Netflix Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
August 3, 2023

There are 9 speakers on the call.

Operator

Good day, and welcome to the Daqo New Energy Second Quarter 2023 Results Conference Call. All participants will be in listen only mode. After today's presentation, there will be opportunity to ask questions. Please note that this event is being recorded. Now I'd like to turn the call over to Ms.

Operator

Anita Xu, Investor Relations Director. Please go ahead.

Speaker 1

Hello, everyone. I'm Anita Xu, the Investor Relations of Daqin Thank you for joining our conference call today. Daqo New Energy just issued its financial results for the Q2 of 2023, which can be found on our website at www.dqsolar.com. So today, attending the conference call, we have our new Chairman and CEO, Dave from Mr. Zhang on our new Chairman and CEO, followed by his comments on market and operations, and then Mr.

Speaker 1

Yang will discuss the company's financial performance for the quarter the year. And after that, we'll open the floor to Q and A from the audience. So before we begin the formal remarks, I would like to remind you that certain statements on today's call, including expected future operational and financial performance and industry growth, are forward looking statements that are made under the Safe Harbor provisions of the U. S. Private Securities Litigation Reform Act of 1995.

Speaker 1

These statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in Any forward looking statements. Further information regarding these and other risks is included in the reports or documents we have filed with or furnished to the Securities and Exchange Commission. These statements only reflect our current and preliminary review as of today and may be subject to change. Our ability to achieve these projections is subject to risks and uncertainties.

Speaker 1

All information provided in today's call is as of today, and we undertake no duty to update such information, except as required under applicable law. Also, during the call, we'll occasionally come reference monetary amounts in U. S. Dollar terms. Please keep in mind that our functional currency is the Chinese RMB.

Speaker 1

We offer these translations into U. S. Dollars solely for the convenience of the audience. So now, I'll pass it on to Mr. Zhang.

Speaker 2

Thank you, Anita. Good morning, good evening. Efficient operation of our polysilicon facilities in the Q2 of 2023 resulted in the production volume of 45,306 metric tons, representing an increase of 11,458 metric tons as compared to the previous quarter as our Phase 5A 100,000 Natural 10's polysilicon project in Inner Mongolia reached full production capacity in June. All production costs decreased by 8.3% from Q1 to $6.92 per kg, primarily due to improvements in manufacturing efficiency as well as a reduction in the cost of For the quarter, we generated $230,000,000 in EBITDA With strong operating cash flow and continued to maintain a strong balance sheet with no financial debt, At the end of the quarter, the company had a cash balance of $3,200,000,000 and a combined cash and banking note Receivable balance of $4,000,000,000 With an Addition of our new Inner Mongolia Phase 5A facility, our total annual polysilicon nameplate Capacity has expanded to 205,000 metric tons. For the Q3, we expect our total Polysilicon production volume to be approximately 55,000 metric tons to 57 metric tons, representing an increase of 21% is expected to be approximately 193,000 metric tons to 198,000 metric tons of polysilicon, representing an increase of 44% to 48% as compared to 2022.

Speaker 2

In addition, based on our Our new semiconductor grade polysilicon project with 1,000 metric tons annual capacity is expected to start and highly automated production system that optimizes operational efficiency, improves We are confident that our Inner Mongolia project will further enhance the company's competitive edge. The polysilicon industry experienced increased challenges and substantial price volatility during the Q2. Several new polysilicon facilities and new entrants finally started production with some reaching poor capacity Production capacity in the first half of this year. The shortage of polysilicon over the past 2 years came to an end. The increased supply ultimately led to relatively oversupply and excess industry inventory.

Speaker 2

In an effort to gain market shares with inferior quality products, New entrants and some established industry players engaged in aggressive pricing. Expectations of lower feature pricing in The market led to delays and reductions of downstream customer orders, as well as aggressive pricing required by customers. The situation worsened significantly in the second half of May as inventory reduction efforts by Leading producers led to raise to the button that saw polysilicon prices declined by approximately 70% at the end of the second quarter compared to Q1 levels. In the second half of June, Polysilicon prices reached a button and customers began ordering aggressively at the lower prices. By middle of July, we saw Approximately 15% to 20% price recovery compared to the button reached in June.

Speaker 2

Recently, we have also seen an increase in the ASP premium for N type polysilicon With a meaningful increase in demand volume, we expect that this trend will further benefit us As the industry transitions to next generation N type technology, we shipped 53,502 A substantial increase over Q1 shipments. Polysilicon inventory at our original Xinjiang facility decreased to less than a week's production volume. As our facility in Inner Mongolia is newly established, its products require customer qualification before we can ship meaningful volumes to customers and the qualification process took longer than anticipated due to market volatility during the period. At the end of the quarter, with customer orders on hand that covered all our inventory. We had practically sold all shippable products.

Speaker 2

The customer qualification process for the products of our Inner Mongolia facility completed successfully in July. And at the end of July, with brisk customer orders and demand, we had further reduced our polysilicon inventory to a very healthy level of approximately 1 week of production across our 2 facilities. For the Q2, we recorded approximately US19.7 million dollars in foreign exchange loss For approximately $0.26 per ADS near the end of April, the company Approximately RMB4.96 billion in cash dividends from its subsidiary Xinjiang Daqo, which was approximately US716.7 million dollars based on the exchange rate and the date The dividend funds were received during the quarter. The company converted approximately RMB1.85 billion to US dollar to fund our share repurchase program as the USD to Renminbi currency, Chinese currency exchange rate fluctuated significantly During the month of May June and as required by accounting standards, we recorded an unrealized Foreign exchange loss primarily related to our quarter end cash balance of RMB3.1 billion held by the company in an offshore account. Regarding the company's share buyback program, At the end of July, the company had already repurchased 4,160,000 ADS for approximately US188.7 million dollars under the current program with average cost of approximately US45.32 dollars per ADS combined with the program completed in 2022, In aggregate, the company has already repurchased $6,000,000 ADS for approximately US308.6 The continuous cost reduction in solar PV products and the associated reduction in solar energy generation Most analysis expectations, it is generally expected that solar PV will eventually become one of the most important In addition, as the solar PV technology keeps evolving, we believe that The increasing needs for polysilicon of very high purity, such as anti polysilicon, will help differentiates us from our competitors.

Speaker 2

While most of our competitors will likely struggle With the current market environment, Dark New Edge has one of the best balance sheets in the industry with no financial debt, and this will help us with the current market environment successfully. We are optimistic that As the solar end market continues to grow and as our customers continue to expand capacity, particularly for N type solar products, Prices will improve. We will continue to maintain solid growth and capture the long term benefits of growing global Solar PV Market. Moving to outlook and guidance. The company expects to produce approximately 55,000 metric tons to 57 metric tons of polysilicon during the Q3 of 2023, The company expects to produce approximately 193,000 metric tons to 198,000 metric tons of polysilicon for the full year of 2023, inclusive of the impact of the company's annual facility maintenance.

Speaker 2

This outlook reflects Dark New Energy's current and preliminary view as of the date in this press release and may be subject to change. The Company's ability to achieve these projections is subject to risks and uncertainties. See Safe Harbor statement at the end of this press release. Now I will turn the call to our CFO, Min. Please go ahead.

Speaker 3

Thank you, Longgen, and hello, everyone. Thank you for joining our earnings conference call today. Now I will discuss our financial results for the Q2 of 2023. Earnings were $636,700,000 compared to $709,800,000 in the Q1 of 2023 and $1,240,000,000 in the Q2 of 2022. The decrease in revenue compared to the Q1 of 2023 was primarily due to a decrease in average selling prices mitigated by increasing sales volume.

Speaker 3

Gross profit was $258,900,000 compared to $506,700,000 in the Q1 of 2023 and $947,000,000 in the Q2 of 2022. Gross margin was 40.7% compared to 71.4% in the Q1 of 2023 at 76% in the Q2 of 2022. The decrease in gross margin compared to the Q1 of 2023 was primarily due to Lower average selling prices, which was partially mitigated by lower production costs. Selling, general and administrative expenses 2022. The slightly higher SG and A expenses compared to the previous quarter was due to higher shipment volume that resulted in higher shipping expenses.

Speaker 3

Engine expenses during the Q2 also includes 27 $500,000 in non cash share based compensation costs related to the company's share incentive plans compared to $28,000,000 in the Q1 of R and D expenses were $2,200,000 compared to $1,900,000 in the Q1 of 2023 and $2,700,000 in the same quarter of 2022. R and D expenses vary from period to period and reflect R and D activities that take place during the quarter And most of our R and D activities for the quarter related to product purity improvement related activities. Foreign exchange losses were $19,700,000 compared to $0,000 in the Q1 of 2023 And also in the Q2 of 2022. The significant volatility and fluctuation in the U. S.

Speaker 3

Dollar to Chinese New Year exchange rate during this quarter resulted in primarily an unrealized foreign exchange loss And as a result of the above mentioned, income from operations was $214,000,000 compared to $463,800,000 in the Q1 of 20 $23,000,000 to $927,600,000 in the Q2 of 2022. Operating margin was 33.6% compared to 65.3% in the Q1 of 2023 and 74.6% in the same quarter of 2022. Net income attributable to Daqo New Energy shareholders was $103,700,000 compared to $278,800,000 in the Q1 of 2023 and $627,800,000 in the Q2 of 2022. Earnings per basic ADS was $1.35 compared to $3.56 in the Q1 of 2023 and $8.36 in the Q2 of 2022. Adjusted net income, non GAAP attributable to Daqo New Energy's shareholders, excluding non cash share based compensation costs, was $134,500,000 compared to $310,000,000 in the Q1 of 2023 at $630,000,000 in the same quarter of 2022.

Speaker 3

Adjusted earnings for basic ADS was 1 point 7 5 compared with $3.96 in the Q1 of 2023 and $8.39 in the Q2 of 2022. EBITDA was $230,000,000 for the quarter compared to $490,000,000 in the Q1 of 2020 $355,000,000 in the Q2 of 2022. EBITDA margin was 36% compared to 69% in the Q1 Both 2023 and 76.8 percent in the Q2 of 2022. Now on the company's financial condition. As of the June 30, 2023, the company had RMB3.16 $9,000,000,000 in cash, cash equivalents and restricted cash compared to $4,100,000,000 as of March 31, 2023 And $3,300,000,000 as of June 30, 2022.

Speaker 3

As of June 30, 2023, the notes receivable balance was 798,500,000 compared to $791,000,000 as of March 31, 2023 and $1,270,000,000 as of June 30, 2022. Notes receivables represent banknotes with maturity within 6 months. And now on the company's cash flow. For the 6 months ended June 30, 2023, net cash provided by operating activities was $786,000,000 compared to $1,130,000,000 in the same period of last year. And for the 6 months ended June 30, 2023, Net cash used in investing activities was $495,700,000 compared to net cash used in investing Activities of $80,000,000 in the same period of 2022.

Speaker 3

The net cash used in investing activities in the first half of twenty twenty three was primarily related to the capital expenditures on the company's polysilicon projects in Baodou City, Inner Mongolia. And for the 6 months ended June 30, 2023, net cash using finance activities was $477,500,000 The net cash used in financing activity in the first half of twenty twenty three was primarily related to $174,000,000 in The company's share repurchases and $306,600,000 dividend payments made by the company Xinjiang Daqo subsidiary to its And that concludes our prepared remarks. And operator, we will now open the floor for questions.

Speaker 4

Thank you.

Operator

We'll now begin the question and answer session. First question will be from Philip Shen of ROTH, MKM, please go ahead.

Speaker 4

Hi, everyone. Thanks for taking the questions. Logan, Sorry to see you leave and was wondering if you could touch on your personal situation and give Some color as to timing and detail around what you might do next. It sounds like from the release that you're leaving effective immediately, but you're on the call today. So just curious If there's any more you can share.

Speaker 4

Thanks.

Speaker 2

Thank you, Philip. I think I'm working for the company more than 5 years And know everybody well. And then also remember, our new CEO and Chairman, Please stay, Daqo is longer than me. Basically, he also knows this industry very well. Even during the past 5 years, We're working together and so I think during personal I think a family personal reason I'm leaving.

Speaker 2

But I think still I'll turn over the control to Mr. Xu. I think he will Direct the company to the next high step. Did I ask your question, Philip?

Speaker 4

Yes. Thank you, Logan. Shifting over to pricing, You talked about the dynamics of how pricing fell in Q2 and then there was a bit of a recovery. Can you talk about what you see for polysilicon pricing in Q3, Q4 and also 2024? How much higher or lower could poly pricing go in 2024?

Speaker 4

Thanks.

Speaker 2

I think in last year Q4, During the seasonal and also some downstream clients, I think they are planning to stop demand, So almost the 5 big polysilicon plants have the inventory by the end of last year. And but as the Q1 when because Chinese New Year is coming in February, So demand immediately come out. So in Q1, the price continued to go up back from, I think, Q4, the button almost RMB80.80 per kg to 240, but really because I think a new entrant, the inventory I think digests. So immediately, I think in May June, the price continue to go down. Especially, I think in June, the price almost go down to the bottom.

Speaker 2

Basically, I think breakeven, I can call. Let me just go to like 55 to 60. Then for some reason, as you know that, by the end of last month, I think 2 company, I'm not mentioning, okay, They have I think the facilities have some problems with the bomb, you see. Almost one of the big players almost stopped Xinjiang Oil production. So I think right now, beside that, I think the market come back.

Speaker 2

The order is coming, I think, in the pipeline, Especially some order the integration is continuing on. We see in Q3, Q4, So the demand right now is a little hot. So the price right now back like N type is around RMB 83 to RMB 85 per kg. The P type, I think, is around like a 65 6.3, 6.5 per kg Let me be. So we think in Q3, we still are very profitable.

Speaker 2

I think this situation will continue lasting to October. Then during November December, another I think season will come up. The winter is coming. The Western countries maybe the Christmas Day and Chinese New is coming. So I think during November, December or January February, the price definitely is going to deep again.

Speaker 2

Also, I think as other like Daqo, Mongolia, we are full capacity running. Then like TBA, they also the first project in Mongolia is not very successful. Last year, they're starting trial production, still not full capacity running, but they will now tell the market they were Full capacity running by next month. So we see the supply is continuing to go up. So I think the next year, the polysilicon price, even next 2 years, especially I think Very clear, the polysilicon produced in China right now is a different price from polysilicon produced outside of China, for example like Waka, OCI because they can easily trace ability to For right now, I think next 2 years, Chinese polysilicon maybe were stable maybe between, I think, around RMB60 to around between 75, I think like that channel.

Speaker 2

That's what I'm thinking, okay. Then I think This also will push, I think, some Chinese producer, silicon producer will move outside to China to other locations outside of China to produce silicon. As you can see that like US IIIA already attracted a lot of company, a Chinese company to do the At module, I think sale even weaver. So I think that trend will continue to come in. So I think globally, I think after 2 to 3 years, I think the Chinese maybe right now the 11 b per watt down to 1.4 per watt.

Speaker 2

That's maybe the good thing because the returns on projects But that maybe stimulate the installation, but also a lot of installation continue going on the market demand and install Then go to the grid also have problem, especially in China. So it's all trade off. You're Thinking you see the module price go down, maybe you will increase the II on the project. But meantime, you see the connect to the grid delay Also, we'll affect the returns on IR. But China right now, the market is so hot.

Speaker 2

We think the rooftop, the SOE, I see it's all going on. So I don't think any problem within 2 years, I think Europeans continue to go, I think continued growth. The only thing is the over labor force action in Europe is starting 2025 Q2. So I think that gives time to the Chinese producer to move the production outside of China. So I think that's you see, What I'm thinking to the whole market in the future.

Speaker 2

But remember, Daqo is the only one in China right now Note that produced high quality products can compete with Walker. So Especially I think as the n type silicon continues to grow, we already see the price difference between n type and the P is running right now 8 to 10 per kg. So our advantage is very clear. If you look at our Q2, I think the gross margin It's almost more than 50%. I think we still can keep our gross margin even let's say in Q3, Q4 still we're about Even Q4 still were about 30%.

Speaker 2

I think 20% is our premium compared with other competitors. Based on the quality and the cost effective and the scale.

Speaker 4

Great. Thank you, Longgen. That was a lot of color. You said something very interesting just now about how Chinese producers could Launch and ramp capacity outside of China to serve the U. S.

Speaker 4

And other, maybe even Europe. So I was wondering if you could highlight right. So can you talk about like do you guys have plans to ramp up facilities outside of China? And then how many metric tons do you see? Are there announcements already of who could be Ramping and which countries and what's the timing of when those things when those facilities could ramp?

Speaker 4

And then also you talked about this Price delta between Chinese and non Chinese polysilicon pricing. Can you talk about what the magnitude of that Premium is a few couple of months ago, I think it was something around $10 delta. What is the non China poly price now? And do you expect that difference to maintain? Or do you think that could

Speaker 2

Basically, if you look at the figure today, outside of China Silicon, majority is Walker, OCI and Homelock, I think, add together, it's around 80,000 tons. That cannot meet, I think, even U. S. Market, 50 GW, let's say. 50 GW, I think, need at least, I think, 120,000 metric tons, right?

Speaker 2

Of course, I think US is not only just a polysilicon module, there may be also thin film, other stuff. So we see basically, I think Europe, US is a typical market, not only besides you see the I think IAA stimulus Because also the political issue, for example, the antidumping, the tariff, all those stuff, CBD, AD, And plus, I think Uber labor forced reaction, all these I think you can see today, for example, Like Katrina, I think they use the water materials produced in Vietnam from wafer selling module. This can easily be selling, I think the module 2, U. S, around $0.40 per watt. Also, I think the Maxon do the same thing.

Speaker 2

So I think in the U. S. Market right now, the market can absorb high module price. It's already there, I think. Then as I think the U.

Speaker 2

S. Market continue asking for from I think module to sell and waiver, step by step Require localization materials. I think that's what pushed the capacity from module, cell and silicon. The same situation, I think, will happen in Europe. So Europe, I think, from you have to I think in the future, I think I'm not going to remember that, Maybe 85% or 65% you have localization, so that's why I think a lot of Chinese senior player will move to Europe.

Speaker 2

But today, you see, I think the production ecosystem, I think the environmental, I think Middle East, Southern Asia, maybe same as China, I think it can produce I think lowest cost effective module So it's a lot of company right now because I think go to the Middle East like Saudi, UAE and Oman, Qatar, because they have 20,030 version in the Middle East And also the strong relationship right now, political relationship with China. So we see a lot of trends. We see also a lot of news come out. You can see TCL, the news with the Virgin Industry, all right, you can see that. And also U.

Speaker 2

S, you also can see, I think, a LONGi, Jinko, the expansion in U. S. And Europe, then a lot of right now. I think not only module, but also I think the WAVA Capacity right now is moving to Europe. So I think this has happened.

Speaker 2

I think Become global production global products. That's a good thing, I think. That's also very easy, I think, the market demand and supply and become more healthy.

Speaker 4

Sorry to interrupt you. Just to kind of focus the conversation a little bit. Just I thought you were referring to Chinese polysilicon producers ramping facilities in the outside of China. Do you are you aware of any of those activities? And do you think you might ramp polysilicon production facilities Outside of China and if so, where would that still be the Middle East and maybe Southeast Asia or would that be some other locations?

Speaker 4

Thanks.

Speaker 2

I think it definitely is the I think a very I think the economic stimulus to attract Chinese producer To move outside of China to produce the silicon, but you should remember that silicon plant is a capital intensive, Also environmental and also the chemical industry. So the design, the permits, all these I think is very high. Daqo also did a lot of research. For example, if we go to U. S, maybe taking 5 years to finish the construction, then 10 times the total investments.

Speaker 2

So it's impossible for us to set the plants in any Chinese, I think, producer to set the plants in U. S. Then if you go to other places like Middle East, you have to consider, If you set the plants outside of China, what's the competitive age, right? If the cost, the final product is still used in the local, There is no competitive age. The only thing is traceability.

Speaker 2

The product can go to Europe, go to the U. S, then medium term. Today, if you look at the PB Link, I think I didn't look. Last week, I think, Walker, I think international Pacific is still $27 to I think $35 whatever. And China right now is around like $10 to $11 So the difference is there.

Speaker 2

I think that will continue to exist. The reason is because the I just mentioned that outside of China There's no way within 2 years can increase. We also didn't see any Existing player, for example, OCI, Walker, HomeLock, their extension. So we also didn't see any Chinese producer is going to planning to set the plants outside of China. At least right now, we didn't see any news.

Speaker 2

Daqo is a little different because we right now, I think, are listing U. S. Then Also listing Asia. So for a U. S.

Speaker 2

Company, we cannot compete the business with, I think Asia Company, so the silicon, we only can do the Asia. So that's why we'll be careful. I think with the new Chairman and CEO, I think Mr. Chu, I think he has the future planning. I think, yes, we are looking to study anytime if possible.

Speaker 4

Okay, Longy. That's really very good color. Thank you. One last question for me. We recently wrote That Longji's detained product in the U.

Speaker 4

S. Using Tongwei Poly from Maybe 4 or 5 months ago that was the pain, was denied entry into the U. S. I know you're ramping your Inner Mongolia facilities Now, what is your what do you think your ability is to import your poly through Southeast Asia into the U. S.

Speaker 4

Now. Are you a little bit more pessimistic given the Long G situation? Or are you still optimistic because you have traceability to the court side? Thank you.

Speaker 2

Frank speaking, I'm very pessimistic. The reason is because Tongwei of course, Tongwei situation is maybe a little different. At least they are, I think, have different location. I think the U. S.

Speaker 2

Customer, I think, depend The reason is because Tongwei on the whole global, they maybe use Xinjiang, I think Silicon store, they cannot improve. They didn't use, right? So yes, we have to see because at this moment, Because of political, I think, conflicts, I think what I want to say is difficult to clear any player right now Any silicon produced in China can pass the traceability to export to U. S. But if we can do to show in Mongolia, starting from O to Industry silicon to silicon powder to silicon producer, the whole value chain to show, I think we don't know, all right?

Speaker 2

We have to try, all right? So I can tell you, but we will make our efforts.

Speaker 4

Great, Longgen. Thank you for taking all the questions. I'll pass it on.

Speaker 3

Great. Thank you, Phil.

Operator

Thank you. Our next question will be from Al Alejo, Jefferies, please go ahead.

Speaker 5

Thanks a lot for management for taking my questions. I'm also Happy to hear Longgen is moving on and thanks for the contribution of the company as well in So my first question is, what is the CapEx plan for the remaining of this year and next year?

Speaker 3

Okay. So if you look at the CapEx plan, okay, so I would say in the first half, right, so I think for from our financial statements, right, approximately 495 $700,000 was used in investing activities, and that's pretty much all used for CapEx, mostly related 2 are in the Mongolia Phase 2 and some of it is for Mongolia Phase 1. And then for the second half, we're currently planning an additional $750,000,000 in CapEx. In aggregate, this is mostly used for Ina Mongolia Phase 2, which is under construction right now. And then it looks like $100,000,000 will be in the final payments related to in the Mongolia Phase 1.

Speaker 3

So I think in aggregate for the full year, we were planning roughly $1,250,000,000 in CapEx. So that's the current CapEx plan right now.

Speaker 5

Thank you. So another question is, Since the average selling price in Q2 is lower than the average market price in the market. So I would like to ask how is the company selling more in June instead of April? And What is the space between the different lines? Because the prices have been declining over

Speaker 2

First of all, I don't know if we got the ASP, market ASP, then you can make a decision we are below the But I can tell you is because we are the company that digests all the inventory. So basically, yes, sliding our price is very competitive. But compare our quality, I still think it's challenging, but still it's very profitable. So if you look at Tongwei, I think the whole industry is together. I think the profit in the second quarter almost cutting Half, less than half.

Speaker 2

We still have more than 50% increase, half, half more higher than half. So I don't think you it's apple to apple. I still think we're selling pretty good, I think, ASP To the good clients, yes.

Speaker 5

Because they are guiding that they are selling at around RMB 120 per kilogram, So I saw our numbers around 97 or 98 including tax. So that's why that's a question. Maybe there's some timing difference, I'm not sure.

Speaker 2

Yes, it's maybe not apple to apple. Really, we're not a common other company, but That's a fact that we are the I think the figure would tell you.

Speaker 5

I understand. So How about the share buyback pace? Because since the buyback in Q2 was not very aggressive. So can I assume the company will accelerate the buyback in Q3 because there is more than 500,000,000

Speaker 3

So yes, I think we still have $500,000,000 or more than $500,000,000 left On the company's the parent company's balance sheet in the offshore account, which we will use for the share buyback program? And the share buyback program continued to be in place and has not been changed. And certainly, we will look forward to support the share price, especially now with the new Chairman and CEO on board. I think as well new plans for the company. And certainly, I think, obviously, subject to for some more Conditions, our share price and other factors, things like that, but we will continue to execute on

Speaker 2

our share buyback But we are assured, I think we're going to finish the 700,000,000 purchase program by the end of the year.

Speaker 3

That's the current expectation.

Speaker 2

I need that right.

Speaker 5

Thank you. So, yes, that's quite positive. And I think my last question is, What is the view on aggressive expansion by others? Because Some of the peers are actually having concrete due diligence in Saudi. So I wonder if we are also investigating the expansion plan in Saudi or other places will seem more

Speaker 3

Okay. We did investigate in overseas expansion in the past We did actually even send our teams overseas Due diligence. And we continue to think there are a lot of challenges related to overseas expansions, Particularly, for example, around the higher production cost and the sustainability of the price Premium and as well as the market opportunities. So we certainly are continuing To monitor the various opportunities. But I think as of now, the company has no plan to do overseas expansion right now.

Speaker 5

Thank you.

Operator

Thank you. The next question will be from Chi Chiao of Goldman Sachs. Please go ahead.

Speaker 6

Hi. Thank you for taking my question. Can I ask what's the portion of the anti poly for the first half this year? And how what kind of a portion would you expect for the full year? And also, we know that Q2 operating cash flow is actually Negative.

Speaker 6

Can you also share why is that? Thank you.

Speaker 3

Okay. Hello, Jitao. Thank you so much for your questions. So with regard to EnTech, so the percentage keeps improving. So in Q1, it was roughly in the range of 10% to 20%.

Speaker 3

Actually, for Q2, we've already increased To the range of 20% to 30%. I think based on the company's Both in the market conditions and the market demand from the customers and also the price premium that's afforded in the market. So I think towards the end of Q2, now that price premium is in the RMB 10 to RMB 15 The per kilogram range for N type relative to P type, we are actually modifying our process and optimizing our process I think in the second half, right now, our expectation is that N type We'll constitute somewhere between 30% to 50% of our production. So obviously, Xinyuan is a more mature process And but the equipment has a little bit more limitation on the entire percentage, but we think we can improve it further. Well, I know Mongolia is In the process of improving its quality and ramping up.

Speaker 3

So we're very optimistic that over time, the Innamovolia Can you repeat your second question again? Operator, maybe.

Speaker 6

Sure. The Q2 operating cash flow seems to be negative. Can I Ask why is that?

Speaker 3

The negative because for the 6 months, we had 786,000,000. I think the operating cash flow.

Speaker 6

Right, right. But it seems that the first quarter Cash flow is like more than $800,000,000 So it seems like the second quarter is slightly net negative.

Speaker 2

Thank you, Noah.

Speaker 3

It's probably related to our banknote, but let me follow-up with you on that topic.

Speaker 6

Sure, sure. Great. Thank you so much.

Speaker 3

Okay. Thank you.

Speaker 6

Thank you.

Speaker 2

Thank you. Next question will

Operator

be from Rocky Wen, AIM Investments. Please go ahead.

Speaker 3

Thanks for

Speaker 7

the management team. So my question is, So we have changes in our management team. And I want to ask, Due to our changing our investment, do we have plan to launch new business or do new investment?

Speaker 2

I think The change of the new management team, I think Mr. Xu is the Chairman and CEO, I think he also is the biggest shareholder and the Controller. And the Asia Controller, I think, yes, maybe I think in the future, definitely we're looking to do some study. But we still, I think, will forecast our existing business. And as we lay down 3 to 5 year strategy, you see, Welcome our truck production starting, I think, Q3.

Speaker 2

So our strategy didn't change. Of course, we're looking at other opportunities, maybe overseas and maybe downstream, but not right now. We will announce There really.

Speaker 7

Okay. And my next question is, Do we consent to go in private because we have a lot of cash and This cash maybe somehow cover our market cap. So do we consider to go private?

Speaker 2

I think privatization we're not going to privatization is not management team to make machine. And we have to go through the whole share orders. But definitely one thing is clear, I think the valuation between Asia and U. S. Share is the difference is higher.

Speaker 2

So right now we only have a channel is going to throw Asia to declare dividends to buy back the U. S. Shares, so it's anti diluted as you can see, right? So I think we think the price can continue as a valuation in U. S.

Speaker 2

Market can continue to go up. But I want to remind you by the June 23 July 23 next year, that means after we IPO in Asia after 3 years, The U. S. Company holding 73 percent of Asia, we can sell it, starting to sell it. So that means we have another channel.

Speaker 2

We can sell The A share took up the money, then back to U. S. Market to buy back the U. S. Shares.

Speaker 2

So basically, we think in the future, If the valuation is so different, you see, we can throw that to arbitrage. Therefore, we will reduce the circulating shares, you see, And that's, I think, to push in the market, right? But with privatization, I don't think so for long term because We also want the U. S. Shareholders to get to to share our benefits.

Operator

Thank you. Our next question will be from Leo Hou of

Speaker 8

This is Leo Ho from Dowel Capital Markets. A couple of questions I would like to ask 1 by 1, if I may. The first question is regarding share buyback. I just would like to confirm that so our current plan is that we are going to spend the entirety of the US700 $1,000,000

Speaker 3

I would say let me just say that I think the $700,000,000 program is in place. I think there has been no changes To that, I think certainly the company and the management team will continue to monitor the market and repurchase The shares. Yes, I think based on the share repurchase program. Yes.

Speaker 8

My second question is regarding the 2nd quarter production number. I noticed that we have produced 45,000 tons eventually, but According to your Q1's guidance, we should be producing around 55,000 ton in the Q2. May I know what is the reason behind 10,000 ton Are we doing like any retrofit for our old or new capacity? What's the reason behind? And if we are doing retrofit, can you briefly Tell us what capacity or which in which provinces that we are doing, thank you.

Speaker 3

I think I'm just looking at Our previous guidance, I think we guided to 44,000 to 46,000 tons of Production for Q2, so we actually produce more pretty much in line with our previous guidance. So it is They're basically in line. I think as we ramp up in the Mongolia as we expected. And then it's for the Q2 that we were expecting in I think 55,000 to 57,000 metric tons. So that's reflecting the full ramp up of the Inner Mongolia facility?

Speaker 8

So are we doing any like retrofit in the second quarter?

Speaker 2

I think if you look at the end of Q1, we have inventory almost, I think, 20,000 tons. So in Q2, we produced 45,000 tons. So then we're selling 51,000 tons almost 52,000 tons. So we still have some any inventory in Q2, it's 10,450,000 Yes, it's 10,550. So I think the figure is correct.

Speaker 8

Okay, okay. Thank you. Just a few more questions. I just want to know, do we have any forecast for For like anti product within our total production mix for 2024. And also I would like to know at this point in time aside from us, How many producers in the market do you see are capable manufacturing N type polysilicon at large scale?

Speaker 3

So I think for 2024, we expect EnTech to be greater than 50%. I think in fact, I think Once we're fully ramped up in terms of our updates to our optimization of our process, we should have CN type In the range of 70% to 90% for the company, especially for next year. In terms of number of producers, I think right now, we are one of the largest producer of enzyme type and supplier of enzyme in the market. I think the other main producers include rocker and then some from Asia Silicon and then some from

Speaker 8

Thank you so much. My last question is on John Fincher. I think For amongst large polysilicon producers in China, it seems like we are the only one without any joint venture with Downstream customers, are we planning to form any joint venture in the future? And why we didn't form any of them in the past? Thank you.

Speaker 3

I mean, we won't roll this possibility out. I think in the past, we wanted to be kind of a Pure play and really the primary merchant supplier of polysilicon. And I think that benefited us very well, especially Last year, I think some of our peers that had JV partners or minority investors have to We have a share a lot of their proper income with the shareholders. So obviously, I think with the recent Market trends actually, a number of customers have approached us and indicated interest in doing Minority or JV Investments. So that is something that we are in discussion, but there's nothing concrete to report.

Speaker 8

Okay. Thanks so much for taking my questions. That's all for me. Thank you.

Speaker 3

Great. Thank you.

Speaker 2

Thank you.

Operator

Our next question comes from Frank Fawn of Nomura. Please go ahead.

Speaker 5

Thanks, Renee, for taking my question. My question actually was raised earlier. It's about the privatization plan. So no further questions from me. Thank you.

Speaker 3

Great, great. Thank you. Thanks for joining our call.

Speaker 2

Thank

Operator

you. This concludes our question and answer session. I'd like to turn the conference back over to Ms. Anita Xu for closing remarks.

Speaker 1

Yes. Thank you, everyone, again for participating in today's conference call.

Speaker 2

Okay.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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Netflix Q2 2023
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