Chinese joint venture fuels REC Silicon's third-quarter profit


REC Silicon on Tuesday posted third-quarter revenue of $126.5 million, up nearly 7% year on year and down just $300,000 compared to second-quarter sales.

Net profit soared from a loss of $269.7 million in the same period last year to $119.1 million, reflecting strong earnings before interest, tax, depreciation and amortization (EBITDA) of $145.9 million. REC Silicon said the improved result mainly reflected higher EBITDA, special items and positive net financial items.

The Washington-based Norwegian group attributed increased EBITDA to $101 million it made from the sale of its silane based FBR-B technology to the Yulin joint venture it launched earlier this year in China.

Additionally, the company reported the receipt of the final technology transfer payment of $99 million from the joint venture in China. Front End Engineering Design (FEED) has been delivered and the project has relocated to China to begin detailed engineering.

"Increased EBITDA in the third quarter is primarily the result of stable operations and continued focus on production efficiency,” said REC Silicon CEO Tore Torvund. “The results demonstrate the value of REC Silicon's superior FBR technology. "I am pleased that our FBR technology is being recognized as the leading polysilicon manufacturing technology, which has resulted in the announcement to expand our Moses Lake facility, the Yulin JV in China and a potential expansion in Saudi Arabia."

REC Silicon, which produces polysilicon and silicon gas at plants in Moses Lake, Washington, and Butte, Montana, has announced a 3,000 metric ton granular polysilicon expansion at its Moses Lake facility and an agreement to investigate the development of a 20,000 metric ton granular polysilicon plant in Saudi Arabia.

The company expects total polysilicon production for 2014 to reach 18,600 metric tons.

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REC Silicon said its third-quarter revenues were broadly in line with the previous quarter, with lower polysilicon sales volumes offset by increased sales volumes of silicon gases.

The company’s total third-quarter polysilicon sales decreased by 7.5% to 3,903 metric tons compared to the second quarter. REC Silicon said uncertainty caused by the trade dispute between the United States and China, anticipated polysilicon production capacity additions and late developing demand for solar PV installations contributed to decreases in spot market prices during the quarter.

In addition, the group reduced its debt by $55 million to $228 million, primarily due to the repayment of an NOK 196 million ($29 million) bond.

Commenting on the U.S.-China trade dispute, the company said it was continuing to sell its solar grade polysilicon into China “by working with customers to utilize available options under existing laws, namely the ‘Process in Trade,' under China customs laws."

According to REC Silicon, the Office of the U.S. Trade Representative (USTR) has told the company that it has held recent discussions with the Chinese Ministry of Commerce (MOFCOM) in relation to a resolution of the dispute and added that these discussions had recently picked up pace.

REC said that while the U.S. government had said that it is currently making diplomatic efforts and engaged with the Chinese government with the intention of resolving the dispute, "the outcome and timing of these discussions is uncertain."

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