Daqo New Energy Corp. (NYSE: DQ) ("Daqo New Energy" or the
"Company"), a leading polysilicon manufacturer based in China,
today announced its unaudited financial results for the second
quarter ended June 30, 2011.
Second Quarter 2011 Financial and Operating
Highlights
- Polysilicon shipments were
approximately 1,001 metric tons, or MT. Photovoltaic (PV) module
shipments were 3.9 Mega watts, or MW. In addition, the Company
manufactured 8.1 MW PV modules for outsourcing customers. Wafer
shipments were 1.3 MW.
- Revenues were $70.7 million, a decrease
of 19.0% from the first quarter of 2011 and an increase of 34.8%
from the second quarter of 2010.
- Gross profit was $33.0 million, a
decrease of 25.9% from the first quarter of 2011 and an increase of
69.8% from the second quarter of 2010.
- Gross margin was 46.6% in the second
quarter of 2011, compared to 51.0% in the first quarter of 2011 and
37.0% in the second quarter of 2010.
- Operating income was $32.6 million, a
decrease of 24.9% from the first quarter of 2011 and an increase of
98.0% from the second quarter of 2010.
- Operating margin was 46.2%, compared to
49.8% in the first quarter of 2011 and 31.4% in the second quarter
of 2010.
- Net income attributable to Daqo New
Energy Corp. shareholders was $25.7million, a decrease of 26.6%
from the first quarter of 2011 and an increase of 118.6% from the
second quarter of 2010.
- Earnings per fully diluted ADS were
$0.73, compared to $0.99 in the first quarter of 2011, and $0.41 in
the second quarter of 2010.
"The substantial price decline and weak market demand in the
second quarter of 2011 has impacted our revenue. However, our core
business, the production of polysilicon, was still at 100%
utilization and we kept no inventory at the quarter end. We have
seen the pricing environment for polysilicon stabilized since the
beginning of the third quarter and the demand picked up. The wafer
and module markets continue to see pricing pressure. However, the
modules order picked up in the third quarter and the majority of
our wafer output will be used in our module production through
tolling arrangement with our cell partner.” Commented, Dr. Gongda
Yao, the Chief Executive Officer of the Company, “ On the financing
side, we are happy to announce that we have obtained bank loan
approval from Bank of China for our Xinjiang phase II polysilicon
expansion plan, which fulfills the financing requirement for the
project”.
Second Quarter 2011 Results
Revenues
Revenues were $70.7million, a decrease of 19.0% from the first
quarter of 2011 and an increase of 34.8% from the second quarter of
2010.The change was primarily attributable to revenues generated
from sales of polysilicon. The Company generated revenues of $63.0
million from 1,001 MT polysilicon sold, compared to revenues of
$77.7 million for 1,089 MT of polysilicon sold in the first quarter
of 2011, and revenues of $47.0 million for 896 MT of polysilicon
sold in the second quarter of 2010. The revenues decrease from
polysilicon sold from the first quarter 2011 was primarily due to a
lower average selling price of the polysilicon as compared to the
first quarter 2011. The revenues increase from polysilicon sold
from the second quarter of 2010 was primarily due to the higher
average selling price of polysilicon product combined with the
higher sales volume.
In the second quarter of 2011, the Company also generated $6.8
million and $0.9 million for the sales of PV modules and wafers,
respectively.
Gross profit and margin
Gross profit was $33.0 million, a decrease of 25.9% from the
first quarter of 2011 and an increase of 69.8% from the second
quarter of 2010.
Gross margin was 46.6% in the second quarter of 2011, compared
to 51.0% in the first quarter of 2011 and 37.0% in the second
quarter of 2010. The decrease from the first quarter of 2011 in
gross profit and the gross margin was primarily due to the lower
average selling price of the polysilicon product during the second
quarter of 2011. The increase from the second quarter of 2010 in
gross profit and the gross margin was on the other hand mainly due
to higher average selling price of the polysilicon and higher
shipment volume combined with lower production cost per kilogram
for the polysilicon product.
Selling, general and administrative expenses
Selling, general and administrative expenses increased slightly
from $3.8 million in the first quarter of 2011 to $3.9 million in
second quarter of 2011. The increase of $1.4 million in this
quarter from that of the second quarter of 2010 was primarily due
to the increase of share based compensation, and other operating
expense, which is in line with the Company’s business
expansion.
Research and development expenses
Research and development expense was $165 thousand in the second
quarter of 2011, compared to $128 thousand in the first quarter of
2011 and $483 thousand in the second quarter of 2010. The decrease
in research and development expenses from the second quarter of
2010 was mainly related to the decrease of technical consulting
charges.
Other operating income
Other operating income $3.8 million in the second quarter of
2011, compared to $3.0 million in the first quarter of 2011 and $74
thousand in the second quarter of 2010. Other operating income
mainly composed of financial incentives that the Company received
from local government authorities, which contributed the
fluctuations from period to period.
Operating income and margin
As a result of foregoing, operating income in the second quarter
of 2011 was $32.6 million, compared to $43.5 million in the first
quarter of 2011 and $16.5 million in the second quarter of 2010.
Operating margin was 46.2%, compared to 49.8% in the first quarter
of 2011 and 31.4% in the second quarter of 2010.
Net Interest expense
Net interest expense in the second quarter of 2011 was $1.7
million, which remained constant with the first quarter of 2011,
and decreased from $2.6 million in the second quarter of 2010. The
decrease from the second quarter of 2010 was primarily due to
reduction in the Company’s average short-term and long-term
borrowings and interest capitalized in the second quarter of
2011.
Income tax expense
Income tax expense in the second quarter of 2011 was $4.5
million, compared to $6.5 million in the first quarter of 2011 and
$2.1 million in the second quarter of 2010. The decrease from the
first quarter of 2011 was primarily due to the lower income before
tax in the second quarter of 2011. The increase from the second
quarter of 2010 was primarily due to the higher income before tax
in the second quarter of 2011.
Net Income attributable to our shareholders, net margin and
earnings per share
Net income attributable to Daqo New Energy Corp. shareholders
was $25.7 million, a decrease of 26.6% from the first quarter of
2011 and an increase of 118.6% from the second quarter of 2010.
Net margin was 36.3% in the second quarter of 2011, compared to
40.1% in the first quarter of 2011 and 20.3% in the second quarter
of 2010.
Earnings per fully diluted ADS were $0.73, compared to $0.99 in
the first quarter of 2011, and $0.41 in the second quarter of
2010.
Financial Condition
As of June 30, 2011, Daqo New Energy Corp. had $147.5 million in
cash and cash equivalents and restricted cash, compared with $182.2
million as of March 31, 2011. As of June 30, 2011, the accounts
receivable balance was $31.8 million, compared to $22.8 million as
of March 31, 2011. As of June 30, 2011, total borrowings were
$162.7 million, of which $67.8 million were long-term borrowings,
compared to total borrowings of $146.2 million, including $75.3
million long-term borrowings as of March 31, 2011.
Outlook for Third Quarter 2011
For the third quarter of 2011, the Company expects to
ship 975-990 MT of polysilicon. The company also expects to ship 10
MW of wafer as well as 20 MW of modules. For the module shipment,
the company further expects 10 MW will come from its brand name
module and 10 MW outsourcing for its customers. This outlook
reflects our current and preliminary view and may be subject to
change. Our ability to achieve this projection is subject to risks
and uncertainties. See “Safe Harbor Statement” at the end of this
press release.
Conference Call
Daqo New Energy will host a conference call at 8:00 am, Eastern
Standard Time on August 15, 2011 to discuss the results for the
quarter. Joining the call will be Dr. Gongda Yao, the Company’s
Chief Executive Officer and Mr. Jimmy Lai, the Chief Financial
Officer.
To participate in the conference call, please dial the following
number five to ten minutes prior to the scheduled conference call
time: +1-800-901-5231. International callers should dial
+1-617-786-2961. Passcode is 54639315.
A replay will be made available until September 15, 2011 on Daqo
New Energy’s website or by dialing +1-888-286-8010. International
callers should dial +1-617-801-6888. The passcode is 42758963.
This conference call will be broadcast live over the Internet
and can be accessed on Daqo New Energy's website at
http://www.dqsolar.com. To listen to the live webcast, please go to
Daqo New Energy's website at least fifteen minutes prior to the
start of the call to register, download and install any necessary
audio software.
About Daqo New Energy Corp.
Daqo New Energy Corp. (NYSE: DQ) is a leading polysilicon
manufacturer based in China that aims to become a vertically
integrated photovoltaic product manufacturer. Daqo New Energy
primarily manufactures and sells high-quality polysilicon to
photovoltaic product manufacturers. It also manufactures and sells
photovoltaic wafers and modules. For more information about Daqo
New Energy, please visit www.dqsolar.com.
Safe Harbor Statement
This announcement contains forward-looking statements. These
statements are made under the “safe harbor” provisions of the U.S.
Private Securities Litigation Reform Act of 1995. These
forward-looking statements can be identified by terminology such as
“will,” “expects,” “anticipates,” “future,” “intends,” “plans,”
“believes,” “estimates” and similar statements. Among other things,
the outlook for the third quarter of 2011 and quotations from
management in this announcement, as well as Daqo New Energy’s
strategic and operational plans, contain forward-looking
statements. The Company may also make written or oral
for-ward-looking statements in its reports filed or furnished to
the U.S. Securities and Exchange Commission, in its annual reports
to shareholders, in press releases and other written materials and
in oral statements made by its officers, directors or employees to
third parties. Statements that are not historical facts, including
statements about the Company’s beliefs and expectations, are
forward-looking statements. Forward-looking 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, including but not limited to the
following: the demand for photovoltaic products and the development
of photovoltaic technologies; global supply and demand for
polysilicon; alternative technologies in cell manufacturing; our
ability to significantly expand our polysilicon production capacity
and output; the reduction in or elimination of government subsidies
and economic incentives for solar energy applications; and our
ability to successfully implement our vertical integration
strategy. 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. Daqo New
Energy does not undertake any obligation to update any
forward-looking statement, except as required under applicable law.
All information provided in this press release and in the
attachments is as of the date of this press release, and Daqo New
Energy undertakes no duty to update such information, except as
required under applicable law.
Daqo New Energy Corp. Unaudited
Condensed Consolidated Statement of Operations (US dollars
in thousands, except ADS and per ADS data) Three months
Ended Six months Ended June 30,2011 March 31,2011 June
30,2010 June 30,2011 June 30, 2010 Revenues $70,721 $87,311
$52,481 $158,032 $97,582 Cost of revenues (37,765) (42,813)
(33,073) (80,578) (64,044) Gross profit 32,956 44,498 19,408 77,454
33,538 Operating expenses Selling, general and administrative
expenses
(3,906)
(3,838)
(2,514)
(7,744)
(8,123)
Research and development expenses
(165)
(128)
(483)
(293)
(936)
Other operating income 3,758 2,959 74 6,717 2,441 Total operating
expenses (313) (1,007) (2,923) (1,320) (6,618) Income from
operations 32,643 43,491 16,485 76,134 26,920 Interest expense
(2,193) (2,083) (2,611) (4,276) (5,359) Interest income 450 326 34
776 160 Foreign exchange gain (loss) 42 62 - 104 287 Income before
income taxes 30,942 41,796 13,908 72,738 22,008 Income tax expense
(4,513) (6,528) (2,147) (11,041) (3,859) Net income 26,429 35,268
11,761 61,697 18,149 Net income attributable to
noncontrolling interest
744
273
13
1,017
117
Net income attributable to Daqo New Energy Corp. shareholders
25,685
34,995
11,748
60,680
18,032
Deemed dividend on Series A convertible redeemable preferred shares
-
-
1,100
-
2,200
Net income attributable to Daqo New Energy Corp. ordinary
shareholders
25,685
34,995
10,648
60,680
15,832
Earnings per ADS Basic and diluted $0.73 $0.99 $0.41 $1.73
$0.61 Weighted average ADS outstanding Basic 35,142,821
35,142,821 20,000,000 35,142,821 20,000,000 Diluted
35,142,821 35,304,624 25,942,821 35,142,821 25,942,821
Daqo New Energy Corp.
Unaudited Condensed Consolidated
Balance Sheet
(US dollars in thousands)
June 30, March 31, June 30, 2011
2011 2010 ASSETS: Current Assets: Cash and
cash equivalents $126,079 $171,401 $63,384 Restricted cash 21,432
10,820 1,999 Accounts receivable, net 31,826 22,801 51,867 Prepaid
expenses and other current assets
6,935
5,812
3,176
Advances to suppliers 2,625 4,061 2,271 Inventories 15,016 14,115
7,352 Amount due from related party -Advance to related party
supplier 5,590 - - - others 440 18 - Deferred tax assets-current
1,243 566 - Total current assets 211,186 229,594 130,049 Property,
plant and equipment, net 501,787 443,636 378,483 Prepaid land use
right 8,714 8,647 6,441 Deferred tax assets 1,062 1,004 1,439 Other
non-current assets 162 160 -
TOTAL ASSETS 722,911
683,041 516,412 LIABILITIES: Current
liabilities: Short-term borrowings, including current portion of
long-term borrowings
94,970
70,936
48,972 Accounts payable 13,181 6,080 5,411 Advances from customers
24,808 45,063 31,789 Payables for purchases of property, plant and
equipment
14,709
13,972
24,699
Accrued expenses and other current liabilities
10,761
13,106
15,446 Income tax payable 9,756 19,326 4,223 Total current
liabilities 168,185 168,483 130,540 Long-term borrowings 67,766
75,283 128,534 Accrued warranty cost 302 227 - Long Term Liability
14,646 - - Amount due to related party 4,005 3,870 589 Total
liabilities 254,904 247,863 259,663 Mezzanine equity - -
57,803
EQUITY: Daqo New Energy Corp. shareholders’
equity: Ordinary shares 18 18 10 Additional paid-in capital 141,455
140,815 1,034 Retained earnings 177,561 151,876 67,442 Accumulated
other comprehensive income
12,166
8,162 1,496 Total Daqo New Energy Corp.’s shareholders’ equity
331,200
300,871
69,982 Noncontrolling interest 136,807 134,307 128,964 Total equity
468,007 435,178 198,946
TOTAL LIABILITIES & EQUITY
$722,911 $683,041 $516,412
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