China-based polysilicon and wafer producer, Daqo New Energy, has reported record third quarter results, due to strong demand that is expected to continue through the first quarter of 2015.

Daqo noted in an earnings call that it was already running its wafer production operations at full-capacity and expected 100% utilisation rates through the first quarter of 2015.

The company is also ramping new polysilicon capacity, noting in the call that it had already secured long-term supply contracts for more than 60% of 2015 capacity and 50% of its 2016 capacity.

Management noted that the long-term contracts were only with three customers and that discussions with other potential customers was ongoing, indicating the company soon expects to be fully allocated for at least the next two years.

“So we believe next two years, our production volume can be securely signed off with our major customers we are doing business with right now,” noted Dr. Gongda Yao, CEO of Daqo New Energy in the earnings call. “So very optimistic about the added capacity will be shipped in the future for next two years.”

Production update

Daqo reported a record quarterly polysilicon production volume of 1,748MT in the third quarter of 2014, up from 1,504MT in the previous quarter. Importantly, Daqo claimed that its polysilicon costs also reached a record low of US$13.05/kg, compared to US$14.13/kg in the second quarter of 2014. Polysilicon cash cost was said to have dropped to US$10.72/kg in the third quarter of 2014, down from US$11.48/kg in the previous quarter.

“We expect to continue to produce polysilicon in our Xinjiang facilities at this output level which exceeds our nameplate capacity by 9%,” noted Dr. Yao. “We believe we will continue to maintain this level of production cost until our existing capacities are upgraded to the new hydrochlorination system, which we expect will further lower our production cost to $12.00/kg by the end of the second quarter of 2015."

Dr. Yao also noted that its polysilicon expansion project in Xinjiang was expected to be fully ramped to 12,150MT by the end of the second quarter of 2015.

Daqo reported quarterly polysilicon shipments of 1,598 MT, up from 1,436MT in the second quarter of 2014.

Financial results

Daqo reported revenue if US$47.3 million, up from US$43.7 million in the second quarter of 2014 and US$29.6 million in the third quarter of 2013.

Polysilicon revenue was US$32.8 million, up from US$31.0 million in the second quarter of 2014, and US$22.9 million in the third quarter of 2013. The increase from the second quarter of 2014 was due to higher sales volumes offset by slightly lower ASP’s.

Polysilicon ASP’s were US$21.50/kg, compared to US$22.04/kg in the second quarter of 2014.

Wafer sales were US$14.5 million, compared to US$12.7 million in the second quarter of 2014. The company noted that a higher proportion of wafer sales came from internally produced wafer versus wafer OEM in the quarter.

The company shipped 18.5 million pieces of wafer, increasing from 17.6 million pieces in the previous quarter.

Gross profit was US$11.6 million, compared to US$10.1 million in the second quarter of 2014.

Guidance

Daqo guided polysilicon shipments in the fourth quarter to be in the range of 1,500MT to 1,550MT and wafer shipments of approximately 16.8 million to 17.0 million pieces.