Daqo New Energy : Q4 2024 Results Presentation

Published: 2025-02-27 05:40:16 ET DQ

February 27 2025

Q4 and Fiscal Year 2024 Results Presentation

"A leading manufacturer of high-purity polysilicon for the global solar PV industry"

Management Remarks

Mr. Xiang Xu, Chairman and CEO of the Company, commented, "In 2024, we faced a challenging market environment with excess

capacity in the solar PV industry leading to sharp price declines across the entire value chain. We proactively managed these

difficulties by curtailing polysilicon production to reduce cash burn, particularly in the third and fourth quarters. Nevertheless, we reached an annual polysilicon production volume of 205,068 MT in 2024, meeting our guidance of 200,000 MT to 210,000 MT, which represented an increase of 3.7% year-over-year compared to 197,831 MT in 2023. Our N-type product mix increased significantly from approximately 40% of total production in 2023 to 70% in 2024. We sold 181,362 MT in 2024, ending the year at a reasonable inventory level. Despite solid growth in demand for solar PV products globally, the mismatch between demand and supply drove prices lower in 2024 even below cash cost. Overall, our polysilicon ASPs decreased significantly from $11.48/kg in 2023 to $5.66/kg in 2024. Revenue came in at $1.0 billion compared to $2.3 billion in 2023 as a result of lower ASPs as well as lower sales volume. As polysilicon ASPs fell below production cost starting in the second quarter of 2024, we recorded a non-cash provision for inventory impairment expense, with a negative gross margin of 20.7% for 2024. Due to the continuous negative gross margin, we recorded a non-cash long-lived assets impairment charge of $175.6 million for the quarter related to our older polysilicon production lines.

Despite the losses, Daqo New Energy continued to maintain a strong balance sheet and ample cash reserves. At the end of 2024,

the Company had a cash balance of $1.0 billion, short-term investments of $10 million, bank notes receivables of $55 million, and a fixed term bank deposit balance of $1.1 billion. Overall, the company maintains strong liquidity with a balance of quick assets of $2.2 billion, which can be readily converted to cash if needed. This solid financial position ensures we are well-equipped to navigate the market downturn and remain strategically resilient."

Management Remarks - Continued

"On the operational front, during the fourth quarter, the Company continued to operate at a lower utilization rate of 40%-50% of our nameplate capacity in light of weak market prices. The total production volume at our two polysilicon facilities for the quarter was 34,236 MT, further decreasing from the third quarter by 9,356 MT. Meanwhile, we intensified our efforts to reduce inventory, and our sales volume reached 42,191 MT in the fourth quarter, compared to 42,101 MT in the previous quarter. As the result of lower utilization, idle-facility related cost for the quarter was approximately $1.02/kg, which was primarily related to non-cash depreciation expense. Overall polysilicon unit production cost edged up 3% sequentially to an average of $6.81/kg. However, thanks to our relentless efforts to improve operational efficiency, our cash cost declined further to $5.04/kg, a 6% quarter-over-quarter decline compared to $5.34/kg in the third quarter."

"Due to the current market pricing environment, we currently expect total polysilicon production volume in the first quarter of 2025 to

be approximately 25,000 MT to 28,000 MT. We plan to maintain a relatively low utilization rate in 2025 until a turning point emerges in the sector. As a result, we currently anticipate full year production volume in 2025 to be approximately 110,000 MT to 140,000 MT."

Management Remarks - Continued (2)

"Discussions on industry self-regulation measures have been ongoing since the fourth quarter. Meanwhile, the polysilicon market remained sluggish heading into the quarter as downstream customers continued drawing down accumulated inventory and coping with lower wafer capacity utilization rates of approximately 50%. Polysilicon pricing remained stable within this cyclical bottom range of RMB 36-42/kg throughout the quarter. In November and December, leading polysilicon producers reduced production to offset the higher hydro-electricity cost during the winter season and to mitigate inventory risks. As such, industry production of polysilicon continued to decline month-over-month. According to industry statistics, the total production volume in China descended to approximately 100,000 MT per month in December, the lowest level in the year. On December 26, polysilicon futures trading officially launched, with the initial benchmark price set at RMB 38.6/kg. Although some prices were quoted higher at RMB 42-43/kg, futures trading volumes remained small and had limited impact on spot pricing. On a positive note, new solar PV capacity in China reached a

record high of 68 GW in December, which was beyond expectation and reinforced market confidence in the resilience of solar PV in

the short run and market potential in the medium to long term."

"Despite the significant challenges resulting from overcapacity in the solar PV industry, we have seen proactive initiatives to restore the industry's healthy development. On December 6, 2024, led by the China Photovoltaic Industry Association (CPIA), our Company,

along with other major solar PV manufacturers, have reached consensus that implementing self-discipline would be fundamental to

mitigating the irrational competition amid falling prices and heightened global trade pressures. Moreover, the solar PV industry continued to show strong demand prospects. For the year of 2024, China's newly installed solar PV capacity grew 28% year-over- year to 277 GW, which not only hit a record high but also exceeded market expectations. We remain optimistic that as supply adjusts to more rational levels, we will see a better balance between supply and demand this year. In the long run, as a renewable energy source and one of the lowest-cost sources of electricity worldwide, solar power will continue to be a key driver of the global energy transition and sustainable development. Looking ahead, Daqo New Energy will capitalize on the long-term growth in the global solar PV market and strengthen its competitive edge by enhancing its higher-efficiency N-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 and no financial debt, we believe we are well positioned to weather the current market downturn and emerge as

one of the leaders in the industry to capture future growth."

Operational and Financial Highlights in Q4 2024

GAAP)(2) was -121.1% in Q4 2024, compared to -17.3% in Q3 2024

Notes:

financial measures to comparable US GAAP measures" set forth at the end of this press release.

ADS means American Depositary Share. One (1) ADS representing five (5) ordinary shares.

Operational and Financial Highlights in FY2024

Notes:

Production cost and cash cost only refer to production in our polysilicon facilities. Production cost is calculated by the inventoriable costs relating to

production of polysilicon divided by the production volume in the period indicated. Cash cost is calculated by the inventoriable costs relating to production

of polysilicon excluding depreciation expense, divided by the production volume in the period indicated.

Daqo New Energy provides EBITDA, EBITDA margins, adjusted net income attributable to Daqo New Energy Corp. shareholders and adjusted earnings

per basic ADS on a non-GAAP basis to provide supplemental information regarding its financial performance. For more information on these non-GAAP

financial measures, please see the section captioned "Use of Non-GAAP Financial Measures" and the tables captioned "Reconciliation of non-GAAP

financial measures to comparable US GAAP measures" set forth at the end of this press release.

ADS means American Depositary Share. One (1) ADS representing five (5) ordinary shares.

Polysilicon Facilities Update

Q4 2024 Key Figures

Outlook

▪ Quarterly production volume: 34,236 MT

▪ Expected production volume in Q1 2025:

▪ Sales volume: 42,191 MT

25,000 ~ 28,000 MT

▪ Average selling prices: $4.62/kg

▪ Expected production volume in the full year of 2025:

▪ Average total production cost: $6.81/kg

110,000 ~ 140,000 MT

▪ Average cash cost: $5.04/kg

Polysilicon Nameplate Capacity in Daqo's Facilities (MT)

Phase 5B

305,000

Phase 5A

205,000

Phase 4B

Phase 4A

105,000 MT

Capacity

Phase 2B

Phase 3A

Phase 3B

debottlenecking

70,000 MT

Phase 2A capacity

Phase 2A

enhancement

30,000 MT

35,000 MT

12,150 MT

18,000

5,000

6,150

Q1 2013

Q1 2014

Q3 2015

Q1 2017

Q4 2018

Q2 2019

Q4 2019

Q1 2022

Q2 2023

Q3 2024

Fully ramped up production date

Polysilicon Manufacturing Overview

Production Volume (MT)

61,01462,27864,961

57,664

45,306

43,592

35,32633,40133,70233,848

34,236

31,383

19,77718,09718,40621,00820,18521,10221,68423,616

16,204

8,764 7,150 9,437

2019

2020

2021

2022

2023

2024

Cash Cost and Depreciation ($/kg)*

$14.11

Depreciation

$0.79

Cash Cost

$10.09

Total Production Cost

$8.12

$0.90

$7.42

$7.69

$7.55

$6.97

$6.84

$7.26

$6.82

$6.92

$6.52

$6.50

$6.61

$6.81

$1.22

$1.47

$6.38

$5.86

$5.79

$5.82

$5.92

$6.29

$6.31

$13.32

$0.75

$0.91

$0.94

$6.37

$6.19

$1.12

$0.91

$0.85

$0.92

$0.94

$0.88

$0.92

$0.90

$0.88

$0.76

$0.87

$0.85

$0.78

$0.76

$0.80

$1.27

$1.77

$9.19

$6.20

$6.65

$5.85

$5.47

$5.01

$5.04

$5.37

$5.41

$5.96

$6.51

$6.06

$6.78

$6.61

$6.05

$5.67

$5.72

$5.61

$5.39

$5.34

$5.04

$4.87

$4.88