Daqo New Energy is planning to double polysilicon production capacity to 25,000MT after completing its current expansion to 12,000MT, due to increased demand and higher average selling prices (ASPs) that reach US$21.63/kg in the first quarter of 2014, compared to US$18.67/kg in the previous quarter.

As expected the company reached full name plate capacity of 6,150MT in the first quarter of 2014 with production in the quarter reaching 1,517MT, up from 1,445MT in the previous quarter.

Daqo’s next expansion phase to take name plate capacity to 12,150MT has also started and is expected to be completed at the end of 2014. The company has already spent approximately US$22 million on the expansion, with a further US$59 million allocated through to the end of the year to complete the latest expansion phase. Daqo noted that a further US$16 million in expenditure would be needed after the new capacity had been fully ramped.

Significantly, Daqo noted that in achieving its 6,150MT production target its polysilicon cash cost was lowered to US$11.8/kg (excluding depreciation) and a polysilicon production cost of US$14.5/kg that included depreciation in the first quarter, which is among the lowest in the world and probably the lowest based on actual capacity.

However, further production optimisation and lower electricity costs are expected to lower production costs (including depreciation) to around US$14/kg by the end of the year. After expanding polysilicon capacity to 12,150MT and further production process upgrades, polysilicon cash cost of production was expected to be approximately US$8.7/kg and US$12/kg with depreciation by the second quarter of 2015.

Financial results

Having lowered production costs and benefiting from a significant increase in ASPs, Daqo reported a return to profitability in the first quarter of 2014.

"We increased shipment volumes by 9.4% quarter-on-quarter (QoQ) to 1,391MT, expanded EBITDA margin to 32.5% from 21.9% in the previous quarter, and produced positive operating income of US$6.6 million, marking the Company's return to profitability on a net income basis for the first time since the third quarter of 2011,” said Dr. Gongda Yao, Daqo New Energy’s CEO. “This was achieved despite the costs relating to the non-operational Chongqing polysilicon plant of US$3.7 million this quarter."

The company reported revenue in the quarter of US$42.1 million, up from US$37.0 million in the fourth quarter of 2013, with polysilicon revenue of US$30.1 million, compared to US$24.2 million in the fourth quarter of 2013.

Revenue from wafer sales in the quarter were US$12.0 million, down slightly from US$12.8 million in the fourth quarter of 2013.

Gross profit was US$9.0 million, compared to approximately US$1.0 million in the previous quarter and a gross loss of US$12.9 million in the first quarter of 2013.

Gross margin was 21.4%, compared to 2.6% in the fourth quarter of 2013 and negative 89.0% in the first quarter of 2013.

The company guided second quarter polysilicon shipments to be between 1,375MT to 1,400MT and wafer shipments of 16.6 million to 17 million pieces.

To support its current expansion plans, Daqo is planning to issue 2,000,000 American depositary shares (ADS), representing 50,000,000 ordinary shares in the company. The last sale price for the Daqo’s ADSs were US$36.84 with the expectation of raising around US$69.3 million for the proceeds, according to SEC filings.