REC Silicon hit by falling demand in Q2

REC Silicon has posted revenue of $58.9 million for the second quarter of 2018, a 15.3% drop compared with the same period in 2017. The polysilicon producer also saw its EBITDA fall into the red, posting a loss of $9.6 million.

The company blames the loss on reduced demand from the solar sector, and polysilicon production figures for the quarter show REC’s struggle to find buyers – capacity utilization rates were lowered in early June to around 25%, but despite this, polysilicon inventory rose by 401 metric tons (MT). Total production was 2,491 MT, and sales 2,077 MT.

REC Silicon’s Solar Materials segment was responsible for much of the company’s overall loss – contributing $20.4 million in revenue – a 37.7% decrease over the previous quarter’s $32.7 million, and an EBITDA loss of $8.4 million, primarily attributed to the write down in the value of existing inventory, in anticipation of low future sales prices.

Presenting the results, REC Silicon CEO Tore Torvund pointed out that the company performed much better in its supply of silane gas, which achieved increased production and revenue.

In July, the company announced it would be reducing the workforce at its Moses Lake, Washington, U.S. polysilicon facility “due to the ongoing impacts of the trade war between China and the United States.” This trade war is cited as a continuing risk to REC Silicon’s liquidity.

Though it estimates that cost reductions will allow it to meet cash flow requirements for the next 12 months, the report for Q2 candidly states that “the company’s liquidity is dependent upon increases in demand for solar grade polysilicon, or a resolution to the solar trade war in the United States.”

Utilization at the Moses Lake facility is expected to remain at 25% “until the trade war is resolved or market conditions improve.” The joint venture facility in Yulin, China, in which REC Silicon has a 15.06% stake, having reduced this earlier in the year, produced 1,000 MT of polysilicon during the quarter, after coming online in Q1 2018 and producing 800 MT in this period.

“We are very satisfied with the development of the Yulin JV, and I am very hopeful that this will be good investment for REC,” commented Torvund in the results presentation. “We are inside the Chinese market, only 15% but we have an opportunity down the road to increase our partnership to 49%”

Guidance figures for the full year have also been reduced. Overall, REC Silicon now targets production of 9,284 MT in 2018, and target cash production costs of $15.9/kg in the third quarter, and $12.4/kg for the full year, at its fluidized bed reactor plant in Moses Lake.