REC Silicon continues job and production cuts

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Polysilicon producer REC Silicon has been forced to make further cuts to production output and shed more jobs as it reacts to the current US/China trade tariff war and subsequent lower polysilicon sales to China.

The company said in releasing third quarter 2015 financial results that a total of 45 jobs would be lost, bringing its head count down from 720 to 675.

Tore Torvund, REC Silicon CEO, said: “While we remain hopeful that the trade war between the US and China will be resolved, uncertainty remains and we must plan our business around the current conditions. These cost cutting measures, while difficult, are necessary to help REC Silicon remain competitive while we continue to grow sales outside of China.”

REC Silicon would also defer maintenance outages and limit capital expenditures to critical maintenance of facilities only to reduce operating costs and further lower production to cut inventory and overall costs. 

Polysilicon production is targeted to be around 2,980MT in the fourth quarter, and total 16,840MT in 2015, a 290MT reduction from prior 2015 guidance. 

Silicon gas sales volumes are also being lowered by 150MT for the year to 3,060MT.

However, the company noted that sales volumes had increased in the second quarter and that demand remained strong and that it still planned to resume operations of its Silane III unit at the beginning of 2016, market conditions permitting. 

Financial results 

REC Silicon reported third quarter 2015 revenue of US$87.5 million, down from US$93 million in the previous quarter and a negative EBITDA of US$14.1 million, compared to a EBITDA of US$5.8 million in the previous quarter. 

The slip into losses was attributed to lower ASPs due to pricing of polysilicon to new customers in an attempt to counter the loss of business in China as well as overall higher operating costs in the quarter. 

The company is targeting wafer producers outside China, which is approximately 20% of total wafer production capacity that requires around 75,000MT of polysilicon consumption annually.

The company noted that its Fluidised Bed Reactor (FBR) polysilicon cash cost was lower than guided due to a one-time property tax benefit, resulting in costs of US$13.8/kg, compared to guidance of US$15.2/kg. 

Polysilicon inventory decreased by 1,026MT, compared to a 1,248MT inventory build in the previous quarter, and is expected to fall further in the fourth quarter as shipments to new customers was expected to continue. 

Total polysilicon sales increased by 18% to 4,512 MT compared to the second quarter of 2015, while ASPs declined 13%. 

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