Daqo New Energy released its third quarter 2011 financial results, which saw the company’s revenues and margins down compared to previous quarters. The company finalized its revenues for the third quarter at US$59.6 million, profits at US$19.9 million and its gross margin at 33.3%.
Daqo’s US$59.6 million in revenues for Q3 2011 took a hit compared to the US$70.7 million it posted in Q2 2011 and US$63.2 million in Q3 2010. The company advised US$53 million of its revenue came from 1,022MT of polysilicon sold during Q3, compared to US$63 million in revenues for 1,001MT of polysilicon sold in Q2 2011. Daqo noted that the volume of polysilicon in Q3 increased by 2.1% and 5% compared to Q2 and Q3 volumes, respectively, however, a lower average selling price (ASP) contributed to lower revenues.
Gross profit of US$19.9 million was lower compared to US$33 million in Q2 2011 and US$26.9 million in Q3 2010. Similarly, its 33.3% gross margin was lower than its 46.6% gross margin in Q2 2011 and 42.5% in Q3 2010. Daqo acknowledged that a lower ASP of the polysilicon product and an inventory charge in Q3 led to the falling gross profit and gross margin results.
“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, CEO 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.”
Mark Bachman, an analyst at Avian Securities, noted that Daqo New Energy’s wafer and module shipments, 6.5MW and 1.9MW, respectively, were short of the company’s original 10MW guidance. Bachman also advised that profitability in Q4 2011 would more than likely be negative due to continued ASP anxieties for polysilicon, wafers and modules.
Daqo New Energy’s Q4 outlook has the company expecting to ship 800MT to 850MT of polysilicon after a periodical two-week maintenance shutdown of its production facility in December. The company anticipates shipping 16MW of wafers and 14MW of modules, with 8MW coming from its brand name modules.
Bachman advised that the company’s Q4 production estimates led to “little confidence behind the numbers.” He remarked that even if polysilicon sales show a mid-teens gross margin, both wafer and module sales are “gross margin neutral only under the favorable assumption of cost improvement outpacing ASP erosion.”