Daqo New Energy (NYSE: DQ) reported Q4 EPS of $1.18, $0.98 better than the analyst estimate of $0.20. Revenue for the quarter came in at $75.6 million versus the consensus estimate of $72.4 million.

• Polysilicon production volume of 7,301 MT in Q4 2018, compared to 4,734 MT in Q3 2018
• Polysilicon external sales volume(1) of 7,030 MT in Q4 2018, compared to 6,199 MT in Q3 2018
• Polysilicon average total production cost(2) of $7.94/kg in Q4 2018, compared to $8.94/kg in Q3 2018
• Polysilicon average cash cost(2) of $6.64/kg in Q4 2018, compared to $7.12/kg in Q3 2018
• Polysilicon average selling price (ASP) was $9.69/kg in Q4 2018, compared to $10.79/kg in Q3 2018
• Revenue from continuing operations was $75.6 million in Q4 2018, compared to $67.4 million in Q3 2018
• Gross profit from continuing operations was $16.9 million in Q4 2018, compared to $12.8 million in Q3 2018. Gross margin from continuing operations was 22.4% in Q4 2018, compared to 19.1% in Q3 2018
• EBITDA (non-GAAP)(3) from continuing operations was $29.5 million in Q4 2018, compared to $14.8 million in Q3 2018
• EBITDA margin (non-GAAP)(3) from continuing operations was 39.1% in Q4 2018, compared to 22.0% in Q3 2018
• Net income from continuing operations was $17.1 million in Q4 2018, compared to $4.2 million in Q3 2018 and $57.7 million in Q4 2017
• Net loss from discontinued operations was $5.7 million in Q4 2018, compared to $22.4 million in Q3 2018 and net loss from discontinued operations of $23.6 million in Q4 2017
• Net income attributable to Daqo New Energy shareholders was $11.4 million in Q4 2018, compared to net loss attributable to Daqo New Energy shareholders of $18.3 million in Q3 2018 and net income attributable to Daqo New Energy shareholders of $33.7 million in Q4 2017.
• Earnings per basic American Depository Share (ADS) was $0.86 in Q4 2018, compared to loss per basic ADS of $1.39 in Q3 2018, and earnings per basic ADS of $3.16 in Q4 2017
• Adjusted net income (non-GAAP)(3) attributable to Daqo New Energy shareholders was $15.7 million in Q4 2018, compared to $4.3 million in Q3 2018 and $35.3 million in Q4 2017
• Adjusted earnings per basic ADS (non-GAAP)(3) of $1.18 in Q4 2018, compared to $0.33 in Q3 2018, and $3.31 in Q4 2017

"I would like to thank our entire team for their hard work and dedication for delivering another outstanding quarter in which we successfully completed the Phase 3B project and ramped production up to full capacity by the end of November 2018, three months ahead of schedule," commented Mr. Longgen Zhang, CEO of Daqo New Energy.

"During the quarter, we achieved new record both in production volume and sales volume which were 7,301 MT and 7,030 MT, respectively. With the successful ramp up of our new phase 3B facility and efforts of our operating team, both production volume and cost reduction targets were achieved with excellent results. During the fourth quarter of 2018, we successfully reduced our total production cost to $7.94/kg and our cash cost was lowered to $6.64/kg, representing our lowest cost structure in history. With our Xinjiang production facilities now running at full capacity, we expect to produce approximately 8,500 to 8,700 MT of polysilicon during the first quarter of 2019. Furthermore, with reduction in unit utility usage, operating leverage and other cost savings, we expect to further reduce our total production cost to approximately $7.50/kg. In addition, we plan to conduct a capacity debottlenecking project to gradually upgrade several older CVD furnaces with improved technology, allowing us to increase production capacity by additional 5,000 MT. We plan to start this project in mid-March and complete it by the end of June. The debottlenecking project will have limited impact on production volume, therefore we expect to produce 7,600 to 7,800 MT of polysilicon during the second quarter of 2019. Subsequent to the completion of the debottlenecking project, we anticipate the Company will reach total annual production capacity of 35,000 MT.

"The Phase 4A capacity expansion project is progressing smoothly and will increase our production capacity to 70,000 MT by the end of the first quarter of 2020 with an even lower cost structure once fully ramped up. In February 2019, we received approval from Bank of China for a RMB400 million 5-year fixed-asset capital project loan and a RMB50 million working capital loan. The Company has obtained a total of RMB830 million ofadditional bank loans, including the loans from Bank of China and credit facilities from other domestic Chinese banks, to support our capacity expansion and working capital needs. These loans will support capital expenditure for our Phase 4A project and enable us to complete it on schedule."

"2018 was a challenging but also promising year for solar PV industry. The policies issued by the Chinese government on May 31, 2018 immediately impacted the market and resulted in a significant price decline across the entire value chain. However, this fall in price significantly stimulated demands from markets outside of China, especially where grid-parity has already been reached. The global solar PV market recovered rapidly in the following months and has since achieved equilibrium again, even with very limited contribution from China, the world's largest individual solar PV market."

"A draft of China's solar policy for 2019 has already been released with the final version yet to be confirmed. The draft indicates a new incentive program based on a fixed subsidy amount rather that a fixed quota system as was previously done. The fixed subsidy amount is expected to be in the range of approximately RMB 3 billion and could cover approximately 30-35GW of installations. Poverty alleviation projects will be subsidized and funded separately. In addition, the market anticipates some grid-parity projects which will not require central government subsidies. Based on industry research, China's installation target for 2019 is anticipated to be approximately 40-45 GW but there could be some variations in the final version of China's policy in 2019. Grid-parity and cost reduction will continue to play a key role in driving global demand from developed markets such as Europe and the US to developing markets like India, South Asia, Africa and South America. We expect global solar installations in 2019 to be approximately 120 to 140 GW."

"We believe demand for polysilicon, which is the key ultra-pure raw material for crystalline-silicon solar PV module, will keep growing as solar PV becomes more and more competitive compared to other energy sources. We believe the current market challenges are temporary and should be resolved during the second half of 2019, especially when demand and installation from China recovers. Looking forward, we believe the solar PV industry has become much stronger and increasingly independent of policies and is expected to grow sustainably over the long-term with better stability. The pace of new capacity expansion within the polysilicon industry will smooth out going forward. As a leading polysilicon manufacturer, we believe Daqo New Energy is ideally positioned to benefit from this fast growing market and will continue to outperform its peers with lower cost and better quality."

For earnings history and earnings-related data on Daqo New Energy (DQ) click here.