Daaco New Energy Q3 2025 Earnings Call - Margin Improvement Amid Anticipated Industry Consolidation

Conference Operator: Hello, and welcome to the DAACO New Energy Third Quarter twenty twenty five Results Conference Call. All participants will be in listen only mode. Please note this event is being recorded. I would now like to turn the conference over to Jessie Zhao, Investor Relations Director. Please go ahead.

Jessie Zhao, Investor Relations Director, Stockholm New Energy: Hello, everyone. I’m Jessie Zhao, the Investor Relations Director of Stockholm New Energy. Thank you for joining our conference call today. Stockholm New Energy just issued its financial results for the 2025, which can be found on our website at www.dqsolar.com. Today attending the conference call, we have our Deputy CEO, Ms.

Anita Xu our CFO, Ms. Min Yang and myself our Chairman and CEO, Mr. Jiang Xu is on a business trip now. So Ms. Anita Xu will deliver our management remarks on behalf of Mr.

Xu. Today’s call will begin with an update from Mr. Xu on market conditions and company operations and then Mr. Yang will discuss the company’s financial performance for the quarter. After that, we will open the floor to Q and A from the audience.

Before we begin with the formal remarks, I would like to remind you that certain statements on today’s call, including expected future operational and financial performance and industrial growth, are forward looking statements that are made under the Safe Harbor provisions of The U. S. Private Securities Litigation Reform Act of 1995. These statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward looking statements.

Further information regarding these and other risks is included in the reports or documents we have filed with or furnished to the Securities and Exchange Commission. These statements only reflect our current and preliminary view as of today and may be subject to change. Our ability to achieve these projections is subject to risks and uncertainties. All information provided in today’s call is as of today, and we undertake no duty to update such information, except as required under applicable law. Also during the call, we will occasionally reference monetary amounts in U.

S. Dollar terms. Please keep in mind that our functional currency is the Chinese RMB. We offer these translations into U. S.

Dollars solely for the convenience of the audience. Now I will turn the call to our Deputy CEO, Ms. Anita Xu. Ms. Xu, please go ahead.

Hello, everyone. This is Anita.

Anita Xu, Deputy CEO, Daaco New Energy: I’ll now deliver our management remarks on behalf of our CEO, Mr. Zhu. So with the recovery of market prices across the solar PV value chain in the 2025, we believe the industry is gradually recovering from its cyclical downturn. In particular, the polysilicon sector reached an inflection point during the quarter with prices rebounding significantly. As a result, we’re pleased to report that for the third quarter, Daiko New Energy recorded positive EBITDA of USD 45,800,000.0 as well as adjusted net income of USD 3,700,000.0.

Moreover, our strong balance sheet is further reinforced. As of 09/30/2025, the company had cash balance of USD $552,000,000, short term investments of USD $431,000,000, bank notes receivables balance of 157,000,000 and total fixed term bank deposit balance of USD 1,100,000,000.0. In total, our bank deposit and financial investment assets readily convertible into cash as needed stood at USD 2,210,000,000.00, representing an increase of USD 148,000,000 compared to the end of the second quarter. Our solid financial foundation provides us with confidence and strategic flexibility to navigate the ongoing market recovery and capture long term opportunities. Operationally, the company implemented proactive measures to counteract the continued market oversupply, maintaining a nameplate capacity utilization rate of 40%.

Total polysilicon production for the quarter was 30,650 metric tons, slightly above our guidance range of 27,000 to 30,000 metric tons. We also capitalized our favorable pricing condition to sell not only our current quarter’s output but also significant portion of our existing inventory, leading to a sharp rise in our sales volume to 42,406 metric tons from 18,126 metric tons in the previous quarter. The strong increase in sales volume reflects both our customers’ confidence in ZAGO’s product quality and their continued preference for our products in the new pricing environment. As a result, our sales volume far exceeded production, bringing our inventory down to a healthier level. Another positive note, production costs declined significantly during the third quarter, extending our ongoing cost reduction trend.

Total production costs declined by 12% to US6.38 dollars per kilogram in Q3 twenty twenty five from US7.26 dollars per kilogram in the 2025. Total idle facility related costs, primarily noncash depreciation expenses, also fell to US1.18 dollars in Q3 from 1.38 in Q2, driven by higher production levels. In particular, our cash costs decreased by 11% from $5.212 per kilogram in Q2 to US4.54 dollars per kilogram in Q3, the lowest in the company’s history. Cash cost includes approximately US0.16 dollars per kilogram of idle facility maintenance related costs. In light of the current market conditions, we expect our total polysilicon production volume in the 2025 to be approximately 39,500 metric tons to 42,500 metric tons.

As a result, we anticipate our full year 2025 production volume to be in the range of 121,000 to 124,000 metric tons. At the industry level, according to industry statistics, monthly supply of polysilicon in Q3 remained in the range of approximately 100,000 to 130,000 metric tons. On September 24, President Xi announced China’s new 2035 environmental targets at the UN Climate Summit. These targets include increasing the share of non fossil fuels in total energy consumption to over 30% and expanding the installed capacity of wind and solar power to over six times the 2020 level, aiming to reach an accumulative capacity to 3,600 gigawatts by 02/1935. The official announcement re informed China’s ambitious strategy to transition toward a new low carbon energy structure with solar PV playing a pivotal role in the process.

Entering the third quarter, China’s anti evolution initiative to restrict low price competition in the polysilicon sector continued to impact the industry. Market expectations of consolidation tighter supply have improved overall industry fundamentals. In particular, on August 19, the Ministry Industry and Information Technology, the Central Ministry of Social Work, the NDRC, the State Council’s State Owned Assets Administration Commission, the General Administration of Market Supervision and the National Energy Administration jointly held a symposium on the photovoltaic industry. The meeting emphasized the need to strengthen industrial regulation, curb this orderly low price competition, standardize product quality and promote industry self discipline. On September 16, the Standardization and Administration of China released a draft of a new mandatory national standard setting energy consumption limits per unit of polysilicon production.

Once implemented, poly manufacturers with unit energy consumption higher than 6.4 kilogram must implement corrective improvements within a specified period. Those failing to comply or meet the entry threshold after rectification will be ordered to cease operations. According to China Silicone Industry Association, China’s effective capacity of polysilicon production is expected to decline to 2,400,000 metric ton per year, a decrease of 16.4% from the 2024 and of 31.4% from total installed production capacity. We expect that implementation of this new energy consumption standard will substantially ease the issue of industry overcapacity. As a result of these more thoughtful measures, Pulsar comprised road sharply to RMB45 to RMB49 per kilogram in July from RMB32 to RMB35 per kilogram in June, and further climbed to RMB49 to RMB55 per kilogram at the end of the quarter.

The solar PV industry continues to demonstrate strong long term growth prospects. In the medium term, we believe that the combination of industry self discipline and government anti evolution regulations will help foster a healthier and more sustainable industry. In the long run, as one of the most cost effective and sustainable energy sources globally, solar power is expected to remain a key driver of the global energy transition and sustainable development. Looking ahead, Daiko New Energy is well positioned to capture the long term growth in the global solar PV market and further strengthening its competitive edge by enhancing its higher efficiency N type technology and optimizing its cost structure through this digital transformation and AI adoption. As one of the world’s lowest cost producers of the highest quality N type products and with a strong balance sheet and no bank loan, we’re confident in our ability to capitalize on the market recovery and emerge as an industry leader, well positioned to seize future growth opportunities.

So now I’ll turn the call to our CFO, Mr. Ming Ye, who will discuss the company’s financial performance for the quarter. Ming, please go ahead.

Ming Yang, CFO, Daaco New Energy: Thank you, Anita, and hello, everyone. This is Ming Yang, CFO of Dakelu Energy. We appreciate you joining our earnings conference call today. I will now go over the company’s third quarter twenty twenty five financial performance. Revenues were $244,600,000 compared to $75,200,000 in the 2025 and $198,500,000 in the 2024.

The increase in revenue compared to 2025 was primarily due to an increase in both sales volume and average selling price. Gross profit was $9,700,000 compared to gross loss of $81,000,000 in the 2025 and gross loss of million in the 2024. Gross margin was 3.9% compared to negative 108% in the 2025 and negative 30% in the 2024. The increase in gross margin compared to the 2025 was primarily due to the increase in average selling prices of polysilicon, a decrease in our production costs as well as write off of provision for inventory impairment. Selling, general and administrative expenses were $32,300,000 compared to $32,100,000 in the 2025 and $37,700,000 in the 2024.

SG and A expenses during the third quarter included $18,600,000 in non cash share based compensation costs related to the company’s share incentive plan compared to $18,600,000 in the 2025. R and D expenses were $600,000 compared to $800,000 in the 2025 and $800,000 in the 2024. R and D expenses vary from period to period reflect R and D activities that take place during the quarter. As a result of the foregoing loss from operations was $20,300,000 compared to $115,000,000 in the 2025 and $98,000,000 in the 2024. Operating margin was negative 8% compared to negative 153% in the 2025 and negative 49% in the 2024.

Net loss attributable to Dacroniu Energy shareholders was $14,900,000 compared to $76,500,000 in the 2025 and $60,700,000 in the 2024. Loss per basic ADS was $0.22 compared to $1.14 in the same quarter of 2025 and $0.92 in the 2024. Adjusted net income attributable to Daco New Energy shareholders excluding non cash share based compensation costs was $3,700,000 compared to adjusted net loss attributable to Daco New Energy shareholders of $57,900,000 in the 2025 and $39,400,000 in the 2024. Adjusted earnings per basic ADS was $05 per share compared to adjusted loss per basic ADS of $0.86 in the 2025 and $0.59 in the 2024. EBITDA was 45,800,000.0 compared to negative $48,000,000 in the 2025 and negative $34,000,000 in the 2024.

EBITDA margin was 18.7% compared to negative 64% in the 2025 and negative 17% in the 2024. Now on the company’s financial condition. As of 09/30/2025, the company had $551,600,000 in cash, cash equivalents and restricted cash compared to $598,600,000 as of 06/30/2025 and $850,000,000 as of 09/30/2024. And as of 09/30/2025 short term investment was RMB431 million compared to RMB418.8 million as of 06/30/2025 and $245,000,000 as of 09/30/2025. As of 09/30/2025, bank notes receivable balance was $157,000,000 compared to $49,000,000 as of 06/30/2025 and $83,000,000 as of 09/30/2024.

No receivable balance represent bank notes with maturity within six months. And as of 09/30/2025, the balance of fixed term deposits within one year was RMB1.03 billion compared to RMB960.7 million as of 06/30/2025 and RMB1.2 billion as of 09/30/2024. Now on the company’s cash flow. For the nine months ended 09/30/2025, net cash used in operating activities was 50,000,000 compared to RMB356 million in the same period of 2024. And for the nine months ended 09/30/2025, net cash used in investing activities was RMB448.9 million compared to RMB1.7 billion in the same period of 2024.

The net cash used in investing activities in 2025 includes million for the purchase of PP and and 328,600,000.0 in net purchase of short term investments and fixed term deposits. For the nine months ended September 2025, net cash used in financing activities was $32,000 compared to $48,500,000 in the same period of last year. And that concludes our prepared remarks. We will now open the call to Q and A from the audience. Operator, please begin.

Conference Operator: We will now begin the question and answer session. The first question comes from Philip Shen with ROTH Capital Partners. Please go ahead.

Philip Shen, Analyst, ROTH Capital Partners: Hi, everyone. Thank you for taking my questions. First one is on the gross margins. It looks like you guys had positive gross margins for the first time in a while, maybe supported by the impairment. And so wanted to get a feel for what kind of we see positive gross margins in Q3 and or Q4?

How would you expect that to trend in 2026? Thanks.

Ming Yang, CFO, Daaco New Energy: Hello, Phil. This is Ming Yang, the CFO. Thanks for your question. And we’re very pleased to report that we were able to record positive gross margin for the third quarter. A lot of it is driven by the increase in selling prices.

The quite significant increase that we saw in Q3 and as well as a significant reduction in our per unit cost and also helped by some of the benefits from an earlier write down of inventory. But we do expect that our Q4 gross margin as of today should be positive as well. Should be positive. I think based on our current expectation for trends for both ASP as well as for our costs continue cost reduction as well.

Philip Shen, Analyst, ROTH Capital Partners: Great. Thanks, Bing. And so maybe Q3 remains negative, Q4 flips positive and then through 2026, do you see potential for the year to be positive as well?

Ming Yang, CFO, Daaco New Energy: As of today, yes.

Philip Shen, Analyst, ROTH Capital Partners: Okay, great. Shifting over to some bigger picture questions. Last week, we hosted a couple of webinars, one with Clean Energy Associates and the other one with the Crew Group, the commodities research unit that acquired Exawatt based out of London. In any case, they were talking about a lot of the overhaul efforts and the anti evolution efforts in China for polysilicon and downstream. But they’re saying that even after the overhaul in the polysilicon segment, there could still be instead of maybe 3x overcapacity for poly, now just 2x.

So still substantial overcapacity. How do you guys continue to work to better match capacity with the lower levels of demand? What other actions can you and the industry take? And then how much capacity might you and the industry acquire over time and then shut down? Thanks.

Anita Xu, Deputy CEO, Daaco New Energy: Thank you, Phil. So regarding the overall capacity, first of all, I think it’s correct that even with the exit of some capacity, there would still be a relative oversupply compared to demand. However, I think how it’s going to work is that although you still have more supply in terms of the nameplate capacity, they’ll try to balance with demand in terms of the production volume, meaning none of

Ming Yang, CFO, Daaco New Energy: the

Anita Xu, Deputy CEO, Daaco New Energy: companies will be operating at full utilization rate until demand climbs up again. I think that’s what’s going to happen at least in the short term to the midterm.

Philip Shen, Analyst, ROTH Capital Partners: Okay, got it. Thank you. And do we or you guys expect any additional actions from the government or from the industry that maybe we’re not all aware of that could also serve as a positive catalyst? In addition to the lower utilization rate, what else can you and the industry and the government do? Thanks.

Anita Xu, Deputy CEO, Daaco New Energy: I think the overall conversation on the consolidation in terms of the SPVI bet that all investors have seen a lot of news around that. And I would say the anti evolution initiatives are still ongoing and conversations. All the companies are taking the initiative to participate and are actively engaging in these conversations, so that we would see a healthier and more sustainable industry going forward. And I think that’s the key focus right now, at least in the near term. And I would say aside from the NT evolution in terms of the consolidation, the other one that might be worthy to mention is the draft on the new mandatory national standard, right.

I think that would work as another positive catalyst like while the consolidation conversation is still ongoing, the government is also pushing out the national standard on energy consumption and that would serve as a hard cutoff point for some of the industries for some of the companies in the industry.

Philip Shen, Analyst, ROTH Capital Partners: Okay, great. Thank you for the color. Anita, I’ll pass it on.

Conference Operator: The next question comes from Alan Lau with Jefferies. Please go ahead.

Alan Lau, Analyst, Jefferies: Thanks a lot for taking my question anytime. Question, would like to follow-up on the sales question on the self discipline in the industry. Would like to know if there a when do you expect the whole consolidation agreement among the remaining chains will be signed? And what exactly in terms of mechanisms to make sure the players to obey the quota or the volumes that are agreed upon by the parties? Is there any performance bond or some kind of mechanisms like that?

Anita Xu, Deputy CEO, Daaco New Energy: Thank you, Alan. So of course, like I just mentioned, the conversations are still ongoing. So we’re waiting for more details before we can unveil it to the investors. But I would say we’re pushing toward median or having a consensus in terms of the consolidation. And it’s difficult for us to say exactly when that’s going to turn out or when we can see an agreement signed.

But of course from our perspective, the sooner the better, right. So that of course, we’ve seen a price recovery in the third quarter already, but suppose we can get a consolidation done soon, we might see further uptick in the prices. Yes, but of course, because there are many parties involved in working out the consolidation, including the government entities and the companies in the industry, so it’s taking some time. But of course, we are working very diligently and working very hard toward having consensus.

Alan Lau, Analyst, Jefferies: Thank you. So my second question is to follow-up on the company specific matter. So I have noticed that actually the ASP achieved by the company is quite high relative to peers. Would like to know what’s your expectation on the prices especially if the consolidation initiative is implemented? And then secondly, also look at from the cost perspective both the production cost and the cash cost went down.

So how do you see the trend in 4Q or in terms of the tax as well?

Ming Yang, CFO, Daaco New Energy: Okay. I’ll just add the cost transfers and Anita will talk about the ASP especially what our expectations after the consolidation initiative. So we did see a significant reduction in cost for this quarter and it’s actually a bit better than what we had originally anticipated. So cost went down about 12% quarter over quarter overall cost and especially cash costs declined by more than 11% quarter over quarter. And a significant portion of that is actually the reduction in energy usage, especially around efficiency.

So we did a lot of efforts in terms of improving our process and for further optimization and I would say that a lot of those efforts actually begin to materialize especially in the third quarter and as well as the usage of silicon powder in terms of per unit reduction. And also this quarter, we benefited additionally from a decline in silicon metal pricing and also because of the increase in production. So this quarter production is more than 10% higher than the previous quarter. So there’s also per unit reduction in terms of relatively fixed costs, for example, labor and benefits. So the combination of these helped us to reduce our costs.

And we actually expect currently expect Q4 cost to continue to decline compared to Q3, think in the low single digit range. So we should continue to see a low single digit percentage range. So we should continue to see benefit from our cost reduction efforts.

Anita Xu, Deputy CEO, Daaco New Energy: And in terms of the ASPs, so first of all, for the fourth quarter, as we’re still undergoing the conversation to make the consolidation happen, we think the price change will remain relatively stable at the current level, because prices have already ticked up in the third quarter. Near the end of the quarter, it’s already in the range of to RMB55 per kilogram. So we think that’s going to sustain in the third fourth quarter. However, after the consolidation is completed, of course, the consolidation will be done in phases. So it’s more likely going to be capacities exiting in different phases.

And we do we should expect prices to tick up after the consolidation happens to rise around RMB60 per kilogram first and perhaps ticking up further as we see more nameplate capacities exiting the industry. So perhaps in the range of 60 to 80 as we foresee it.

Alan Lau, Analyst, Jefferies: Thank you. That’s very clear. I think my last question is on the buyback because the company has announced the buyback program a couple of months back. I like to know the progress of buyback since then and also combining the consideration of potential CapEx or acquisition spending. Would like to know what is the pace of buyback Ampesty’s by the company?

Thanks.

Anita Xu, Deputy CEO, Daaco New Energy: Thank you, Alan. So in terms of the share repurchase, after we announced the program, share prices actually increased to the highest to US31 dollars which was about 35% higher than what was near the August. And because we wanted to purchase more shares, so we were waiting and monitoring the market closely. And another thing is that we were waiting to see what would be the initial investment for the consolidation, right? So suppose the initial investment is around RMB30 billion versus like RMB10 billion.

It means a huge difference to what we have to put in the consolidation. Hence, we’re still waiting to see how that’s going to unfold before we can confidently start the share repurchase again.

Alan Lau, Analyst, Jefferies: Okay. So assume the consolidation asset will materialize in 4Q then probably there will be more clarity on the amount that EQ has to spend in that platform and then probably the company will start buyback probably in 4Q or in first Q right? Is it fair expectation?

Anita Xu, Deputy CEO, Daaco New Energy: Sorry, sorry, what’s the question?

Alan Lau, Analyst, Jefferies: Assuming yes, So the timing, so if it’s the consolidation effort is going to be in 4Q or first Q then DQ will start buyback in right after that. So which is a couple of months from now.

Anita Xu, Deputy CEO, Daaco New Energy: In terms of the timing of the share repurchase?

Alan Lau, Analyst, Jefferies: Yes.

Anita Xu, Deputy CEO, Daaco New Energy: I think that after we have a more clear picture of what the consolidation looks like, we can start the share repurchase.

Alan Lau, Analyst, Jefferies: Thank you. That’s very clear. I’ll pass on. Thanks a lot.

Jessie Zhao, Investor Relations Director, Stockholm New Energy: Thank you, Alan.

Conference Operator: The next question comes from Meng Wen Huang with Goldman Sachs. Please go ahead.

Meng Wen Huang, Analyst, Goldman Sachs: Yes. Thanks for taking my question, Nita and Yang. So my first question is regarding to the production costs. So Ming, you just mentioned the lower cash cost is mainly due to our capacity upgrades. So therefore, less energy usage now.

So I was wondering what’s our unit electricity consumption per kilogram of the poly right now?

Ming Yang, CFO, Daaco New Energy: Okay. So it’s actually different for our two facilities, but generally it seems a range of call it 52 to 55 kilowatt hour per kilogram currently.

Meng Wen Huang, Analyst, Goldman Sachs: Sure. That’s clear. And my second question is regarding to the production. So we raised our production plan by 30% plus in 4Q from 3Q level. So the direction is really going against with our peers.

So I was wondering how we fit our production left to current industry wide production quarter narrative? And also what drives our more positive demand outlook into 4Q? I think that supposed to be a traditional weak demand season.

Anita Xu, Deputy CEO, Daaco New Energy: Thank you, Moen. So I would say that we were among the first to start lowering our utilization rate to around 30 So percent initially, I would say we have been very aggressive in doing that. However, as prices have recovered in the third quarter, we do foresee a more optimistic outlook going forward with the consolidation and also the proposal on energy consumption, we do see the direction to curb the ambitious competition in the industry, right? So we are more confident in the future outlook and we have weighed our own current plan as well as in terms of the cost. If we increase our production volume now, we can further reduce our production costs.

So I think that’s the logic behind raising our production plan in the fourth quarter.

Meng Wen Huang, Analyst, Goldman Sachs: So can we use the over 50% utilization as the guidance of the production plan in 2026 and going forward?

Anita Xu, Deputy CEO, Daaco New Energy: Yes, think that will be a reasonable assumption for 2026.

Meng Wen Huang, Analyst, Goldman Sachs: Sure. That’s very clear. That’s all my questions. I will pass the question to the next investors. Thanks.

Anita Xu, Deputy CEO, Daaco New Energy: Thank you, Thank you.

Conference Operator: Next question comes from Gordon Johnson with GLJ Research. Please go ahead.

Gordon Johnson, Analyst, GLJ Research: Hey, guys. Thanks for taking the question. So just, I guess, number one, focusing on your current production cost, $638,000,000, I’m looking at what PV Insights is reporting for polysilicon prices in Q4 so far, six fifty three, that would suggest a margin of two percent. But when I look at the Guangzhou stock I’m sorry, futures exchange, it has polysilicon prices right now, futures at like around $8.40. So when we look at your Q4 gross margin, are we looking at a margin similar to what you reported, in the February range or something higher?

And then I have a follow-up. Thanks.

Ming Yang, CFO, Daaco New Energy: I think for the Poly futures market, you have to subtract by a 13% VAT. I think once you subtract that, I think you gave maybe a ballpark mid to high single digit kind of gross margin, something like that. So let me just say just kind of a range of gross margins, low to mid single digit kind of gross margin, I think based on the current market environment.

Gordon Johnson, Analyst, GLJ Research: Okay. That’s helpful. And then are you you guys mentioned that you sold a lot out of inventory. Is that done or will you continue that? And then my last question is, given the new five year plan that’s coming through in China, what is your expectation for installations, solar installations writ large in China in 2026 versus 2025?

Thanks again for the questions.

Ming Yang, CFO, Daaco New Energy: Okay. So I think in terms of sales, I think it is still a little bit early, right? So we’re at the October. There’s two more months to go by. I think based on our latest customer orders and order trends, At this point, we do anticipate that the overall sales volume for the quarter should be similar to our expected production volume.

I think that’s the baseline for our sales. But we do also look for opportunities to sell down additional inventory. So that’s what the current market condition looks like.

Gordon Johnson, Analyst, GLJ Research: Okay. And then on total installs in China for next year versus this year? Thanks.

Anita Xu, Deputy CEO, Daaco New Energy: And for installation, we think it will be relatively stable or low single digit compared to this year. Because this year, the forecast is in the range of around, I would say, 20 to two fifty gigawatts for additional installations in China. So I think for next year, would be more likely in the range and perhaps for growth to around, I would say, 70 to two eighty gigawatts.

Gordon Johnson, Analyst, GLJ Research: Thank you.

Ming Yang, CFO, Daaco New Energy: Great. Thanks, Warner.

Conference Operator: This concludes our question and answer session. I would like to turn the conference back over to Jessie Zhao for any closing remarks.

Jessie Zhao, Investor Relations Director, Stockholm New Energy: Thank you, everyone, again for participating in today’s conference call. Should you have any further questions, please don’t hesitate to contact us. Thank you, and have an awesome day. Goodbye.

Conference Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.