximately US1.58 dollars per kilogram, which was primarily related to non cash depreciation expenses. Overall, polysilicon unit production costs increased by 11% sequentially to an average of US7.157 dollars per kilogram, primarily due to higher unit depreciation costs as a result of lower production. Speaker 200:05:34Our cash costs increased by 5% to US5.31 dollars per kilogram quarter over quarter, primarily due to maintenance and facilities related costs during the quarter. In light of the current market conditions, we expect our total production volume in the second quarter of twenty twenty five to be in the range of 25,000 metric to 28,000 metric tons. As a result, we anticipate our full year 2025 production volume to be in the range of 21,000 to 140,000 metric tons. During the first quarter, polysilicon producers implemented self discipline measures to mitigate the impact of irrational competition and mid volume prices, resulting in an industry wide capacity utilization of approximately 50%. According to industry data, domestic polysilicon production volume came in at 105,500 metric tons in March and below 100,000 metric tons for both January and February. Speaker 200:06:34Consequently, supply in the first quarter fell short of demand, gradually reducing industry inventory levels. On February 9, Chinese authorities introduced a market based reform policy for new energy on grid tariffs to promote the high quality development of the renewable energy sector. All on grid electricity generated from renewable energy such as wind and solar power will be traded through market mechanisms with prices determined by supply and demand. This policy aims to balance grid mode more effectively. As mandates in the policy, the cutoff date that distinguishes new projects from existing projects 05/31/2025 and new energy projects that commenced operations on and after 06/01/2025 will be subject to a provincial level competitive bidding process. Speaker 200:07:22As a fixed tariff structure for renewable energy electricity transitions to a market based pricing mechanism, uncertainties around future electricity prices and revenue generation have emerged. In response, project developers and investors are accelerating project completions ahead of the June 1 deadline in order to secure current policy benefits, which have led to a surge in downstream installations. So fueled by this front loading, market prices of solar products have trended upward, narrowing losses across the value chain, particularly for end products. However, given the relatively high level of policy inventory held by wafer manufacturers, price increases have yet to fully materialize in the polysilicon segment. Polysilicon prices remained stable throughout the quarter at approximately RMB37 to RMB42 per kilogram. Speaker 200:08:14In the medium to long term, we believe current low prices and market downturn will eventually result in a healthier and more sustainable industry. As ongoing losses for profitability and cash for less competitive players to exit the market, we expect overcapacity to be ultimately eliminated, bringing the solar PV industry back to normal, improved profitability and healthier margins. The solar PV industry continued to show promising prospects. China's new solar PV installations reached 59.71 gigawatt in the first quarter, a robust 30.5% year over year growth. In the long run, as one of the most cost effective and sustainable energy resources worldwide, solar power is expected to remain a key driver of the global energy transition and sustainable development. Speaker 200:09:05Looking ahead, Dapunu Energy is well positioned to capitalize on the long term growth in the global solar PV market and strengthening its competitive edge by enhancing its higher efficiency and type technology and optimizing its cost structure through digital transformation and AI adoption. As one of the world's lowest cost producers with the highest quality N type product, a strong balance sheet with no financial debt, we're confident in our ability to weather the current market downturn and emerge as a leader in the industry ready to capture future growth. So now I will turn the call to our CFO, Mr. Ming Yang, who will discuss the company's financial performance for the quarter. Ming, please go ahead. Speaker 300:09:49Thank you, Anita, and hello, everyone. This is Min Yang, CFO of Dacogneo Energy. We appreciate you joining our earnings conference call today. I will now go over the company's first quarter twenty twenty five financial performance. Revenues were $123,900,000 compared to $195,400,000 in the fourth quarter of twenty twenty four and $415,000,000 in the first quarter of twenty twenty four. Speaker 300:10:15The decrease in revenue compared to the fourth quarter of twenty twenty four was primarily due to a decrease in sales volume. Gross loss was $81,500,000 compared to $65,300,000 in the fourth quarter of twenty twenty four and gross profit of $72,000,000 in the first quarter of twenty twenty four. Gross margin was negative 66% compared to negative 33% in the fourth quarter of twenty twenty four and seventeen point four percent in the first quarter of twenty twenty four. The decrease in gross margin compared to the fourth quarter of twenty twenty four was primarily due to a lower average selling price and higher production costs. SG and A expenses were 35,100,000.0 compared to $29,400,000 in the fourth quarter of twenty twenty four and $38,000,000 in the first quarter of twenty twenty four. Speaker 300:11:06SG and A expenses during the first quarter included $18,600,000 in non cash share based compensation costs related to the company's sharing incentive plans compared to $14,900,000 in the fourth quarter of twenty twenty four. R and D expenses for the quarter were $500,000 compared to $400,000 in the fourth quarter of twenty twenty four and $1,500,000 in the first quarter of twenty twenty four. R and D expenses converted from peer to peer and reflect R and D activities that take place during the quarter. And as a result of the foregoing, loss from operations was $114,000,000 compared to a loss of $200,000,000 in the fourth quarter of twenty twenty four and income from operations of $30,000,000 in the first quarter of twenty twenty four. The decrease of loss from operations in the first quarter of twenty twenty four compared to the fourth quarter of twenty twenty four fiscal '20 '20 '5 earlier, was also attributable to the loan the asset impairment of $175,600,000 assets and allowance for expected credit loss of $18,000,000 recorded in the fourth quarter of twenty twenty four. Speaker 300:12:21Operating margin was negative 92% compared to negative 154% in the fourth quarter of twenty twenty four and seven point three percent in the first quarter of twenty twenty four. Net loss attributable to Dacon New Energy shareholders was $71,800,000 compared to $180,000,000 in the fourth quarter of twenty twenty four and net income of $15,500,000 in the first quarter of twenty twenty four. Loss per basic ADS was 1.07 compared to $2.71 in the fourth quarter of twenty twenty four and earnings per basic ADS of $0.24 in the first quarter of twenty twenty four. Non GAAP adjusted net loss attributable to Duckone Energy shareholders excluding non cash based compensation costs was $53,000,000 compared to $170,600,000 in the fourth quarter of twenty twenty four and adjusted net income of $36,000,000 in the first quarter of twenty twenty four. Adjusted loss per basic ADS was $0.80 compared to $2.56 in the fourth quarter of twenty twenty four and adjusted earnings per basic ADS of $0.55 in the first quarter of twenty twenty four. Speaker 300:13:43EBITDA was negative $48,000,000 compared to negative $236,000,000 in the fourth quarter of twenty twenty four and $76,900,000 in the first quarter of twenty twenty four. EBITDA margin was negative 39% compared to negative 121% in the fourth quarter of twenty twenty four and eighteen point 5% in the first quarter of twenty twenty four. Now on the company's financial condition. As of 03/31/2025, the company had RMB792 million in cash, cash equivalents and restricted cash compared to RMB1.04 billion as of 12/31/2024 and RMB2.7 billion as of 03/31/2024. And as of 03/31/2025, the notes receivable balance was $62,700,000 compared to $55,000,000 as of 12/31/2024, and $194,000,000 as of 03/31/2024. Speaker 300:14:46Notes receivable represents bank notes with maturity within six months. And as of 03/31/2025, the balance of fixed term deposits within one year was 1,120,000,000.00 compared to $1,090,000,000 as of 12/31/2024, and new as of 03/31/2024. And now on the company's cash flows. For the three months ended 03/31/2025, net cash used in operating activities was $38,900,000 compared to $116,000,000 in the same period of 2024. And for the three months ended 03/31/2025, net cash used in investing activities was $211,000,000 compared to $190,500,000 in the same period of 2024. Speaker 300:15:40The net cash used in investing activities in the first quarter of twenty twenty five was primarily related to the purchase of short term investments and fixed term deposits. And for the three months ended 03/31/2025, net cash used in investing financing activities was new compared to $6,000,000 in the same period of 2024. And that concludes our prepared remarks. We will now open the call to Q and A from the audience. Operator, please begin. Operator00:16:10We will now begin the question and answer session. The first question today comes from Phil Shen with ROTH Capital Partners. Please go ahead. Speaker 400:16:46Hi, everyone. Thank you for taking my questions. In your prepared remarks, you talked about overcapacity ultimately being eliminated. I was wondering if you could talk through when you think that could happen? And you also mentioned less competitive players will exit the market. Speaker 400:17:11Who have you seen exit thus far? And then what which exits do you think might be near term? Thanks. Speaker 200:17:21Thank you, Phil. So in terms of the rebalancing of supply and demand, to give a quick recap, so back in 2024, the total polysilicon production volume is around 1,820,000 metric ton. And the nameplate capacity production production capacity of polysilicon of all completed projects, regardless of whether it's completed or temporary shutdown, exceeded 1,400 gigawatt, which is roughly 3,200,000 metric tons. That's more than double of demand. And what we've seen in this cycle compared to the previous cycle is that, the incumbents and even some of the new players, they either have a very solid shareholder base that in a worst case can they inject asset or have other source of financing. Speaker 200:18:13For instance, recently, we've seen Tongwei announcing RMB10 billion in fundraising at its subsidiary. So I think that's just one case that signals rebalancing of supply and demand will take longer than expected compared to the previous cycles. And we've seen that the overall industry utilization rate is currently at around 40% to 50%. And we actually haven't seen any companies completely exiting the market. Most of them are either lowering their utilization rate or undergoing this temporary shutdown. Speaker 200:18:53So it's hard to say when exactly we would see the players exiting. But as we are still transacting prices below most of the company's cash costs, it will be relatively difficult for some of the companies to sustain the current situation. Speaker 400:19:14Thank you, Anita. That's helpful. So you mentioned the industry utilization rate is between 4050%. Can you tell us what you expect that to trend or how you expect it to trend by quarter through this year? Do you think it goes above 50% by Q4? Speaker 400:19:36Or do you think we're well below sorry, 50% even in Q4? Thanks. Speaker 200:19:43Yes, sure. So in the first quarter, the monthly domestic production actually came in to around 90,000 to 100,000 metric tons per month. And we've seen a slight shortage in supply compared to the monthly demand. And the inventory depletion of polysilicon is actually happening at a very slow pace. However, because of the high level of inventory in polysilicon, we've seen almost, I would say, hundred thousand metric tons in total at poly at the poly manufacturer and at the ingot manufacturer, now that's across the analogy. Speaker 200:20:24We think the inventory depletion will take at least four months, assuming the most extreme case of zero production per month and also a monthly production of 950,000 metric tons. And because of that, the poly prices actually remained relatively stable during the first quarter, trading at RMB38 to RMB42 per kilogram with untied from the top players actually coming in at RMB41 to RMB42. And if we're looking at the second quarter and maybe going forward, we believe the prices will be supported at the current level because of the policy that was rolled out in February. So we expect price level to sustain at the current range before the policy cutoff date of May 31, especially because we expect strong April and May demand at around 55 gigawatts to 65 gigawatts, which will translate to a public demand of around 125,000. But we do see potential downside risk, coming from the policy change, also coming from external tension, especially from the Trump administration's trade war two point zero. Speaker 200:21:42So after the rush installations, we see demand would trend down slightly. And that's why we maintain cautious and expect pricing to be relatively suppressed at the low price range of to RMB40 per kilogram throughout the remaining of 2025. Speaker 400:22:05Okay, great. So again, a lot of information there. Thank you. So you said demand in China after May would be down slightly, but I think you mentioned 55 gigawatts for those April, May. What's your expectation for after May 31, how much demand how much lower could demand be on monthly basis in China? Speaker 400:22:33Thanks. Speaker 200:22:35I think overall, the whole year of 2025, we believe China demand will still come in relatively strong in the range of two fifty to 300 gigawatts, which would be roughly equivalent to 1,400,000 to 1,600,000 metric ton of poly demand. Although compared to 2024, it may seem more stagnant, primarily because of the potentially deteriorating solar project returns, which was impacted by the new policy in February, primarily because of the uncertainty in calculating the yield. But in the long run, we are encouraged to see that renewable energy is actually transitioning to a more market driven and heading into a more sustainable and high quality development compared to being subsidized by the government with more guaranteed on grid volume price for all incremental renewable projects. So, yes, I think overall this year in China, it would still be relatively supported at two fifty to 300 gigawatts. Speaker 400:23:47Okay, great. Appreciate the time and taking my questions. Thanks. I'll pass it on. Speaker 200:23:53Thank you, Phil. Operator00:24:02The next question comes from Allen Han with JPMorgan. Please go ahead. Speaker 500:24:08Hi, management. Thank you for taking my questions. My first question is regarding ADR the distinct risk. I mean, what is the strategy? I mean, you're looking for to employ or what do you think like how should we encounter the ADR delisting risk? Speaker 200:24:26Thank you, Allen. So first of all, we fully understand our investor concern over the risk of forcing the ADR to delist from The U. S. Amid the heightened U. S.-China trade war. Speaker 200:24:40Although we personally, although we I think that we would remain vigilant and consider the delisting of the LADRs relatively low probability. I do acknowledge that the Trump administration is putting all options on the table. And because that this will be a key stake for negotiation as decoupling from the two largest economies spread to the financial sectors. And we actually consider a potential dual within returning to the Hong Kong Exchange back in 2022 as some background information because of the risk arising from the holding foreign companies accountable act. But that issue was effectively resolved after in the same year after PCAOB determined at the end of twenty twenty two that it was able to inspect and investigate auto firms in China and Hong Kong completely. Speaker 200:25:40So it vacated its 2021 determination. And this is why our listing in Hong Kong was held off and we decided to keep our ADRs because the trading volume is much higher for the ADRs compared to the Hong Kong listing. And based on our understanding, think for Hong Kong listing, it would take maybe around six months depending on regulatory approvals of the market conditions and our internal readiness. And to be fully transparent to our investors, while we have no immediate plans in place amid the current situation, we are definitely closely monitoring the market and the regulatory developments. And we want to assure you that we remain fully committed to driving the long term value for our stakeholders and also executing our long term growth vision. Speaker 200:26:34And it's very unfortunate for us to see tensions escalating. But if circumstances do exacerbate to the most extreme case of a forced delisting, our management team will definitely evaluate all strategic options to protect the interest of our shareholders, such as a listing in Hong Kong or seek other means to return capital to our shareholders. Speaker 300:27:02Thank you very much. Speaker 500:27:03And my next question is regarding cash cost. I know that like the cash production cost in first quarter has edged up a little bit from fourth quarter last year. And there you mentioned about like maintenance cost. Just want to like get a feeling about like the outlook on cash cost, I mean, in the subsequent quarters in the year. Speaker 300:27:26Allen, thanks for your question. So, cash cost did trend up slightly this quarter, I guess about 5% to 6% compared to the previous quarter. It's primarily due to two primary reasons. Okay. The first reason is that I think since December of last year, our Inner Mongolia Phase two was shut down completely and then weighing into what's called in Chinese Weibo or maintenance of the facilities for a longer term. Speaker 300:28:06So it's incurring equivalent to roughly $0.20 per kilogram of cost this quarter, okay? Even though there's no production, there's that additional cost related to, for example, the electricity, the air and the people, employees necessary to maintaining facilities. So that actually adds up roughly $0.2 in cash cost. If you look at the way that we record cash cost is actually all of the cash costs that occur for the facilities, right, so not just for production, also for the maintenance, okay. And then we subtract out the depreciation and the non cash share based compensation to arrive at the cash cost. Speaker 300:28:58Okay. So there's that $0.2 additional impact because of the maintenance related to the facility that's now being shut down. And then there's another roughly $0.10 of cost related to the maintenance of facility. In the Mongolia, I went to maintenance in roughly the second half of March. Okay. Speaker 300:29:20So as you can see, it had some impact on production for the quarter. For example, if you compare to the previous quarter, right, I mean, we produced around 34,000 metric tons, right? And for this quarter, we only produced roughly 24,800 metric tons, we incurred relatively similar level of employees in terms of staffing costs. So I think that's the part that is more that has to be kind of amortized over fewer amount of production. So there's that $0.10 impact of cost that we have. Speaker 300:30:00I think if we remove these impact, I think we would have roughly $5 So I think going forward for Q2, I think, again, I think depending on production level, but I think based on current guidance, we should probably have similar to slightly lower cash costs compared to the current quarter. Speaker 500:30:24Got it. Thank you. And I'll pass it on. Speaker 300:30:29You, Thank you. Operator00:30:56This concludes our question and answer session. I would like to turn the conference back over to Jessie Zhao for any closing remarks. Speaker 100:31:04Thank you, everyone, again for participating in today's conference call. Should you have any further questions, please don't hesitate to contact us. Thank you and have an awesome day. Goodbye. Operator00:31:20The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallDaqo New Energy Q1 202500:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(6-K) Daqo New Energy Earnings HeadlinesDaqo New Energy Corp. (NYSE:DQ) Q1 2025 Earnings Call TranscriptApril 30 at 4:38 PM | msn.comDaqo New Energy (NYSE:DQ) Shares Gap Down on Disappointing EarningsApril 30 at 2:13 AM | americanbankingnews.comSecret financial plot unfolding in Washington DC… [DEVELOPING]What stocks are next up to soar in 2025? I believe I’ve found the answer - and it might surprise you. You see, I’ve recently uncovered a secret financial plot unfolding in Washington DC…April 30, 2025 | Timothy Sykes (Ad)Daqo New Energy Files Annual Report on Form 20-F for Fiscal Year 2024April 29 at 7:24 AM | prnewswire.comDaqo New Energy Announces Unaudited First Quarter 2025 ResultsApril 29 at 7:16 AM | prnewswire.comDaqo New Energy (DQ) Projected to Post Earnings on TuesdayApril 27 at 3:37 AM | americanbankingnews.comSee More Daqo New Energy Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Daqo New Energy? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Daqo New Energy and other key companies, straight to your email. Email Address About Daqo New EnergyDaqo New Energy (NYSE:DQ), together with its subsidiaries, manufactures and sells polysilicon to photovoltaic product manufacturers in the People's Republic of China. Its products are used in ingots, wafers, cells, and modules for solar power solutions. The company was formerly known as Mega Stand International Limited and changed its name to Daqo New Energy Corp. in August 2009. 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There are 6 speakers on the call. Operator00:00:00Good day, and welcome to the Dakot New Energy First Quarter twenty twenty five Results Conference Call. All participants will be in a listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Jessie Zhao, Investor Relations Director. Operator00:00:37Please go ahead. Speaker 100:00:39Hello, everyone. I'm Jessie Zhao, the Investor Relations Director of Jaco New Energy. Thank you for joining our conference call today. Jaco New Energy just issued its financial results for the first quarter of twenty twenty five, which can be found on our website at wwwdqsolar.com. Today, attending the conference call, we have our Chairman and CEO, Mr. Speaker 100:01:04Zhang Xu our Deputy CEO, Mr. Nita Xu our CFO, Mr. Min Yang and myself. Today's call will begin with an update from Mr. Zhu on market conditions and company operations, followed by a translation from Ms. Speaker 100:01:21Zhu for Mr. Zhu and then Mr. Yang will discuss the company's financial performance for the quarter. After that, we will open the floor to Jenny 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 the industry growth, are forward looking statements that are made under the Safe Harbor provisions of The U. Speaker 100:01:49S. 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 statements. Further information regarding these and other risks is included in the report or documents we have filed with or furnished to the Securities and Exchange Commission. Speaker 100:02:16These 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 will undertake no duty to update such information except as required under applicable law. Also during the call, we will occasionally reference monetary amounts in U. S. Speaker 100:02:44Dollar 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. Speaker 100:02:55Now I will turn the call to our Chairman and CEO, Mr. Jiang Xu. Mr. Xu, please go ahead. Speaker 200:03:26Hello, everyone. This is Anita. So thank you for joining our conference today. And I'll now deliver the management remarks on behalf of Mr. Xu. Speaker 200:03:34In the first quarter of twenty twenty five, the solar PV industry continued to face significant challenges. Overcapacity persisted and polysilicon prices stayed below cash cost levels. Although this caused Aqua New Energy to sustain quarterly operating and net losses, our losses narrowed sequentially and we continue to maintain a strong and healthy balance sheet with our financial debt. As of 03/31/2025, the company had a cash balance of US792 million dollars short term investment of US168 million dollars bank notes receivable of US63 million dollars and a fixed term bank deposit balance of US1.1 billion dollars In total, our quick assets, readily convertible into cash as needed, stood at USD 2,150,000,000.00, providing us with ample liquidity. With no financial debt, our solid financial position gives us the confidence that we'll remain strategically resilient and well positioned to overcome the current market downturn. Speaker 200:04:30On the operational front, the company operated at a reduced utilization rate of approximately 33% of our nameplate capacity in response to challenging market conditions and weak selling prices. Total production volume at two polysilicon facilities for the quarter was 24,810 metric tons, slightly below our guidance range of 25,000 metric tons to 28,000. However, volume reached 28,008 metric tons, exceeding production and enabling us to reduce inventory to a healthier level. As a result of lower utilization across our factories, idle facility related costs for the quarter was approximately US1.58 dollars per kilogram, which was primarily related to non cash depreciation expenses. Overall, polysilicon unit production costs increased by 11% sequentially to an average of US7.157 dollars per kilogram, primarily due to higher unit depreciation costs as a result of lower production. Speaker 200:05:34Our cash costs increased by 5% to US5.31 dollars per kilogram quarter over quarter, primarily due to maintenance and facilities related costs during the quarter. In light of the current market conditions, we expect our total production volume in the second quarter of twenty twenty five to be in the range of 25,000 metric to 28,000 metric tons. As a result, we anticipate our full year 2025 production volume to be in the range of 21,000 to 140,000 metric tons. During the first quarter, polysilicon producers implemented self discipline measures to mitigate the impact of irrational competition and mid volume prices, resulting in an industry wide capacity utilization of approximately 50%. According to industry data, domestic polysilicon production volume came in at 105,500 metric tons in March and below 100,000 metric tons for both January and February. Speaker 200:06:34Consequently, supply in the first quarter fell short of demand, gradually reducing industry inventory levels. On February 9, Chinese authorities introduced a market based reform policy for new energy on grid tariffs to promote the high quality development of the renewable energy sector. All on grid electricity generated from renewable energy such as wind and solar power will be traded through market mechanisms with prices determined by supply and demand. This policy aims to balance grid mode more effectively. As mandates in the policy, the cutoff date that distinguishes new projects from existing projects 05/31/2025 and new energy projects that commenced operations on and after 06/01/2025 will be subject to a provincial level competitive bidding process. Speaker 200:07:22As a fixed tariff structure for renewable energy electricity transitions to a market based pricing mechanism, uncertainties around future electricity prices and revenue generation have emerged. In response, project developers and investors are accelerating project completions ahead of the June 1 deadline in order to secure current policy benefits, which have led to a surge in downstream installations. So fueled by this front loading, market prices of solar products have trended upward, narrowing losses across the value chain, particularly for end products. However, given the relatively high level of policy inventory held by wafer manufacturers, price increases have yet to fully materialize in the polysilicon segment. Polysilicon prices remained stable throughout the quarter at approximately RMB37 to RMB42 per kilogram. Speaker 200:08:14In the medium to long term, we believe current low prices and market downturn will eventually result in a healthier and more sustainable industry. As ongoing losses for profitability and cash for less competitive players to exit the market, we expect overcapacity to be ultimately eliminated, bringing the solar PV industry back to normal, improved profitability and healthier margins. The solar PV industry continued to show promising prospects. China's new solar PV installations reached 59.71 gigawatt in the first quarter, a robust 30.5% year over year growth. In the long run, as one of the most cost effective and sustainable energy resources worldwide, solar power is expected to remain a key driver of the global energy transition and sustainable development. Speaker 200:09:05Looking ahead, Dapunu Energy is well positioned to capitalize on the long term growth in the global solar PV market and strengthening its competitive edge by enhancing its higher efficiency and type technology and optimizing its cost structure through digital transformation and AI adoption. As one of the world's lowest cost producers with the highest quality N type product, a strong balance sheet with no financial debt, we're confident in our ability to weather the current market downturn and emerge as a leader in the industry ready to capture future growth. So now I will turn the call to our CFO, Mr. Ming Yang, who will discuss the company's financial performance for the quarter. Ming, please go ahead. Speaker 300:09:49Thank you, Anita, and hello, everyone. This is Min Yang, CFO of Dacogneo Energy. We appreciate you joining our earnings conference call today. I will now go over the company's first quarter twenty twenty five financial performance. Revenues were $123,900,000 compared to $195,400,000 in the fourth quarter of twenty twenty four and $415,000,000 in the first quarter of twenty twenty four. Speaker 300:10:15The decrease in revenue compared to the fourth quarter of twenty twenty four was primarily due to a decrease in sales volume. Gross loss was $81,500,000 compared to $65,300,000 in the fourth quarter of twenty twenty four and gross profit of $72,000,000 in the first quarter of twenty twenty four. Gross margin was negative 66% compared to negative 33% in the fourth quarter of twenty twenty four and seventeen point four percent in the first quarter of twenty twenty four. The decrease in gross margin compared to the fourth quarter of twenty twenty four was primarily due to a lower average selling price and higher production costs. SG and A expenses were 35,100,000.0 compared to $29,400,000 in the fourth quarter of twenty twenty four and $38,000,000 in the first quarter of twenty twenty four. Speaker 300:11:06SG and A expenses during the first quarter included $18,600,000 in non cash share based compensation costs related to the company's sharing incentive plans compared to $14,900,000 in the fourth quarter of twenty twenty four. R and D expenses for the quarter were $500,000 compared to $400,000 in the fourth quarter of twenty twenty four and $1,500,000 in the first quarter of twenty twenty four. R and D expenses converted from peer to peer and reflect R and D activities that take place during the quarter. And as a result of the foregoing, loss from operations was $114,000,000 compared to a loss of $200,000,000 in the fourth quarter of twenty twenty four and income from operations of $30,000,000 in the first quarter of twenty twenty four. The decrease of loss from operations in the first quarter of twenty twenty four compared to the fourth quarter of twenty twenty four fiscal '20 '20 '5 earlier, was also attributable to the loan the asset impairment of $175,600,000 assets and allowance for expected credit loss of $18,000,000 recorded in the fourth quarter of twenty twenty four. Speaker 300:12:21Operating margin was negative 92% compared to negative 154% in the fourth quarter of twenty twenty four and seven point three percent in the first quarter of twenty twenty four. Net loss attributable to Dacon New Energy shareholders was $71,800,000 compared to $180,000,000 in the fourth quarter of twenty twenty four and net income of $15,500,000 in the first quarter of twenty twenty four. Loss per basic ADS was 1.07 compared to $2.71 in the fourth quarter of twenty twenty four and earnings per basic ADS of $0.24 in the first quarter of twenty twenty four. Non GAAP adjusted net loss attributable to Duckone Energy shareholders excluding non cash based compensation costs was $53,000,000 compared to $170,600,000 in the fourth quarter of twenty twenty four and adjusted net income of $36,000,000 in the first quarter of twenty twenty four. Adjusted loss per basic ADS was $0.80 compared to $2.56 in the fourth quarter of twenty twenty four and adjusted earnings per basic ADS of $0.55 in the first quarter of twenty twenty four. Speaker 300:13:43EBITDA was negative $48,000,000 compared to negative $236,000,000 in the fourth quarter of twenty twenty four and $76,900,000 in the first quarter of twenty twenty four. EBITDA margin was negative 39% compared to negative 121% in the fourth quarter of twenty twenty four and eighteen point 5% in the first quarter of twenty twenty four. Now on the company's financial condition. As of 03/31/2025, the company had RMB792 million in cash, cash equivalents and restricted cash compared to RMB1.04 billion as of 12/31/2024 and RMB2.7 billion as of 03/31/2024. And as of 03/31/2025, the notes receivable balance was $62,700,000 compared to $55,000,000 as of 12/31/2024, and $194,000,000 as of 03/31/2024. Speaker 300:14:46Notes receivable represents bank notes with maturity within six months. And as of 03/31/2025, the balance of fixed term deposits within one year was 1,120,000,000.00 compared to $1,090,000,000 as of 12/31/2024, and new as of 03/31/2024. And now on the company's cash flows. For the three months ended 03/31/2025, net cash used in operating activities was $38,900,000 compared to $116,000,000 in the same period of 2024. And for the three months ended 03/31/2025, net cash used in investing activities was $211,000,000 compared to $190,500,000 in the same period of 2024. Speaker 300:15:40The net cash used in investing activities in the first quarter of twenty twenty five was primarily related to the purchase of short term investments and fixed term deposits. And for the three months ended 03/31/2025, net cash used in investing financing activities was new compared to $6,000,000 in the same period of 2024. And that concludes our prepared remarks. We will now open the call to Q and A from the audience. Operator, please begin. Operator00:16:10We will now begin the question and answer session. The first question today comes from Phil Shen with ROTH Capital Partners. Please go ahead. Speaker 400:16:46Hi, everyone. Thank you for taking my questions. In your prepared remarks, you talked about overcapacity ultimately being eliminated. I was wondering if you could talk through when you think that could happen? And you also mentioned less competitive players will exit the market. Speaker 400:17:11Who have you seen exit thus far? And then what which exits do you think might be near term? Thanks. Speaker 200:17:21Thank you, Phil. So in terms of the rebalancing of supply and demand, to give a quick recap, so back in 2024, the total polysilicon production volume is around 1,820,000 metric ton. And the nameplate capacity production production capacity of polysilicon of all completed projects, regardless of whether it's completed or temporary shutdown, exceeded 1,400 gigawatt, which is roughly 3,200,000 metric tons. That's more than double of demand. And what we've seen in this cycle compared to the previous cycle is that, the incumbents and even some of the new players, they either have a very solid shareholder base that in a worst case can they inject asset or have other source of financing. Speaker 200:18:13For instance, recently, we've seen Tongwei announcing RMB10 billion in fundraising at its subsidiary. So I think that's just one case that signals rebalancing of supply and demand will take longer than expected compared to the previous cycles. And we've seen that the overall industry utilization rate is currently at around 40% to 50%. And we actually haven't seen any companies completely exiting the market. Most of them are either lowering their utilization rate or undergoing this temporary shutdown. Speaker 200:18:53So it's hard to say when exactly we would see the players exiting. But as we are still transacting prices below most of the company's cash costs, it will be relatively difficult for some of the companies to sustain the current situation. Speaker 400:19:14Thank you, Anita. That's helpful. So you mentioned the industry utilization rate is between 4050%. Can you tell us what you expect that to trend or how you expect it to trend by quarter through this year? Do you think it goes above 50% by Q4? Speaker 400:19:36Or do you think we're well below sorry, 50% even in Q4? Thanks. Speaker 200:19:43Yes, sure. So in the first quarter, the monthly domestic production actually came in to around 90,000 to 100,000 metric tons per month. And we've seen a slight shortage in supply compared to the monthly demand. And the inventory depletion of polysilicon is actually happening at a very slow pace. However, because of the high level of inventory in polysilicon, we've seen almost, I would say, hundred thousand metric tons in total at poly at the poly manufacturer and at the ingot manufacturer, now that's across the analogy. Speaker 200:20:24We think the inventory depletion will take at least four months, assuming the most extreme case of zero production per month and also a monthly production of 950,000 metric tons. And because of that, the poly prices actually remained relatively stable during the first quarter, trading at RMB38 to RMB42 per kilogram with untied from the top players actually coming in at RMB41 to RMB42. And if we're looking at the second quarter and maybe going forward, we believe the prices will be supported at the current level because of the policy that was rolled out in February. So we expect price level to sustain at the current range before the policy cutoff date of May 31, especially because we expect strong April and May demand at around 55 gigawatts to 65 gigawatts, which will translate to a public demand of around 125,000. But we do see potential downside risk, coming from the policy change, also coming from external tension, especially from the Trump administration's trade war two point zero. Speaker 200:21:42So after the rush installations, we see demand would trend down slightly. And that's why we maintain cautious and expect pricing to be relatively suppressed at the low price range of to RMB40 per kilogram throughout the remaining of 2025. Speaker 400:22:05Okay, great. So again, a lot of information there. Thank you. So you said demand in China after May would be down slightly, but I think you mentioned 55 gigawatts for those April, May. What's your expectation for after May 31, how much demand how much lower could demand be on monthly basis in China? Speaker 400:22:33Thanks. Speaker 200:22:35I think overall, the whole year of 2025, we believe China demand will still come in relatively strong in the range of two fifty to 300 gigawatts, which would be roughly equivalent to 1,400,000 to 1,600,000 metric ton of poly demand. Although compared to 2024, it may seem more stagnant, primarily because of the potentially deteriorating solar project returns, which was impacted by the new policy in February, primarily because of the uncertainty in calculating the yield. But in the long run, we are encouraged to see that renewable energy is actually transitioning to a more market driven and heading into a more sustainable and high quality development compared to being subsidized by the government with more guaranteed on grid volume price for all incremental renewable projects. So, yes, I think overall this year in China, it would still be relatively supported at two fifty to 300 gigawatts. Speaker 400:23:47Okay, great. Appreciate the time and taking my questions. Thanks. I'll pass it on. Speaker 200:23:53Thank you, Phil. Operator00:24:02The next question comes from Allen Han with JPMorgan. Please go ahead. Speaker 500:24:08Hi, management. Thank you for taking my questions. My first question is regarding ADR the distinct risk. I mean, what is the strategy? I mean, you're looking for to employ or what do you think like how should we encounter the ADR delisting risk? Speaker 200:24:26Thank you, Allen. So first of all, we fully understand our investor concern over the risk of forcing the ADR to delist from The U. S. Amid the heightened U. S.-China trade war. Speaker 200:24:40Although we personally, although we I think that we would remain vigilant and consider the delisting of the LADRs relatively low probability. I do acknowledge that the Trump administration is putting all options on the table. And because that this will be a key stake for negotiation as decoupling from the two largest economies spread to the financial sectors. And we actually consider a potential dual within returning to the Hong Kong Exchange back in 2022 as some background information because of the risk arising from the holding foreign companies accountable act. But that issue was effectively resolved after in the same year after PCAOB determined at the end of twenty twenty two that it was able to inspect and investigate auto firms in China and Hong Kong completely. Speaker 200:25:40So it vacated its 2021 determination. And this is why our listing in Hong Kong was held off and we decided to keep our ADRs because the trading volume is much higher for the ADRs compared to the Hong Kong listing. And based on our understanding, think for Hong Kong listing, it would take maybe around six months depending on regulatory approvals of the market conditions and our internal readiness. And to be fully transparent to our investors, while we have no immediate plans in place amid the current situation, we are definitely closely monitoring the market and the regulatory developments. And we want to assure you that we remain fully committed to driving the long term value for our stakeholders and also executing our long term growth vision. Speaker 200:26:34And it's very unfortunate for us to see tensions escalating. But if circumstances do exacerbate to the most extreme case of a forced delisting, our management team will definitely evaluate all strategic options to protect the interest of our shareholders, such as a listing in Hong Kong or seek other means to return capital to our shareholders. Speaker 300:27:02Thank you very much. Speaker 500:27:03And my next question is regarding cash cost. I know that like the cash production cost in first quarter has edged up a little bit from fourth quarter last year. And there you mentioned about like maintenance cost. Just want to like get a feeling about like the outlook on cash cost, I mean, in the subsequent quarters in the year. Speaker 300:27:26Allen, thanks for your question. So, cash cost did trend up slightly this quarter, I guess about 5% to 6% compared to the previous quarter. It's primarily due to two primary reasons. Okay. The first reason is that I think since December of last year, our Inner Mongolia Phase two was shut down completely and then weighing into what's called in Chinese Weibo or maintenance of the facilities for a longer term. Speaker 300:28:06So it's incurring equivalent to roughly $0.20 per kilogram of cost this quarter, okay? Even though there's no production, there's that additional cost related to, for example, the electricity, the air and the people, employees necessary to maintaining facilities. So that actually adds up roughly $0.2 in cash cost. If you look at the way that we record cash cost is actually all of the cash costs that occur for the facilities, right, so not just for production, also for the maintenance, okay. And then we subtract out the depreciation and the non cash share based compensation to arrive at the cash cost. Speaker 300:28:58Okay. So there's that $0.2 additional impact because of the maintenance related to the facility that's now being shut down. And then there's another roughly $0.10 of cost related to the maintenance of facility. In the Mongolia, I went to maintenance in roughly the second half of March. Okay. Speaker 300:29:20So as you can see, it had some impact on production for the quarter. For example, if you compare to the previous quarter, right, I mean, we produced around 34,000 metric tons, right? And for this quarter, we only produced roughly 24,800 metric tons, we incurred relatively similar level of employees in terms of staffing costs. So I think that's the part that is more that has to be kind of amortized over fewer amount of production. So there's that $0.10 impact of cost that we have. Speaker 300:30:00I think if we remove these impact, I think we would have roughly $5 So I think going forward for Q2, I think, again, I think depending on production level, but I think based on current guidance, we should probably have similar to slightly lower cash costs compared to the current quarter. Speaker 500:30:24Got it. Thank you. And I'll pass it on. Speaker 300:30:29You, Thank you. Operator00:30:56This concludes our question and answer session. I would like to turn the conference back over to Jessie Zhao for any closing remarks. Speaker 100:31:04Thank you, everyone, again for participating in today's conference call. Should you have any further questions, please don't hesitate to contact us. Thank you and have an awesome day. Goodbye. Operator00:31:20The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.Read morePowered by