Daqo increases profitability, revenues as plans to double polysilicon capacity move forward

Daqo New Energy has released financial results for the second quarter of 2014, reporting a 57% year-over-year increase in revenues to $43.7 million, on shipments of 1,436 metric tons of polysilicon.

The company also reported a 19% operating margin, despite reporting losses as recently as six months ago, with profitability boosted by both high prices and reduced costs. Daqo reporting an average polysilicon selling price of $22.04 per kilogram during the quarter, with production costs falling 20% year-over-year to only $14.13.

Additionally, in May Daqo raised $54.6 million through a follow-on public offering, and plans to use the proceeds to support the doubling of capacity at its Xinjiang polysilicon facility.

Daqo began construction on this project in April 2014, and plans to complete installation of equipment by the end of November. The company expects to ramp to a capacity of 12,150 metric tons in the second quarter of 2015, and to dramatically reduce costs in the process.

Johannes Bernreuter of Bernreuter Research notes that the recent announcement that China will close a loophole in its polysilicon tariffs will likely not lead to increased business for Daqo and other large polysilicon makers in the short term.

“The big Chinese polysilicon manufacturers GCL-Poly, TBEA Xinjiang Silicon, Luoyang China Silicon and Daqo are already running more or less at full capacity,” notes Bernreuter.

“Hence, additional volumes will mainly come from second-tier Chinese producers – at least in the short term. For example, LDK Silicon has just restarted production with the first 5,000 MT train of its polysilicon plant.”

“Daqo may benefit from the new situation through the expansion of its capacity from 6,150 to 12,150 MT, which is scheduled to start to ramp up in late 2014 – as far as the additional volume has not yet been sold out.”

In the third quarter of 2014, Daqo expects to ship 1,450 to 1,500 metric tons of polysilicon, as well as 16.8-17.0 million wafers. And while Daqo warns that polysilicon prices are somewhat lower in the third quarter due to high downstream inventories, Bernreuter Research predicts that spot prices could rise an additional $1/kg due to the ruling.

Daqo says that it expects to produce close to its nameplate capacity of 6,150 metric tons of polysilicon over the course of 2014.