Daqo New Energy Corp. (NYSE:DQ) Q3 2024 Earnings Call Transcript

Daqo New Energy Corp. (NYSE:DQ) Q3 2024 Earnings Call Transcript October 30, 2024

Operator: Good day, and welcome to the Daqo New Energy Third Quarter 2024 Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I’d now like to turn the conference over to Anita Chu. Please go ahead.

Anita Chu: Hello, everyone. I’m Anita Chu, the Deputy Chief Executive Officer of Daqo New Energy. Thank you for joining our conference call today. Daqo New Energy just issued its financial results for the third quarter of 2024, which can be found on our website at www.dqsolar.com. Today attending the conference call, we have our CFO, Mr. Ming Yang and myself. Given the time conflict, Mr. Xu will not be able to attend today’s meeting in person. I’ll first begin the call by reading Mr. Xu’s comment on market conditions and company operations. And then Mr. Yang will discuss the company’s financial performance for the quarter and the year. After that, we’ll open the floor to Q&A from the audience. Before we begin the formal remarks, I would like to remind you that certain statements on today’s call, including expected future operational and financial performance and industry 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 statement. 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’ll occasionally reference monetary amounts in US dollar terms.

Please keep in mind that our functional currency is the Chinese RMB. We offer these translations into US dollars solely for the convenience of the audience. So without further ado, let me begin with our management remarks. Entering the third quarter, China’s solar industry’s market conditions remain challenging, exacerbated by the overall oversupply in the industry. Market selling prices continue to be below production costs for the majority of industry players throughout the entire value chain. Although this caused Daqo New Energy to sustain quarterly operating and net losses, our losses narrowed compared to the second quarter and we continue to maintain a strong and healthy balance sheet with no financial debt. At the end of the third quarter, we had a cash balance of $53 million and short-term investments of $245 million.

Bank note receivables of $83 million and a fixed term bank deposit balance of $1.2 billion. To capitalize on higher interest rates compared to those of bank savings, we purchased short-term investments and fixed term bank deposits during the past two quarters. Overall, the company maintains strong liquidity with a balance of quick assets of $2.4 billion. These mainly consists of bank deposits or bank financial products that can be quickly converted to cash when necessary. On the operational front, during the third quarter, we started maintenance of our facilities and adjusted our production utilization rate to 50% in light of weak market demand and to reduce our cash burn. The total production volume at our two polysilicon facilities for the quarter was 43,592 metric tons.

Through continued investments in R&D and dedication to purity improvements at both facilities, our overall N-type product mix reached 75% during the quarter. Our Phase 5B, which started initial production in May and is still ramping up, reached 70% N-type in its product mix, strengthening our confidence in achieving 100% N-type by the end of next year. Despite lower utilization levels, we further reduced our cash cost to $5.34 per kilogram, compared to $5.39 per kilogram in the second quarter. However, unit production cost trended up 7% sequentially to an average of $6.61 per kilogram, as a result of reduced production level which led to facility idle cost of approximately $0.55 per kilogram. Regarding SME grade polysilicon, we started initial production in the second quarter and have since then worked toward qualification by downstream customers.

Recently, we passed qualification with certain customers and anticipate commercial delivery early next year. In light of the current market conditions, we expect our Q4 2024 total polysilicon production volume to be approximately 31,000 metric tons to 34,000 metric tons. As a result, we anticipate our full year 2024 production volume to be in the range of 200,000 metric tons to 210,000 metric tons. During the third quarter, challenging market conditions forced more industry players to reduce production utilization rates and begin maintenance. Based on industry statistics, polysilicon supply in China decreased by 15% and 6% month-over-month in July and August, respectively, with the total polysilicon production volume falling below 130,000 metric tone in August, the lowest year-to-date.

This reduction eased inventory pressure with prices bottoming in the range of approximately RMB35 to RMB40 per kilogram. Despite relatively weak downstream wafer demand during the quarter, poly prices stabilized after reaching their lowest level and have stopped declining. This price level was below the cash costs of even the Tier 1 players, and four consecutive months of cash losses have led all manufacturers to reassess their future strategy. In August and September, due to downstream customers’ effort to take advantage of low prices amid production cuts, polysilicon prices rebounded to approximately RMB38 to RMB43 per kilogram. However, industry polysilicon inventories remained significant at the end of the quarter. One month into the fourth quarter, the polysilicon industry is still rebalancing supply and demand and needs further production cuts and stronger market demand to sustain a price recovery.

The fourth quarter has historically seen strong new solar installations in China, and the aggressive stimulus packages unveiled in September and October to support the domestic economy might encourage investments from state-owned enterprises. In the medium to long-term, we believe the current low prices and market downturn will eventually result in a healthier market, as poor profitability, losses, and cash burn will lead to many industry players exiting the business, ultimately eliminating overcapacity and bringing the solar PV industry back to normal profitability and better margins. This year is challenging for China’s solar PV industry. At this point, we may have reached a cyclical bottom but have yet to see a [Technical Difficulty]. As the price wars have undermined the healthy development of the industry, on October 14, the China Photovoltaic Industry Association convened a special conference attended by senior executives from major manufacturers in the industry, calling to strengthen self-discipline and reduce unbridled competition.

While further details on promoting the sustainability of the industry still need to be discussed, we believe this is a positive signal toward market consolidation with higher-cost and inefficient manufacturers gradually phasing out capacity and exiting the business. On another positive note, on October 18, CPIA announced a reference price of RMB 0.68 per watt for modules, setting a floor for winning bids. On the demand side, new solar PV installations in China in the first nine months of 2024 reached 160.88 gigawatts, growing 24.8% year-over-year. Overall, in the long-run, solar PV is expected to be one of the most competitive forms of power generation globally, and the continuous cost reductions in solar PV products and the resulting reductions in solar energy generation costs are expected to create substantial additional demand for solar PV.

We are optimistic that we will capture the long-term benefits of the growing global solar PV market and maintain our competitive advantage by enhancing our higher-efficiency N-type technology and optimizing our cost structure through digital transformation and AI adoption. As one of the world’s lowest-cost producers with the highest quality N-type product, a strong balance sheet and no financial debt, we believe we are well positioned to weather the current market downturn and emerge as one of the leaders in the industry to capture future growth. Now, I’ll turn the call to our CFO Mr. Ming Yang who will discuss the company’s financial performance for the quarter. Ming, please go ahead.

Ming Yang: Thank you, Anita. And hello, everyone. This is Ming Yang, CFO of Daqo New Energy. We appreciate you joining our earnings conference call today. I will now go over the company’s third quarter 2024 financial performance. Revenues were $198.5 million compared to $219.9 million in the second quarter of 2024 and $484.8 million in the third quarter of 2023. The decrease in revenue compared to the previous quarter is primarily due to a decrease in ASP, as well as a decrease in sales volume. Gross loss was $60.6 million compared to $159.2 million in the second quarter of 2024 and gross profit of $67.8 million in the third quarter of 2023. Gross margin was negative 30.5% compared to negative 72% in the second quarter of 2024 and 14% in the third quarter of 2023.

For the third quarter, the company recorded $80.9 million in inventory impairment expenses compared to $108 million in the second quarter. The increase in gross margin was primarily due to the inventory subject to larger amount of inventory write-downs in the second quarter that were subsequently sold in the third quarter of 2024. SG&A expenses were $37.7 million compared to $37.5 million in the third quarter of 2024 and $89.7 million in the third quarter of 2023. SG&A expenses during the third quarter include $18.9 million in non-cash share-based compensation costs related to the company’s share incentive plan, compared to $19.6 million in the second quarter of 2024 and $46.3 million in the third quarter of 2023. R&D expenses were $0.8 million compared to $1.8 million in the second quarter of 2024, and $2.8 million in the third quarter of 2023.

R&D expenses can vary from period to period with R&D activities that take place during the quarter. Loss from operations was $98 million compared to $195.6 million in the second quarter of 2024. Income from operations of $22.5 million in the third quarter of 2023. Operating margin was negative 49% compared to negative 89% in the second quarter of 2024 and 4.6% in the third quarter of 2023. Net loss attributable to Daqo New Energy shareholder was $60.7 million compared to a loss of $120 million in the second quarter of 2024, and $6.3 million in the third quarter of 2023. Loss per basic ADS was $0.92 compared to loss of $1.81 in the second quarter of 2024, and $0.09 cents in the third quarter of 2023. Adjusted net loss attributable to Daqo New Energy shareholders, excluding non-cash share-based compensation cost was $39.4 million compared to $98.8 million in the second quarter of 2024, and adjusted net income of $44 million in the third quarter of 2023.

Adjusted loss per basic ADS was $0.59 compared to $1.50 in the second quarter of 2024 and adjusted earnings per basic ADS of $0.59 in the third quarter of 2023. EBITDA was negative $34 million compared to negative $145 million in the second quarter of 2024 and $70.2 million in the third quarter of 2023. EBITDA margin was negative 17% compared to negative 66% in the second quarter of 2024 and 14.5% in the third quarter of 2023. Now on the company’s financial condition. As of September 30th, 2024, the company had $853.4 million in cash, cash equivalents, and restricted cash compared to $997.5 million as of June 30, 2024, and $3.3 billion as of September 30, 2023. And as of September 30, 2024, notes receivable balance was $83 million compared to $80.7 million as of June 30, 2024, and $276 million as of September 30, 2023.

Notes receivable represent bank notes with maturity within six months. Now for the company’s cash flow. The nine months ended September 30, 2024. Net cash used in operating activities was $376.5 million compared to net cash provided by operating activities of $1.5 billion in the same period of 2023. And for the nine months ended September 30th, 2024, net cash used in investing activity was $1.75 billion compared to net cash using in investing activities of $954.3 million in the same period of 2023. Net cash using in investing activities in the three quarters of 2024 was primarily related to the purchase of short-term investments and fixed term deposits, which amounted to $1.4 billion. And for the first nine months of the year, purchases of property, plant, equipment, and land-use rights were approximately $336 million.

For the full year, we currently anticipate our total capital expenditure cost to be approximately $426 million. And for the nine months ended September 30, 2024, net cash used in finance activities was $48.5 million compared to net cash used in finance activities of $602 million in the same period of 2023. The net cash used in finance activities in the three quarters of 2024 was primarily related to dividend payments and share repurchase by our [A-share] (ph) subsidiaries. And that concludes our prepared remarks. We will now open the call to Q&A from the audience. Operator please begin.

Q&A Session

Operator: Yes, thank you. We will now begin the question-and-answer session. [Operator Instructions] And the first question comes from Philip Shen with ROTH Capital Partners.

Philip Shen: Hi, everyone. Thank you for taking my questions. I wanted to check in with where you think the government might be in terms of cutting off capacity based on energy intensity. So when do you think that policy could become effective? Is it near term, before the end of the year, or do you think we need to wait for a much longer time? Thanks.

Anita Chu: Phil, are you referring to the government policy about reduction in production?

Philip Shen: Yes, that’s right. And so, I think the government is looking to reduce production based on energy intensity. And so, if you have a 55 kilowatt hour per kilogram cutoff, then producers above that energy intensity would no longer be able to sell to the market or produce at least. So just curious when you think that could become effective and then also how much of the market in terms of percentage or capacity in metric tons could exit if that’s the case. Thanks.

Anita Chu: All right. So — Hi, Phil. Thank you for the question. So I think there have been discussions going around in the industry both from the CPIA and also from [MIT] (ph) and other government entities, right? So I’ll first talk about the CPIA and then I’ll get to the policies. So there have been conversations going on regarding potentially reducing the production level or the utilization rate to 50% across all the players. And I think there has been consensus among the manufacturers to promote a healthier development of the industry through exercising self-discipline. If we look at the current condition, inventory level is above 350,000 metric tons across all. Around 250,000 metric tons at the poly level and then another 100,000 at the wafer level.

However, if we look at the demand side, right now, wafer demand per month is only less than 50 gigawatts, which means that it would only need around 100,000 metric tons of poly demand per month. So there’s still a relatively oversupply if we look at it from that aspect. I think in terms of the structural reform that we’ve been hearing in the market, they were contemplating either the energy consumption or it could be a certain percentage times the main capacity in terms of the production volume. So for the energy consumption, we don’t have more details around that, but I think if we look at companies that have an energy intensity or a consumption of less than 55 kilowatt hours, it would only be the top four to five players.

Ming Yang: Okay. [Multiple Speakers] So, quickly, just to add Anita’s comments, our understanding is the NDRC and National Energy Administration is looking at this and there could be some kind of enforcement and allocation in terms of how much energy usage is allocated to the various manufacturers to restrict production. And we don’t know what the actual policy might look like, right? Or what the ultimate rules are. But if you look at China in history, I know China has done a lot of the supply side reform, especially for — for example, aluminum industry, the glass industry, and the steel industry. And historically, the government has had a lot of success in the supply side reform to stabilize the market and stabilize pricing. So we think the government is looking at this as a practical approach to fix the issues that the solar industry [indiscernible].

Philip Shen: Great. Okay. Thank you, Anita and Ming. And so as a follow up there, I know I asked this earlier, but I’m just going to get a — I’m going to ask it again, but from a timing standpoint, When do you think, like — do you think this is already positively impacting prices? And do you continue to expect pricing to be supported near term or do you think the policy needs to be implemented first and then you see the pricing move more materially? Thanks.

Ming Yang: I think realistically with regard to timing we really don’t know. I think in terms of what we’ve heard or understand is the government, the various government agencies are studying this and they’re talking with the industry players and talking with the industry association with the top manufacturers. And I think, policies like this probably will take one to two months to formulate. So we’re looking at maybe end of November or December or maybe even later. So we really don’t have any real insight on timing. What was the second — yes, go ahead.

Philip Shen: Sorry, Ming, I cut you off. I think that was the — I mean, you gave a little bit of color on time…

Ming Yang: It’s about pricing, right? [Multiple Speakers] Pricing is actually a very –

Philip Shen: Yes, just give your pricing outlook in general, so with and without the reform.

Ming Yang: I think overall the pricing is complicated, right? So pricing is a function of supply and a function of demand and market pricing and also in terms of utilization and I think future expectations of pricing. Certainly I think for the industry we do believe the pricing has bottomed for now and likely to go up further in the future, but we don’t know what the timing looks like or how much it could go up.

Philip Shen: Okay, great. I think I’ll leave it there. Thank you very much and best of luck.

Ming Yang: Okay, great. Thanks, Phil.

Operator: Thank you. And the next question comes from [Rangier Coparate] (ph), a private investor. Please go ahead.

Unidentified Analyst: Yes. So my question is not more on the operations side of the business and more on the potential of the usage of buybacks to correct the difference between Shanghai and New York. As investors, in January 2015, the lockup period — the [Volume 31] we did in July, it should end. So my question is, what are the plans for selling some Shanghai shares as they’re trading at the — we currently own $7 billion of Shanghai shares, 72% of [indiscernible] Shanghai. And yes, it would be a critique for everyone to close some of the difference. It’s a 4.3 times difference. And my question is, what will happen after January 15 as the next report, quarterly report will be likely after January 15th.

Anita Chu: Hi. Thank you. [Andre] (ph), for the question. So considering — we have considered the proposal of potentially selling down the Asia and then use that to repurchase [indiscernible] ADRs to close down the gap, but I think back in July it was due to regulatory difficulties because there was a new regulations launched in May. If the stock price was trading below the IPO issue price, then we are not able to sell down, which is why we also voluntarily disclosed we wanted to extend the period until January. As of now, it’s difficult for us to say what’s the plan next, because it would also be contingent upon the stock price by January, but I think it’s definitely something that we would consider to potentially close down the gap between the Asia and the ADRs.

Unidentified Analyst: Okay. So regarding that, could you provide a bit more color to investors? So even if it would be available, the option, the letter of undertaking of the intent to reduce shareholding which I see on the Security Exchange Commission. Could you provide more color? IPO price wasn’t at RMB21.49 from what I see in 2021. And aren’t we trading currently above IPO prices in Shanghai?

Anita Chu: Back then when we were at the expiration of the lockup period, the share price was also very low, which is why…

Unidentified Analyst: It was below. It did below when it expired below. But the IPO price is RMB21.49, right?

Ming Yang: Yes, that’s correct.

Unidentified Analyst: Okay. So currently, are there any other clauses? I see like three or four clauses here. Are there any clauses which we — like if January was now, it was in October 30, even though it’s not now, but are there any clauses which are not approved or they’re not functioning?

Ming Yang: Okay. So let’s say — so we do have a voluntary lockup, right, that I think will expire in January. So the one that expires and the board of DQ does decide to sell its A-share holding, then we would need to file a plan to reduce our A-share ownership in the open market with the Shanghai Stock Exchange. Yes, and then we would sell the shares under that plan.

Unidentified Analyst: Okay. But there are no other clauses which are preventing that from happening if the conditions continue to be the same as are currently if January was now.

Ming Yang: As long as share price is above RMB21.49, at least based on the rules, we are allowed to sell down share.

Unidentified Analyst: And it’s just 10% in 2025.

Ming Yang: I don’t think — right now the rules is that we could sell roughly 1% to 2% per quarter, per 90 days.

Unidentified Analyst: Okay. I didn’t know that. Okay. Thank you for that. And the last question, again, it’s not relevant operations, but the difference is huge. And I would capitalize some, like show some willingness to capitalize on this huge difference between the two share prices. It’s 4.3 times or 4.5 times the difference. My other question is, I think in the previous quarter, we’re currently reporting the share count only decreased by 0.5% from last quarter. It decreased to $66.3 million from $66 million. Sorry, the other way around. But it’s just a small decrease. So buybacks were not that much used in this quarter. I was expecting more buybacks.

Anita Chu: All right. So in terms of the share repurchase, I think after we announced the shared repurchase program, our management team was also waiting to see when would be a good timing. I think if we accepted based on the cycle — of the poly cycle this round, we were expecting if there’s no structural reform or any sort of policies done to accelerate the balance of supply and demand, then it might last two to three years, given that the players in this round are very strong in financials. And for instance, some of them have already raised a lot of capital in the financial market, and also some of them have other business lines to support for the poly business. So if we let it rebalance, it might take a slightly longer time. So we were waiting for the turning point of the [NSG] (ph) to be more clear before we could buy more aggressively. I think that was the rationale behind it.

Unidentified Analyst: Yes, it was as if the world was falling. I understand. Okay, I understand. But — and the last question — Okay, this is the last question. Regulatory changes in China, they should help the most the polysilicon producers, which are the lowest average selling cost and the producers, which are the most efficient, which Daqo is one. So, my question is, will it focus the regulatory changes? Will it help the large players the most and the ones which have the lowest average cost? Which in turn means that they have the lowest average cost of energy for producing polysilicon, I guess. So that’s the question.

Anita Chu: I think it’s the other way around. If you have the — with the economy of scales and with more advanced technologies, right? I think the larger players have a smaller energy consumption, which is why they have a lower cost. It’s the other way around. So I think the policy would not necessarily be helping the big guys to survive and force the smaller or the nuclear to exit the market, but rather they would want advanced capacity to remain in the market. And the less advanced, or I should say the ones that would cost higher in terms of energy consumption, silicon consumption, steam, etc., might gradually phase out.

Unidentified Analyst: Okay, congratulations to the promotion to CO and please consider after January 15 because if the company does not capitalize on this difference, I think there’s a possibility that this difference will just be raised by a fund or somebody else. So it’s accretive also to the owners of the company, which are the investors, but also the Chairman, the CEOs, the Directors, which own 29% of the company shares in New York. So it will be very accretive after January 15 for everyone, all investors. Thank you very much. Have a wonderful day.

Ming Yang: Thank you.

Anita Chu: Thank you. We appreciate it.

Operator: Thank you. And the next question is from [Ji Hu Wu] (ph) of CICC. Please go ahead, CICC. You are live. Okay. Well, the next question comes from Alan Lau with Jefferies.

Alan Lau: Thanks a lot for management for taking my questions. We’d like to know — the first question is, how much is the impairment embedded in the COGS? And what is the breakdown of that in terms of finished goods and raw materials? Because I noticed that this might distort the gross margin by a lot.

Ming Yang: Okay. So in terms of the inventory impairment, look at the previous quarter we took an impairment charge of $108 million and all the related inventories including finished goods of those right now were sold in Q3. And then at the end of Q3, then we recorded about $80 million of inventory write-down. So the net inventory write-down right now is about $80 million. And then we had roughly $27 million of reversal during the quarter. That not showed up in the cost of goods sold. Okay. Around 66%, or two-thirds is finished goods and about one-third of that is in raw material.

Alan Lau: Thank you. So it’s 66% of $80 million, right, are finished goods?

Ming Yang: Around two-thirds, right, 66%, yes.

Alan Lau: Understood. And my second question is basically on the average production cost. So there appears to be a rebound in the cost. So just to confirm that this is basically due to the lower utilization rates. So the unit depreciation went up. Is this the correct understanding of the rebound in production cost?

Ming Yang: Yes, that is the correct understanding. So of the $6.61 production cost, roughly $0.55 is related to the facility idle cost. The majority of that is depreciation. So if you subtract that, I think you get to like $6.06.

Alan Lau: I understood. Very clear. And —

Ming Yang: [Multiple Speakers] ignore the facility — idle facility costs. Because if you look our cash costs actually came down for the quarter.

Alan Lau: Yeah, exactly. So we’d like to know, because the company is guiding for a further lower utilization rate in 4Q in terms of the production volume. So we’d like to know if we can fairly expect that in 4Q, the trend would be similar, meaning, that cash costs will continue to be at a similar level, whereas average production costs might increase because of a further decline in utilization rates?

Ming Yang: Yes, that’s correct. So we’re actually expecting cash cost to go down because we’re now using the most efficient part of our facility for production with the lowest cash cost, while unfortunately because of depreciation, yes, I think the total production cost will be higher. Because we’re not depreciating the same amount of money over much less production.

Alan Lau: Understood. And in terms of the recent policy changes in China, which led to a very strong rally in the past one or two weeks. I would like to know from our perspective, have we seen any — what do you see of the possibility of the energy control materializing? And at the same time, do you see high changes of price rebound into the next couple of quarters?

Anita Chu: Okay. So thank you, Alan. So I think recently they are having a lot of conversations going on between the different entities and the industry associates. The CPIA has held a meeting last week and this week as well to discuss what the industry is looking like, what the corporates — what are their utilization rates and what are needed from the corporates. So I think ideally, or I could say, it would come more in terms of a blend of, for instance, government enforced structural reform based on either energy consumption like you mentioned or based on a nameplate capacity times a certain percentage of utilization rates to cap the production volume. So we blend up the structural reform and also based on industry self-discipline of players who have to also assess their own strategies.

So I think during the most recent meetings, they’re having consensus on reducing the utilization rate to around 50%. But because different companies have different conditions, for instance, some players might have a low inventory and a lower cost as well. So I think it will take longer time to materialize in terms of a reduction in supply? Sorry, what’s the second question? On price. Oh, in terms of the price, I think for the fourth quarter, given how quickly or how much production would get reduced in the coming months, there could be a chance of price rebound before the end of the year. But really going to the next year is hard to forecast or it’s hard to comment, because we don’t know exactly how it’s going to look like from both the supply and demand side.

As a quick example, so usually historically in the fourth quarter demand has been strong for new solar installations. But this fourth quarter, it’s really a slightly or relatively weak demand as we see it right now. So per month, the quality demand is only around 100,000 metric tons. So I think it will be a more dynamic moving trend.

Alan Lau: Understood. So I think when it comes to the production cut, because a lot of discussion is around the energy consumption, so we’d like to know if you might share what is the per unit energy consumption for the different plants for now?

Anita Chu: For our plants?

Alan Lau: Yes.

Anita Chu: Okay. Right now for Xinjiang, this is roughly $55. And then for in the Mongolia, it’s in the range of $50, I would say low $50s to mid-50s per kilogram.

Alan Lau: Understood. So from this perspective, the market rumor of cutting off a power consumption of 50 seems not very likely, right? Otherwise, that would mean only probably one or two companies continue to operate.

Ming Yang: I think that also depends on how it’s measured, right, because right now, how it’s being — there’s no standardized way of measuring it. So the way we measure ours is actually the power usage by the entire facility, including the front end, the growth of the silica, the back end, even the water and our own generation of hydrogen. We produce our own TCS and things like that. So it’s the whole facility concept. The total use of energy in the whole facility divided by total production. I think not all companies do this. Some companies only measure the poly production part without including the facilities. And so — yes, so I think there has to be first a standardized way of measurement first.

Alan Lau: Which probably would take time and not easy to align the standard.

Ming Yang: Well I think what’s being discussed is, some independent or probably auditor would actually be hired and standardized this first. This is being discussed right now.

Alan Lau: I see. I’ll pass on. Thanks a lot for the answer and also the improvement in the result as well.

Ming Yang: Great. Thank you.

Anita Chu: Thank you.

Alan Lau: Thank you.

Operator: Thank you. And the next question comes from Sarah Lee. Please go ahead, Ms. Lee. Your line is live. All right. Well, at this time, this does conclude the question-and-answer session. So I would like to return the floor to Ms. Chu for any closing comments.

Anita Chu: 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.

Operator: Thank you. The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect your lines.