UPDATE: Daqo New Energy (DQ) Tops Q1 EPS by $1.08, Revenues Beat
Daqo New Energy (NYSE: DQ) reported Q1 EPS of $2.69, $1.08 better than the analyst estimate of $1.61. Revenue for the quarter came in at $168 million versus the consensus estimate of $150.5 million.
First Quarter 2020 Financial and Operating Highlights
- Polysilicon production volume was 19,777 MT in Q1 2020, compared to 16,204 MT in Q4 2019
- Polysilicon sales volume was 19,101 MT in Q1 2020, compared to 13,291 MT in Q4 2019
- Polysilicon average total production cost(1) was $5.86/kg in Q1 2020, compared to $6.38/kg in Q4 2019
- Polysilicon average cash cost(1) was $5.01/kg in Q1 2020, compared to $5.47/kg in Q4 2019
- Polysilicon average selling price (ASP) was $8.79/kg in Q1 2020, compared to $8.77/kg in Q4 2019
- Revenue from continuing operations was $168.8 million in Q1 2020, compared to $118.9 million in Q4 2019
- Gross profit from continuing operations was $56.6 million in Q1 2020, compared to $35.1 million in Q4 2019. Gross margin from continuing operations was 33.5% in Q1 2020, compared to 29.5% in Q4 2019
- EBITDA (non-GAAP)(2) from continuing operations was $63.1 million in Q1 2020, compared to $45.4 million in Q4 2019. EBITDA margin (non-GAAP)(2) from continuing operations was 37.4% in Q1 2020, compared to 38.2% in Q4 2019
- Net income attributable to Daqo New Energy Corp. shareholders was $33.2 million in Q1 2020, compared to $20.1 million in Q4 2019
- Earnings per basic American Depositary Share (ADS) was $2.37 in Q1 2020, compared to $1.45 in Q4 2019
- Adjusted net income (non-GAAP)(2) attributable to Daqo New Energy Corp. shareholders was $37.7 million in Q1 2020, compared to $24.5 million in Q4 2019
- Adjusted earnings per basic ADS (non-GAAP)(2) was $2.69 in Q1 2020, compared to $1.77 in Q4 2019
Management Remarks
Mr. Longgen Zhang, CEO of Daqo New Energy, commented, "We are pleased to report an outstanding quarter with excellent financial and operational results. We operated at full capacity during the quarter and were able to produce and sell record-high volume of 19,777 MT and 19,101 MT of polysilicon, respectively. Thanks to growing economies of scale, savings on energy consumption and improved operational efficiency, our total production cost decreased to $5.86/kg during the quarter, a decrease of 8% from $6.38/kg in Q4 2019. Our cash cost during the quarter also decreased to $5.01/kg, down from $5.47/kg in Q4 2019. In addition, we continued to make improvements in quality and were able to sell approximately 95% of our products to mono wafer customers. All in all, we are very proud of the achievements we made in expanding production volume, optimizing our cost structure and enhancing quality within only two quarters following the start of Phase 4A pilot production. Our exceptional results this quarter reflect the strong capabilities of our Xinjiang facilities at full production following the completion of the Phase 4A expansion project. We believe this also demonstrates our extensive experience and expertise in polysilicon manufacturing, and further solidifies our position as a global leader in the industry."
"Despite the challenging market environment, we successfully expanded our gross margin by further optimizing our cost structure during the quarter. Gross margin during the quarter was 33.5% compared with 29.5% in the fourth quarter of 2019. An expanding gross margin and increasing sales volume resulted in $63.1 million in EBITDA, up 39% sequentially, and $37.7 million in adjusted net income, up 53.5% sequentially. I would like to thank our entire team for their contribution to this quarter's strong results given all the difficulties in securing raw materials, managing on-site operations, and facilitating logistics during lockdown that followed the outbreak of COVID-19 in China."
"Towards the end of the first quarter, the spread of COVID-19 globally and related lockdowns, particularly in the U.S., Europe and certain other emerging markets, resulted in significant disruptions to demand for solar PV products. This has created short-term market uncertainty and volatility across the solar PV industry during the second quarter. Fortunately, the spread of COVID-19 has begun to ease and things are gradually returning to normal across all walks of life, particularly in China. We expect to see some rush orders from solar PV developers in China for legacy projects delayed from last year in order to meet the grid connection deadline set for the end of June. However, a recovery of demand from markets outside of China is critical going forward as overseas markets currently account for approximately 75% of total global solar end market demand. With many economies beginning to reopen, we expect to see a gradual recovery of solar PV demand in the third quarter. We are confident that the long-term solar PV growth prospects remain intact despite the near-term challenging market environment as solar PV energy continues to attract investors seeking to benefit from lower costs and interest rates."
"We are currently conducting scheduled annual maintenance for our Xinjiang facilities. As such, we expect to produce 15,500 to 16,500 MT of polysilicon during the second quarter. Annual production volume for 2020 is expected to be 73,000 to 75,000 MT. We expect to see global solar markets recover as the impact from COVID-19 fades over the next two or three months. We are confident in our ability to navigate this challenging environment leveraging our competitive advantages in product quality and cost structure."
Outlook and guidance
The Company expects to produce approximately 15,500MT to 16,500MT of polysilicon and sell approximately 14,500MT to 15,500MT of polysilicon to external customers during the second quarter of 2020. For the full year of 2020, the Company expects to produce approximately 73,000 to 75,000 MT of polysilicon, inclusive of the impact of the Company's annual facility maintenance.
This outlook reflects Daqo New Energy's current and preliminary view as of the date of this press release and may be subject to changes. The Company's ability to achieve these projections is subject to risks and uncertainties.
For earnings history and earnings-related data on Daqo New Energy (DQ) click here.