Daqo New Energy (DQ) Q2 2024 earnings summary

Executive summary

• Q2 2024 saw severe pricing pressure in the photovoltaic industry, with polysilicon prices falling below production costs, resulting in a $108 million inventory write-down and net losses of $119.8 million.

• Despite market headwinds, liquidity remained strong with $997 million in cash, $2.5 billion in quick assets, and no financial debt at quarter-end.

• Production exceeded expectations, reaching 64,961 metric tons, aided by the ramp-up of the Inner Mongolia Phase 5B project, which contributed 12% of output.

Financial highlights

• Revenue was $219.9 million, down from $415.3 million in Q1 2024 and $637 million in Q2 2023, mainly due to lower ASP and sales volume.

• Gross loss reached $159.2 million, with a negative gross margin of -72.4% versus a positive 17.4% in Q1 2024.

• Net loss attributable to shareholders was $119.8 million, compared to net income of $15.5 million in Q1 2024.

• Adjusted net loss (excluding share-based compensation) was $98.8 million; adjusted loss per ADS was $1.50.

• EBITDA was negative $144.9 million, with an EBITDA margin of -65.9%.

Outlook and guidance

• Q3 2024 polysilicon production is expected at 43,000–46,000 metric tons, with full-year 2024 guidance at 210,000–220,000 metric tons.

• Production utilization rates are being lowered to support pricing and reduce cash burn.

• Management expects further price recovery in the second half of 2024 and normalization by mid-2025, with costs expected to remain around or below $6/kg.

• Industry consolidation is anticipated as unprofitable players exit and regulatory efforts promote higher standards.