Daqo New Energy Corp. (DQ) shares took a hit in pre-market trading on Monday after the company reported disappointing second-quarter earnings that fell short of analysts’ expectations. Revenue came in at $219.9 million, significantly lower than the $636.7 million recorded in the same period last year and missing the consensus estimate of $337.1 million. The company also reported an adjusted loss per ADS of $1.50, missing the consensus loss of $0.56.
The decline in revenue and earnings was attributed to a challenging market environment for the solar industry. Daqo’s CEO, Xiang Xu, highlighted that the industry experienced a significant downturn in the second quarter, with market prices for solar products falling below production costs for most players.
The average selling price (ASP) for Daqo’s polysilicon, a key ingredient in solar panels, fell to $5.12/kg in the second quarter, compared to $7.66/kg in the first quarter of 2024. This decline, coupled with a non-cash inventory impairment expense of $108 million, resulted in a significant negative impact on Daqo’s financial performance.
Despite the challenges, Daqo managed to increase its polysilicon production volume to 64,961 MT in the second quarter, exceeding its own expectations. This was driven by the commencement of production at its 100,000 MT Phase 5B polysilicon project in Inner Mongolia, which contributed about 12% to the total production volume.
Looking ahead, Daqo expects to produce between 43,000 MT and 46,000 MT of polysilicon in the third quarter. However, the company has lowered its full-year production forecast to 210,000 MT to 220,000 MT, down from the previous estimate of 280,000 MT to 300,000 MT.
In a bid to reassure investors and bolster shareholder confidence, Daqo announced a $100 million share repurchase program in July, effective until June 30, 2025. This program demonstrates the company’s belief in its long-term prospects despite the current market headwinds.
Daqo’s shares were down 7.24% at $14.10 in pre-market trading on Monday, reflecting investor sentiment regarding the company’s disappointing earnings report.
Investors interested in gaining exposure to the solar industry and Daqo New Energy can consider the ProShares S&P Kensho Cleantech ETF (CTEX).
