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 third
quarter ended September 30, 2011.
Third Quarter 2011 Financial and Operating Highlights
- Polysilicon shipments were
approximately 1,022 metric tons, or MT. Photovoltaic (PV) module
shipments were 1.9 Mega watts, or MW. In addition, the Company
provided 9.4 MW PV modules manufacturing outsourcing service to its
customers. Wafer shipments were 6.5 MW.
- Revenues were $59.6 million, compared
with $70.7 million in the second quarter of 2011 and $63.2 million
in the third quarter of 2010.
- Gross profit was $19.9 million,
compared with $33.0 million in the second quarter of 2011 and $26.9
million in the third quarter of 2010.
- Gross margin was 33.3%, compared with
46.6% in the second quarter of 2011 and 42.5% in the third quarter
of 2010.
- Operating income was $17.1 million,
compared with $32.6 million in the second quarter of 2011 and $24.0
million in the third quarter of 2010.
- Operating margin was 28.8%, compared
with 46.2% in the second quarter of 2011 and 38.0% in the third
quarter of 2010.
- Net income attributable to Daqo New
Energy Corp. shareholders was $12.1 million, compared with $25.7
million in the second quarter of 2011 and $17.7 million in the
third quarter of 2010.
- Earnings per fully diluted ADS were
$0.34, compared with $0.73 in the second quarter of 2011, and $0.65
in the third quarter of 2010.
"The global solar PV market remained challenging in the third
quarter due to the weak demand and industry oversupply. The average
selling prices throughout the whole supply chain continued to
decline, which impacted our performance in the quarter. The weak
market is expected to continue in the near term and the pricing
environment for our core business, polysilicon could continue to
decline,” commented Gongda Yao, Chief Executive Officer of the
company. “However, we believe our low cost and high quality
polysilicon product is better positioned to weather through the
stormy market environment and we should come out stronger once the
market environment improves. Also, we have one of the best balance
structures among China solar companies, as well as un-used bank
facility, which will help us to endure during the down turn. We
will continue to execute our Xinjiang expansion project and Wanzhou
hydrochlorination project, which should further lower our
production cost in the future.”
Third Quarter 2011 Results
Revenues
Revenues were $59.6 million, compared to $70.7 million in the
second quarter of 2011 and $63.2 million in the third quarter of
2010.The change was primarily attributable to revenues generated
from sales of polysilicon. The Company generated revenues of $53.0
million from 1,022 MT polysilicon sold, compared to revenues of
$63.0 million for 1,001 MT of polysilicon sold in the second
quarter of 2011, and revenues of $55.2 million for 973 MT of
polysilicon sold in the third quarter of 2010. The shipment volume
of polysilicon in the third quarter of 2011 increased by 2.1% and
5.0% compared to that in the second quarter of 2011 and the third
quarter of 2010, respectively. The difference in revenues from
polysilicon sold was primarily due to a relatively lower average
selling price of the polysilicon in the third quarter of 2011.
In the third quarter of 2011, the Company also generated $0.7
million, $2.8 million and $3.0 million for module processing
service fee, sales of PV modules and sales of wafers,
respectively.
Gross profit and margin
Gross profit was $19.9 million, compared to $33.0 million in the
second quarter of 2011 and $26.9 million in the third quarter of
2010.
Gross margin was 33.3%, compared to 46.6% in the second quarter
of 2011 and 42.5% in the third quarter of 2010. The fluctuation
from the second quarter of 2011 and the third quarter 2010 in gross
profit and gross margin was primarily due to the lower average
selling price of the polysilicon product combined with the impact
of inventory charge in the third quarter of 2011. The total
inventory write-down for wafer and modules in the third quarter of
2011 was due to lower of cost or market valuation (LCM) amounted to
$3.7 million.
Selling, general and administrative expenses
Selling, general and administrative expenses were $4.3 million
in the third quarter of 2011, compared to $3.9 million in second
quarter of 2011 and $2.7 million in the third quarter of 2010. The
increase of $0.4 million in this quarter from that of the second
quarter of 2011 was primarily due to operating expense associated
with Xinjiang expansion project. The increase of $1.6 million in
this quarter from that of the third quarter of 2010 was primarily
due to the operating expense associated with Xinjiang expansion
project.
Research and development expenses
Research and development expense was $152 thousand in the third
quarter of 2011, compared to $165 thousand in the second quarter of
2011 and $318 thousand in the third quarter of 2010.
Other operating income
Other operating income $1.8 million in the third quarter of
2011, compared to $3.8 million in the second quarter of 2011 and
$131 thousand in the third quarter of 2010. Other operating income
mainly composed of unrestricted cash 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 third quarter
of 2011 was $17.1 million, compared to $32.6 million in the second
quarter of 2011 and $24.0 million in the third quarter of 2010.
Operating margin was 28.8%, compared to 46.2% in the second quarter
of 2011 and 38.0% in the third quarter of 2010.
Net Interest expense
Net interest expense in the third quarter of 2011 was $1.9
million, compared to $1.7 million in the second quarter of 2011 and
$2.3 million in the third quarter of 2010.
Income tax expense
Income tax expense in the third quarter of 2011 was $2.9
million, compared to $4.5 million in the second quarter of 2011 and
$3.0 million in the third quarter of 2010. The change from the
second quarter of 2011 and the third quarter of 2010 was primarily
due to the lower income before tax in the third quarter of 2011
combined with $970 thousand valuation allowence of deferred tax
assets of modules business in the third quarter of 2011.
Net Income attributable to our shareholders, net margin and
earnings per share
As a result of the aforementioned, net income attributable to
Daqo New Energy Corp. shareholders was $12.1million, compared with
$25.7 million in the second quarter of 2011 and $17.7 million in
the third quarter of 2010.
Net margin was 20.3% in the third quarter of 2011, compared to
36.3% in the second quarter of 2011 and 28.0% in the third quarter
of 2010.
Earnings per fully diluted ADS were $0.34, compared with $0.73
in the second quarter of 2011, and $0.65 in the third quarter of
2010.
Financial Condition
As of September 30, 2011, Daqo New Energy Corp. had $66.8
million in cash and cash equivalents and restricted cash, compared
with $147.5 million as of June 30, 2011. The change in cash
position was primarily due to capital expenditures for business
expansion in Xinjiang. As of September 30, 2011, the Company’s
accounts receivable balance was $29.1 million, compared to $31.8
million as of June 30, 2011. As of September 30, 2011, total
borrowings were $157.6 million, of which $63.1 million were
long-term borrowings, compared to total borrowings of $162.7
million, including $67.8 million long-term borrowings as of June
30, 2011.
Outlook for Fourth Quarter 2011
For the fourth quarter of 2011, the Company plans to shut down
the polysilicon production facility for approximately two weeks in
December for periodical maintenance. For the fourth quarter of
2011, the Company expects to ship 800-850 MT of
polysilicon. The company also expects to ship approximately 16 MW
of wafer as well as 14 MW of modules. For the module shipment, the
company further expects 8 MW will come from its brand name module
and expects to provide 6 MW PV modules manufacturing outsourcing
service to 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 7:00 am, Eastern
Standard Time on November 14, 2011, which is 8:00 pm, Beijing Time
on November 14, 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.
The dial-in details for the live conference call are as
follows:
U.S. Toll Free Number: 18665194004 International dial-in number: +
6567239381 Hong Kong Toll Free: 800930346 Conference ID # 22969909
A replay will be available shortly after the call until December
14, 2011 on the Company website or by dialing:
U.S. dial-in number: 18662145335 International dial-in number: +61
2 8235 5000 Conference ID # 22969909
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 fourth 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 Sep 30,2011 June
30,2011 Sep 30,2010 Revenues $59,564 $70,721 $63,212
Cost of revenues (39,712 ) (37,765 ) (36,321 ) Gross profit 19,852
32,956 26,891 Operating expenses Selling,
general and administrative expenses
(4,326
)
(3,906
)
(2,677 )
Research and development expenses
(153
)
(165
)
(318
)
Other operating income 1,765 3,758 131 Total
operating expenses (2,714 ) (313 ) (2,864 ) Income from operations
17,138 32,643 24,027 Interest expense (2,777 ) (2,193 ) (2,484 )
Interest income 924 450 136 Foreign exchange gain (loss) (27 ) 42
(709 ) Income before income taxes 15,258 30,942 20,970
Income tax expense (2,878 ) (4,513 ) (3,016 ) Net income 12,380
26,429
17,954
Net income attributable to noncontrolling
interest
314
744
241
Net income attributable to Daqo New Energy Corp. shareholders
12,066
25,685
17,713
Deemed dividend on Series A convertible redeemable preferred
shares
-
-
(1,100
)
Net income attributable to Daqo New Energy Corp. ordinary
shareholders
$12,066
$25,685
$16,613
Earnings per ADS Basic and diluted $0.34 $0.73 $0.65
Weighted average ADS outstanding Basic 35,142,821 35,142,821
20,000,000 Diluted 35,142,821 35,142,821 25,942,821
Daqo New Energy Corp.Unaudited
Condensed Consolidated Balance Sheet(US dollars in
thousands)
Sep 30,2011
June 30,2011
Sep 30,2010
ASSETS: Current Assets: Cash and cash equivalents
$59,241
$126,079
$73,574
Restricted cash 7,514 21,432 1,656 Accounts receivable, net 29,086
31,826 31,344 Prepaid expenses and other current assets
8,977
6,935
3,677
Advances to suppliers 3,057 2,625 4,248 Inventories 28,506 15,016
11,711 Amount due from related party -Advance to related party
supplier 5,578 5,590 - - others 2,268 440 22,651 Deferred tax
assets-current 1,174 1,243 - Total current
assets 145,401 211,186 148,861 Property, plant and equipment, net
599,842 501,787 377,207 Prepaid land use right 8,774 8,714 6,493
Deferred tax assets 1,445 1,062 1,640 Other non-current assets 165
162 157
TOTAL ASSETS 755,627
722,911 534,358
LIABILITIES: Current liabilities: Short-term borrowings,
including current portion of long-term borrowings
94,482
94,970
59,843 Accounts payable 12,632 13,181 6,719 Advances from customers
37,664 24,808 36,426 Payables for purchases of property, plant and
equipment
24,100
14,709
20,612
Accrued expenses and other current liabilities
13,999
10,761
17,071 Income tax payable 10,428 9,756 7,333
Total current liabilities 193,305 168,185 148,004 Long-term
borrowings 63,124 67,766 106,915 Accrued warranty cost 362 302 -
Long Term Liability 9,093 14,646 - Amount due to related party
2,935 4,005 492 Total liabilities 268,819
254,904 255,411 Mezzanine equity - -
58,903
EQUITY:
Daqo New Energy Corp. shareholders’
equity:
Ordinary shares 18 18 10 Additional paid-in capital 141,993 141,455
1,422 Retained earnings 189,627 177,561 84,055 Accumulated other
comprehensive income
16,317
12,166
3,598 Total Daqo New Energy Corp.’s shareholders’
equity
347,955
331,200
89,085 Noncontrolling interest 138,853 136,807
130,959 Total equity 486,808 468,007 220,044
TOTAL LIABILITIES & EQUITY $755,627
$722,911 $534,358
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