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Daqo New Energy Announces Unaudited First Quarter 2013 Results

Date2013/6/13

June 7, 2013 - Daqo New Energy Corp. today announced its unaudited financial results for the first quarter of 2013.

First Quarter 2013 Financial and Operating Highlights

Polysilicon shipments were approximately 706 metric tons, or MT, of which 30MT were shipped by the end of the first quarter of 2013 but will be recognized as revenue upon completion of inspection in the second quarter of 2013. Wafer shipments were 2.21 million pieces. We also shipped 72MT of multi-crystal silicon blocks to our customers. Revenues were $14.5 million, compared to $6.2 million in the fourth quarter of 2012 and $32.0 million in the first quarter of 2012. 

Gross loss was $12.9 million, compared to $11.1 million in the fourth quarter of 2012 and $9.9 million in the first quarter of 2012. 

Gross margin was negative 89.0%, compared to negative 178.5% in the fourth quarter of 2012 and negative 30.9% in the first quarter of 2012. 

Operating loss was $16.6 million, compared to $55.9 million in the fourth quarter of 2012 and $10.8 million in the first quarter of 2012. 

Net loss attributable to Daqo New Energy Corp. shareholders was $18.7 million, compared to$75.6 million in the fourth quarter of 2012 and $13.7 million in the first quarter of 2012. 

Earnings per fully diluted ADS were negative $2.70, compared to negative $10.90 in the fourth quarter of 2012, and negative $1.95 in the first quarter of 2012.

"In the first quarter of 2013, we have been running our Xinjiang polysilicon facilities successfully and have achieved our initial targets for cost structure, capacity, and quality. As a result, our Xinjiang facilities have started to contribute positive cash flow since the first quarter of 2013 in this challenging market," Commented Dr. Gongda Yao, Chief Executive Officer of the Company. "In April, we conducted several process optimization projects in our Xinjiang facilities. This enabled us to further reduce our total production cost to approximate $18/kg by the end of May."

"We have seen average selling prices stabilizing across the solar PV value chain. The current improved financial performances of the downstream entities indicate the start of stabilization in the market. We believe today's challenging situation is only temporary. We are confident that the political leaders of China and European Union have competence to manage the international trading conflict in the solar PV industry, so as to enable the industry to achieve a healthy and sustainable growth in the future," Dr. Yao concluded.

First Quarter 2013 Results

Revenues

Revenues were $14.5 million, compared to $6.2 million in the fourth quarter of 2012 and $32.0 million in the first quarter of 2012.

The Company generated revenues of $11.3 million from 676 MT polysilicon sold, compared to revenues of $4.7 million from 266MT of polysilicon sold in the fourth quarter of 2012, and revenues of $25.7 million for 964 MT of polysilicon sold in the first quarter of 2012. The increase from the fourth quarter of 2012 was primarily due to the fact that in the fourth quarter of 2012, Xinjiang facilities were in the stage of pilot production and did not contribute to revenues during this period.

The Company generated $1.7 million from sales of wafers, compared to $0.8 million in the fourth quarter of 2012 and $6.3 million in the first quarter of 2012. The increase from the fourth quarter of 2012 was primarily due to higher sales volume. The decrease from the first quarter of 2012 was primarily due to lower sales volume combined with lower average selling price.

The Company also generated $1.5 million from other businesses, such as sales of multi-crystal silicon blocks and etc.

Cost of Revenues

Cost of revenues in the first quarter of 2013 was $27.4 million, compared to $17.2 million in the fourth quarter of 2012.

The cost related to idle Wanzhou polysilicon facilities was included in the cost of revenues as $10.4 million and $9.7 million in the fourth quarter of 2012 and first quarter of 2013, respectively.

The depreciation of Xinjiang facilities of $5.9 million was also recorded in the cost of revenues in the first quarter of 2013, while Xinjiang facilities were not depreciated during the pilot production in the fourth quarter of 2012.

Gross loss and margin

Gross loss was $12.9 million, compared to $11.1 million in the fourth quarter of 2012 and $9.9 million in the first quarter of 2012.

Gross margin was negative 89.0%, compared to negative 178.5% in the fourth quarter of 2012 and negative 30.9% in the first quarter of 2012.

Gross margin improved from the fourth quarter of 2012 as a result of increased revenues generated from Xinjiang polysilicon sales and lower polysilicon production cost.

The decrease in gross margin compared to the first quarter of 2012 was primarily due to lower average selling price for polysilicon.

Selling, general and administrative expenses

Selling, general, and administrative expenses were $4.1 million in the first quarter of 2013, compared to $1.8 million in the fourth quarter of 2012 and $2.4 million in the first quarter of 2012. 

The increase in selling, general and administrative expenses from the fourth quarter of 2012 was primarily due to a $1.2 million increase in bad debt provision combined with a $0.4 million increase in shipping expense related to larger shipment in the first quarter of 2013.

Research and development expenses

Research and development expenses were $0.4 million in the first quarter of 2013, compared to $2.8 million in the fourth quarter of 2012 and $0.6 million in the first quarter of 2012. In the fourth quarter of 2012, the Company incurred additional research and development expenses for our Xinjiang Phase II polysilicon facilities, which didn't recur in the first quarter of 2013.

Other operating income

Other operating income was $0.8 million in the first quarter of 2013, compared to $2.5 million in the fourth quarter of 2012 and $2.1 million in the first quarter of 2012. Other operating income was mainly composed of unrestricted cash incentives that the Company received from local government authorities, which fluctuates from period to period.

Operating loss and margin

As a result of the foregoing, operating loss was $16.6 million in the first quarter of 2013, compared to $55.9 million in the fourth quarter of 2012 and $10.8 million in the first quarter of 2012.

Operating margin was negative 114.7%, compared to negative 902.5% in the fourth quarter of 2012 and negative 33.8% in the first quarter of 2012.

The operating loss in the fourth quarter of 2012 was significantly impacted by the $42.8 million in long lived asset impairment charges recorded in that period. The operating loss increase in the first quarter of 2013 compared to the fourth quarter of 2012 was primarily due to $1.2 million increase in bad debt provision combined with $1.8 million increase in gross loss which already included depreciation of Xinjiang facilities in the first quarter of 2013.

Net Interest expense

Net interest expense was $5.3 million in the first quarter of 2013, compared to $3.4 million in the fourth quarter of 2012 and $3.6 million in the first quarter of 2012. In the first quarter of 2013, the interest expense related to Xinjiang facilities was no longer being capitalized after such facilities commenced commercial production. Therefore, the interest expense in relation to the Xinjiang facilities increased $2 million in the first quarter of 2013. In the first quarter of 2013, the interest expense related to Wanzhou facilities decreased by $0.3 million due to a decrease in average outstanding loan balance.

Income tax expense / benefit

Income tax expense was $nil for the first quarter of 2013, compared to income tax expense of $19.9 million in the fourth quarter of 2012 and income tax benefit of $1.6 million in the first quarter of 2012.

Net loss attributable to our shareholders and earnings per share

As a result of the aforementioned, net loss attributable to Daqo New Energy Corp. shareholders was $18.7 million in the first quarter of 2013, compared to $75.6 million in the fourth quarter of 2012 and $13.7 million in the first quarter of 2012. 

Earnings per fully diluted ADS were negative $2.70 in the first quarter of 2013, compared to negative $10.90 in the fourth quarter of 2012, and negative $1.95 in the first quarter of 2012.

Financial Condition

As of March 31, 2013, the Company had $11.7 million in cash and cash equivalents and restricted cash, compared to $17.3 million as of December 31, 2012.

As of March 31, 2013, the accounts receivable balance was $19.3 million, compared to $27.8 million as of December 31, 2012. As of March 31, 2013, the notes receivable balance was $13.9 million, compared to $4.6 million as of December 31, 2012. 

As of March 31, 2013, total borrowings were $301.5 million, of which $178.7 million were long-term borrowings, compared to total borrowings of $307.8 million, including $187.5 million long-term borrowings as of December 31, 2012.

Outlook for Second Quarter 2013

For the second quarter of 2013, the Company expects to ship 920MT of polysilicon. The Company also expects to ship approximately 6.5 million pieces of wafer and 25MT of multi-crystal silicon ingots and blocks. This outlook reflects our current and preliminary view and may be subject to change. Our ability to achieve this projection is subject to risks and uncertainties. See "Safe Harbor Statement" at the end of this press release.
 

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