Daqo New Energy ((DQ)) has held its Q4 earnings call. Read on for the main highlights of the call.
Daqo New Energy’s recent earnings call painted a picture of a challenging year, marked by significant declines in revenue and prices, leading to negative margins and asset impairments. Despite these hurdles, the company managed to maintain a robust balance sheet and focused on cost optimization. However, the overall sentiment was overshadowed by the difficulties in the market environment, with reduced utilization rates and substantial financial losses taking center stage.
Increase in Polysilicon Production Volume
Daqo New Energy reported an annual polysilicon production volume of 205,068 metric tons for 2024, aligning with their guidance of 200,000 to 210,000 metric tons. This achievement marks a 3.7% increase from the previous year, showcasing the company’s ability to meet production targets despite the challenging market conditions.
Strong Balance Sheet and Liquidity
The company highlighted its strong financial position, maintaining a cash balance of $1 billion, short-term investments of $10 million, bank notes receivable of $55 million, and a fixed-term bank deposit balance of $1.1 billion. This totals $2.2 billion in quick assets, providing a solid foundation to weather the current market challenges.
Cost Optimization Efforts
Daqo New Energy has been relentless in its efforts to improve operational efficiency, resulting in a 6% quarter-over-quarter decline in cash costs to $5.04 per kilogram. This focus on cost optimization is crucial as the company navigates through the current downturn.
Significant Revenue and Price Decline
The company faced a sharp decline in revenue, falling from $2.3 billion in 2023 to $1 billion in 2024. This was driven by a drastic drop in polysilicon average selling price (ASP) from $11.48/kg in 2023 to $5.66/kg in 2024, reflecting the challenging market environment.
Negative Gross Margin and Asset Impairment
Daqo New Energy recorded a negative gross margin of 20.7% for 2024, alongside a non-cash long-lived asset impairment charge of $175.6 million. These figures highlight the financial strain the company is under due to falling ASPs.
Reduced Production and Utilization Rates
The company operated at a lower utilization rate of 40% to 50% of capacity due to weak market prices. Looking ahead, the expected production volume for 2025 is significantly reduced to 110,000 to 140,000 metric tons, indicating ongoing challenges in the industry.
Net Loss and EBITDA Margin Decline
Daqo New Energy reported a net loss attributable to shareholders of $345 million for the year, with an EBITDA margin of negative 32.9%, a stark contrast to the positive margin of 39.8% in 2023. This decline underscores the financial difficulties faced by the company.
Forward-Looking Guidance
Looking forward, Daqo New Energy anticipates a total polysilicon production volume of 110,000 to 140,000 metric tons for 2025, maintaining low utilization rates amid ongoing industry challenges. Despite the current downturn, the company remains optimistic about the long-term demand prospects in the solar PV industry. They are focusing on enhancing higher efficiency N-type technology and optimizing their cost structure to navigate through the downturn and capture future growth opportunities.
In summary, Daqo New Energy’s earnings call highlighted a year fraught with challenges, including significant revenue declines and financial losses. However, the company’s strong balance sheet and commitment to cost optimization provide a foundation for navigating the current market difficulties. While the immediate outlook remains challenging, Daqo New Energy is positioning itself to capitalize on future opportunities in the solar PV industry.