Daqo New Energy Corp. (DQ) Q4 2014 Earnings Report, Transcript and Summary

Welcome to the Daqo New Energy Corporation Fourth Quarter 2014 Financial 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 call is being recorded. I would now like to turn the conference over to Mr. Bing Sun, CFO. Please go ahead.

Thanks, Andrew. Thank you, everyone, for joining us today for Daqo New Energy's fourth quarter and fiscal year 2014 unaudited financial results conference call. Daqo New Energy just issued its financial results for the fourth quarter and fiscal year 2014, which can be found on the company's website. To facilitate today's conference call, we have also prepared a PPT presentation for your reference. Today, attending the conference call we have Dr. Yao, CEO, and myself. The call today will feature an update from Dr. Yao on business and operational developments, and then I will discuss the company's financial performance for the fourth quarter and fiscal year 2014. After that, we will open the floor to Q&A from the audience. Without further delay, I will now turn the call over to Dr. Yao.

Thank you, Bing. Thank you, all, for joining the call today. In the fourth quarter of 2014, we continue to deliver strong performance in our Xinjiang polysilicon facilities, further increased our quarterly production volume to 1,791 metric ton, a new record, compared to 1,748 metric ton in the third quarter of 2014. To maximize our polysilicon output, we purchased some raw material of TCS externally, which caused our cash cost to slightly increase to $10.88 per kilo, compared to $10.72 per kilo in the third quarter of 2014. With our Hydrochlorination system coming online, which will provide sufficient TCS for 12,150 metric ton capacity by the end of June 2015, we don't expect to continue to purchase TCS externally afterwards. In the fourth quarter of 2014, we shipped 1,537 metric ton of polysilicon and 17.8 million pieces of wafers. We achieved EBITDA margin of 29.6% and operating income of $7.6 million. Our net income attributable to Daqo shareholders was $3.6 million. As for the Phase 2b polysilicon project, which will increase our polysilicon capacity from current 6,150 metric ton to 12,150 metric ton, we are on track with our target to fully ramp it up by the end of June 2015 and lower the total production cost to the level of $12 per kilo. Looking forward, we are also considering further capacity expansion at our Xinjiang facility in the medium-term of the Phase 3 project. The Board of Directors has already approved the company to launching our early stage research for the Phase 3 project. After a comprehensive analysis of the capacity and comparability of the Chongqing machinery and equipment, the company concluded that it would be more efficient to use part of the machinery and equipment in the Phase 3 project rather than using all of them in our Phase 2b project. As a result, we have changed our original relocation plan and determined to utilize a portion of those equipment and machinery in our Phase 3 expansion project in Xinjiang. Subject to market and industry conditions, we expect our Phase 3 expansion, which may be conducted in two stages, to further increase our total polysilicon production capacity to 25,000 metric ton. In February 2015, we raised around $30 million through a public follow-on offering. We intend to use net proceeds for the feasibility study, design and some capital expenditure in -- of Phase 3 expansion, along with other general corporate purposes. In the fourth quarter of 2014, the average selling price or ASP for polysilicon was $20.47 per kilo, compared to $21.50 per kilo in the third quarter of 2014. In the fourth quarter, the foreign polysilicon manufacturers increased their supply of polysilicon into China to take advantage of the grace period before Chinese custom fully block polysilicon import through process trade. As a result, we see pressure on the ASP of polysilicon in the fourth quarter. However, we do not expect the increase of supply from foreign polysilicon manufacturers to continue after contract terms of the existing process trade agreements expire under Chinese government's suspension policy, which is expected to remain in effect in the foreseeable future. Global solar PV installations in 2014 totaled around 45 gigawatts, which represents a 23.2% increase, compared to 36.5 gigawatts in 2013. Currently most analytical reports forecast that global solar PV installations in 2015 will be in the range of 52 to 55 gigawatts, which represents a growth of 16% to 22% compared to 2014 installations. In 2014, annual solar PV installations in China were reported to amount about to 10.6 gigawatts. In March 2015, Chinese National Energy Administration released the 2015 target for solar PV installations of 17.8 gigawatts, which is 19% higher than the initial target of 15 gigawatts, and represents an increase of almost 70% from 10.6 gigawatss in 2014. Although, some additional polysilicon supply may enter the market mainly in the second half of 2015, we believe the supply and demand for polysilicon will remain in balance, on the premise that the global markets, including the China market, will grow as expected. As one of the leading polysilicon producers, we believe we have been very well-positioned in the lowest cost structure, which will be further improved, fast growing capacity, which will be doubled in the second half of 2015 and could potentially be double again in the mid-term and the first class quality, which is essential for producing high efficiency solar PV products. For the first quarter of 2015, the company expects to ship 1,500 metric ton of polysilicon. The company also expects to ship approximately 17.5 million to 18 million pieces of wafers. This outlook reflects our current and preliminary view, and maybe subject to change. Our ability to achieve this projection is subject to risks and uncertainties. I will now turn the call to Mr. Bing Sun to provide updates on financial performance. Bing, please?

Thank you, Dr. Yao. Let's walk through the Q4 and fiscal year 2014 financial performance. Revenue, revenue was $49.5 million in Q4, compared to $47.3 million in the third quarter of 2014, and $37 million in the fourth quarter of 2013. The company generated revenue of $33.8 million from polysilicon in Q4, compared to $32.8 million in the third quarter of 2014. The increase from the third quarter was primarily due to higher sales volume offset by lower average selling prices. The company generated $15.7 million from sales of wafers, compared to $14.5 million in the third quarter. The increase from the third quarter of 2014 was primarily due to higher sales volume. The ASP for wafer remained flat in the fourth quarter. Gross profit was approximately $12.6 million in Q4, compared to $11.6 million in the third quarter of 2014 and approximately $1 million in the fourth quarter of 2013. Gross margin was 25.4%, compared to 24.5% in the third quarter of 2014 and 2.6% in the fourth quarter of 2013. Total costs related to non-operational Chongqing polysilicon plant including depreciation were $3.3 million in Q4, compared to $3.4 million in the third quarter of 2014. Excluding such costs, the non-GAAP gross margin was approximately 32.1% in Q4, compared to 31.7% in the third quarter. On a standalone basis, non-GAAP gross margin for Xinjiang polysilicon facilities were 42.5% in Q4, as about the same level as in Q3. Non-GAAP gross margin for wafer facilities were 10% in Q4, compared to 7.6% in Q3. The improvement in wafer margin was primarily due to decrease in raw material cost and our cost down asset related to wafer projecting cost. SG&A expenses were $4.7 million in Q4 compared to $2.5 million in the third quarter of 2014 and $4 million in the fourth quarter of 2013. The increase in SG&A expenses from the third quarter was primarily due to three reasons. First of all, the relocation expenses for moving Chongqing idle equipment to Xinjiang at about $800 to $1000. Secondly, less reversal of bad debt provision in Q4 and the third, the provision of equipment prepayment in Q4. Note that relocation expenses related to Phase 2b have all been recorded in the fourth quarter of 2014 and we expected such expenses will occur for Phase 2b in the future. As a result of the above, operating income was $7.6 million in Q4 compared to $9.5 million in the third quarter of 2014 and operating loss of $4.1 million in the fourth quarter of 2013. Operating margin was 15.4% compared to 20% in the third quarter of 2014 and negative 11% in the fourth quarter of 2013. Net interest expense was $4.1 million for the fourth quarter compared to $3.5 million in the third quarter. The increase was primarily due to interest charge for discounting bank notes in the fourth quarter. EBITDA was $14.7 million in the fourth quarter compared to $16.4 million in the third quarter of 2014 and $8.1 million in the fourth quarter of 2013. EBITDA margin was 29.6% for the quarter compared to 34.7% in the third quarter of 2014 and 21.9% in the fourth quarter of 2013. The decrease of EBITDA and EBITDA margin from the third quarter was primarily due to the increase of SG&A expense in the fourth quarter. Again, note that on the SG&A expenses, the relocation expense related to Phase 2b have all been recorded in the fourth quarter of 2014 and we can expect such expense will incur for Phase 2b in the future. Net income attributable to Daqo New Energy Corporation shareholders was $3.6 million in the fourth quarter compared to $5.9 million in the third quarter. Income per basic ADS was $0.40 in the fourth quarter compared to $0.66 in the third quarter. Polysilicon inventory updates, starting from the fourth quarter of 2014, we provided the polysilicon inventory updates to the public investors. As you can see, we keep the polysilicon inventory at a very low level. Currently, our average daily polysilicon output is around 18 metric tons to 20 metric tons. At the end of recording period, our polysilicon inventory was only 22 metric tons. Financial conditions, as of December 31, 2014, the company had $29.2 million in cash, cash equivalents and restricted cash compared to $30 million as of September 30, 2014. Account receivable balance was $8.7 million compared to $6.8 million as of September 30. The notes receivable balance was $50.2 million compared to $36.8 million as of September 30. Net PP&E was $559 million, increased from $517.9 million as of September 30. The increase in PP&E was due to Phase 2b polysilicon expansion projects. As of December 31, 2014, total borrowings were $237.1 million, of which $77.3 million were long-term borrowings compared to total borrowing of $246.4 million, including $116.6 million long-term borrowing as of September 30, 2014. We repaid net of $6.6 million bank borrowings in the fourth quarter of 2014. Notes payables were $48.9 million as of December 31, 2014 increased from $28.7 million as of September 30, 2014. As of December 31st, the available credit facility for bank notes was approximately $8.5 million compared to $4.8 million as of September 30, 2014. Cash flows, for the 12 months ended December 31, 2014, net cash provided by operating activities were $45.6 million compared to $47.7 million for the nine months ended September 30, 2014. Note that in today’s business environment and so the industry, the majority of the customer payment is in the form of bank notes. Usually, the maturity date is within six months. Before the maturity date, it is recorded as notes receivable on the balance sheet. The company can discount the bank notes into cash by paying interest expenses. Nevertheless considering the notes would recourse the cash obtained by discounting banking notes deemed as short-term bank loan and temporarily accounted for as cash provided by financing activities. We discounted $39.6 million bank notes in Q4 compared to $12.6 million in Q3. For the 12 months ended December 31, 2014, net cash used within investing activities were $90.6 million compared to $81 million for the nine months ended September 30, 2014. The increase was primarily related to capital expenditure Xinjiang Phase 2b polysilicon project. As of December 31, 2014, the company recorded capital expenditure of $81.1 million from Xinjiang Phase 2b, of which $18.1 million incurred in the fourth quarter of 2014. We expected to further spend $56.4 million in 2015 and another $14.4 million in 2016. For the 12 months ended December 31, 2014, net cash provided by financing activities was $44.3 million compared to $38.1 million for the nine months ended September 30, 2014. Again the unused line of credit as of September 31st were $8.5 million compared to $4.8 million as of September 30. Now the full year 2014 financial results, revenue. Revenue increased by 67.5% from $109 million in 2013 to $182.6 million in 2014. The increase in total revenue is primarily attributable to higher sales volume as well as higher ASP for both polysilicon and wafers. The company shipped approximately 5,962 metric tons of polysilicon and 70.4 million pieces of wafer during 2014 compared to 4,240 metric tons of polysilicon and 33.5 million pieces of wafer for 2013. Gross profit for 2014 was $43.3 million compared to gross loss of $26.1 million in 2013. Gross margin was 23.7% in 2014 compared to negative 23.9% in 2013. The improvement in gross margin and gross profit from 2013 was primarily due to improved cost structures and much higher average selling price for both polysilicon and wafer. SG&A expenses for the year of 2014 were $10.3 million, compared to $18.1 million in 2013. The decrease in SG&A expenses was primarily due to the reversal of provisions for bad debts in 2014 with the settlement of long ageing receivables. As a result of the above, operating income was $32 million in 2014, compared to operating loss of $200.6 million in 2013. Note that the company recognized $158.4 million impairment loss for the long-lived assets of its Chongqing polysilicon facility in the second quarter of 2013. No such loss was recognized in 2014. Operating margin was 17.5% in 2014. Net interest expense decreased from $19.2 million in 2013 to $15.3 million in 2014. The decrease from 2013 was primarily due to the decrease in bank borrowing balance. Income tax expenses were zero in 2014, compared to a $1.3 million for 2013. As a result of the factors described above, we had net income attributable to our shareholders of $16.7 million, compared to a net loss attributable to our shareholders of $70.9 million for 2013. Income per basic ADS were $2.02 for the year of 2014, compared to a loss per ADS of $10.25 for the year of 2013. And that concludes the official part of our presentation. Now let's have the Q&A session. Andrew, please?

[Operator Instructions] The first question comes from Philip Shen of ROTH Capital Partners. Please go ahead.

Hi, Bing, Gongda. Thank you for taking my questions.

Hey, Philip.

Hey. So, we’ve seen poly pricing fall from 20 bucks to about 17 bucks recently. Given the continued use of the process trade loophole through much of 2015, how do you expect poly prices to trend in Q2 and Q3?

Well, I think it seems, yes. So the poly price right now is like 17, or little bit more than 17 range. So, we are expecting process trade will be [impacted] [ph] and probably will be around the end of Q2. Like we last time, we discussed in California. Secondly, China’s demand, it will be pick up from Q2. We see some signal for improvement in shipment, especially for recent weeks. I think the worst time for the weak market is around after Chinese New Year. I think it will be in the March time. So, we still strongly believe that second half in China, the market will recover. Two reasons is the demand for Chinese installations as national guidance for about 18 gigawatts, and secondly, I think the process trade should be totally stopped by latest August of 2015.

Okay.

We are also monitoring. And we are also monitoring import data there very closely and we do see the signs of slowdown after import from overseas.

Okay. Great. In your release, I think you indicated that the Phase 3 expansion could occur in two stages. Can you just give us a little more color and detail on what the two stages might look like, maybe in terms of timing and…?

Yes. Of course like I said, so Phase 3 is still in early stage of study before the design. The decision of the Phase 3 depends on the market conditions and also our financial condition of the company. We are looking for 30,000 metric tons. So the cost if you just with a new fab will be very close to about US$300 million, which is too big for us to one-stage project like that. So if we cut down to the half, most likely our thinking is will be a two stage kind of project. So we can increase 5,000 to 6,000 metric tons project. We can greatly reduce amount of capital we are required to finish such a project. So like I said in the presentation, basically we will utilize the remaining equipments in Chongqing or relocate to Xinjiang, plus with much less cash required to finish about 5,000 to 6,000 metric tons project like that, which will be more feasible for us in the environment. We still -- at this moment, we see -- most likely, we will start like end of this year, some fundamental work for the construction. But the major construction will be -- if we do, will be major, we will do next year and we will finish by end of next year, most likely we’ll be online by earlier 2017.

Great. Thank you, Gongda. Thank you, Bing. I will jump back in queue.

Thank you, Philip.

Thank you.

The next question comes from Gordon Johnson of Wolfe Research. Please go ahead.

Thanks for taking my question. Hey, how are you? I guess my first question is somewhat of a follow-up on the last question. Clearly, polysilicon prices have been quite weak this year. Can you give us some, I guess some of the puts and takes on why you think pricing has been weak and then what are the key attributes to bring prices higher? And then with respect to the Q1 guidance, I’m just doing some back of the envelope calculations here. But given your manufacturing costs in Q4 was $13.23 per kilogram and right now polysilicon prices in Q1 have averaged $18.46. If I use those two numbers for Q1 that’s $5.23 per kilogram for each poly sold. So, if I take your one - your 1,500 metric tons of guidance, that gets you to 7.845 in gross profits but given your net interest expense and OpEx is about $9 million. That means that using all those numbers, it looks like we could see a loss in Q1 of this year. So, I guess could you address two questions? Thank you.

So, we have not talked about Q1 yet. But we will have - hopefully, we will reveal the data by next month. First of all, we mentioned that our Q4 data is -- earning compared with Q3 is less, purely because of SG&A costs increasing. That’s one-time increase only. Our normal - cost is normally of [indiscernible] $3 million range. So this quarter is – we reported fourth quarter is much higher. And so I don’t think your calculation is right. I don’t want to clearly discuss Q1 data at this conference call time.

I think in the first part of the question you asked us about our view on the ASP trend.

Yeah. ASP trend is low. We knew that because last year, we saw that Q4 up to whole 2014 import poly is about 100,000 metric tons for whole year. So it’s much higher than historical high and also the Chinese installation last year is lower than expected. So that’s pushed the poly price to continue going into the 2015… And I think the first quarter of China installation normally is weak. And we already see some pickup for production for the downstream. And we do expect the Q3, Q4 were continuous improvement. So I think at least we will say the poly price will be stabilized in the Q2 and there is a chance for Q3 and Q4 going up a little bit because of the process trade of poly will be totally stopped by Chinese [diluting] [ph] for last year.

So I just want to add a little bit comment on Q1 projection. Just like Dr. Yao said, we don’t normally comment on our Q1 projected financial. So we can talk about the market trend a little bit. And ASPs are right. Q1 still looks a little bit of going downtrend compared to Q4 market ASP wise. But SG&A expenses like Dr. Yao said, if you look at our previous quarters, like we always mentioned our normal quarterly SG&A is around $3 million. And this time like I mentioned, there are lot of like a one-time expenses. So you have to take that into consideration. And also in this Q4, we bought some external TCS so which our cost increased a little bit. This is not the best quarter cost-wise. But we believe going forward that we can still doing our best cost-wise. And so take those into consideration, I think we are optimistic for our future operation, yes.

Okay. That’s helpful. And then lastly, could you guys just talk about -- there has been some I guess concerns around project business in China with respect to curtailment and the ability to collect the FIT. I think Chinese module maker was on record saying, once they connect, it takes 12 months actually get to FIT payment. Could you guys give us any update on what you are seeing there, any improvements, lack of improvement or any kind of color you can give there? And thanks for the questions.

Yes. Hi, Gordon, that’s a very difficult question for us. So we heard it is taking about six to 12 months connecting those things. So this is historically that’s the issue for -- in China for downstream. So that’s affecting the cash is very tight for our customer and especially for the installation in China. And I do not have a much detail like you see because actually we do not participate on those kind of field. But all the knowledge we learn is like a public data for our customers releasing data as same as you can see. So I have no further comments on that.

Thanks again.

Next we have Pierre Maccagno from Dougherty. Please go ahead.

Hey, good morning, Gongda and Sun.

Good morning, Pierre.

Congratulations on your execution for the -- by the end of June. So I wanted to get a little bit more feedback on the price of silicon. So I mean the price of silicon, I mean do you believe that there is not going to be an impact from the price outside China? I mean the price is same outside versus inside China or there is a difference there that you expect going forward.

We do expect some price difference, but as you know, the poly, I think the price difference much less right now is probably you know that is about 70% of the consumption of polysilicon for solar application will be in China anyway. So we do see some very aggressive price cuts for the foreign import poly and because they want to sell this in the market and some of them worry about the process trade and those will be closed. So we saw very aggressive setting in the Q1, especially March timeframe. We do see some kind of stabilize in current month at least. And then as we enter into April, of course it’s too early to say second quarter will be stabilized, but we expected the price will be stabilized because demand for China will pick up in Q2, especially for this year because we -- first quarter Chinese gave guidance for 2015 installation, which is very, very good news. And this is much better than normal year. And it’s clear it’s the one of the top objective of National Congress Conference as the environment improvement. Of course the solar is one of the answers to China to improve the energy structure and also clean energy initiatives. So we have high confidence for Q2 and Q3 where few of the improvement upon Q1 performance. So we do believe the current poly price is not normal at least we will say is because of pushing from the import poly aggressive again into China and also by the first quarter is typical Chinese market weaker quarter because of the Chinese New Year and also the weather conditions, such as normal as every year. So we do not thinking best price will be stable for long time. So we believe Q2 will be stabilized and Q3, Q4 where price were going back to bit of a high than current stage at least. That’s our projection.

Yes. Pierre, I just want to add a comment. If you compare the EBITDA margin from our margin with those international poly makers you can still see we are enjoying a much better EBITDA margin. Therefore, the international poly makers, it’s not sustainable for them to just dumping the polythene to China.

So when you say poly stabilizing, can you give us a rough estimate of what are your thoughts Q3, Q4? I know you have to guess, but a rough guess what you think the price could be?

Okay. We are -- of course the future Q3, Q4 price wise and we just -- as I said, we are just expecting, but we can see from the demand point of view, we roughly mentioned that we knew on limited increasing in China for poly supply. Of course, we noticed that WACO said that they will commission the plant in the USA. Again, those output from WACO’s North America will not able to compete China because otherwise there were base tariff above 50%. So our view, our strong view on the Q3, Q4 is totally because Chinese demand and we are in the processing to deal with few more companies for long-term supply of polysilicon. I think it’s almost standby for which is where we secure our this second expansion, second phase expansion additional 6000 metric ton capacity supply, new supply, we will secure this new contract and those things are doing very well. So we think the demand in China will be increased -- still continue incremental increasing from quarter to quarter. I think within that and also we look at the cost structure of our competitors, I think the $17 is really very close to the limited they can offer. And as Bing said, looking our numbers we still can have positive profit at this price, but many competitors will face much, much difficult financial conditions. So, that’s why we believe current price probably would be better, if not better, they are of course better. I think will be either demand increasing, we believe those price can -- price will be improved into Q3 and Q4.

Yeah. If we assume the big poly makers, their cost of structure, if we believe their structure is at the $15, let’s just make the assumption. So we have 25% gross margin, the price has to be at the $20, right. That’s all I can add, yeah.

Okay. So do you, I mean, internal to China, do you worry about any overproduction of silicon maybe GCL and what about the FBR process that so many people talk about lower cost?

Of course, we worry about competitive things. We are -- we closely looking at changing the market. So far I do not believe FBR will be materialized in 2015. And I think we will continue cost leader in this industry in China. So I still believe China produced polysilicon cannot meet all the Chinese demand. So China still needs to import some poly from outside China in 2015. So those two things will not significantly change in 2015.

Okay. Well, great. Thank you very much and good quarter.

Thank you. Thank you, Pierre.

Thanks.

The next question comes from Mr. Wei Feng from Luminus Management. Please go ahead.

Hi, Dr. Yao and Sun. Good job on managing the working capital in Q4. Just coming back to that operating expense, sorry, so many people already asked that question? But when you say $3 million SG&A or that’s $3 million roughly operating expense per quarter at the normal level?

This is Bing. What I’m saying is the $3 million is the normalized the SG&A expenses for each quarter.

By just adding R&D and everything is probably $3.2 to $3.5 per quarter.

Right. That’s roughly right.

Thanks. And sort of wafer being a sec, can you give us more color on processing cost and ASP in Q4? And that’s -- you mentioned 10% gross margin for wafer in Q4, that’s pure wafer margin not including poly margin, right?

Not included poly margin, right.

Right, right, right. Because we still have arms-length transaction, which mean we sale poly to internal. We’ve been in this segment after the market price. That’s correct.

And ASP and processing cost?

We normally don’t include that detail.

Okay.

But what I can share with you is the decrease -- the $0.04 decrease in cost in the current period from the last period. Out of the $0.04, $0.02 is from the reduction in the raw material cost, which is a poly cost and the $0.02 reduction is from the processing cost.

Got you. And you mentioned the CapEx will be roughly another $56 million in 2015 and $60 million in 2016, that’s for phase 2.

That’s correct. If you add everything, I think you should have come up to $150 million approximately. That’s also on this project.

Okay. Got you. And excluding the growth CapEx when we look at the maintenance CapEx, once you finish ramp ups of the phase 2, what is the run rate of maintenance CapEx?

Hey, Wei, rephrase your question? Sorry.

So you have the growth CapEx and you should have sustaining CapEx or maintenance CapEx?

We don’t really recall the sustaining CapEx. What we have, we have the maintenance cost, which has already been included as part of the production cost.

Okay.

That’s normally like…

The other thing, in 2015, your CapEx probably is $56 million and in 2016 if you don’t expand phase 3, it will stay at $16 million only.

That’s correct.

That’s correct. Yeah. Perfect.

And there is some news that and you actually discussed the power price across the country by 4% to 5% and in your power supply contract, would you benefit from that price cost 4% to 5% or ……

No. We are using the local grade. It is not same as steady grade. We already about only like 40% or even lower compared with the average national state grade. So we will enjoy some about 3% to 4% after phase -- our current expansion finished, so when we ramp up to 12,000 metric ton, we will have another 4% reduction in electricity cost.

That’s procured our savings?

Right. That’s because due to agreement we signed in about one year ago. And at the end of the 2013, we actually made some announcement at that time is regarding the further expansion of further decreasing electricity into the capacity yeah.

Got you. And last question for me. The foreign currency translation, my understanding is non-cash, right. Can you give us some color on what is it about?

Yeah. This is more like accounting question and it’s just the way you translate it financial report from the RMB to U.S. dollars. That’s really has nothing to do with operation at all. It’s not like transaction related.

Okay. So it’s non-cash. Okay. Thanks.

Yeah. It is non-cash.

That’s all. Thanks.

Thank you.

The next question comes from Vincent Yu of SWS Research. Please go ahead.

Hi, Mr. Yao and Sun. This is Vincent Yu from SWS Research. I have two questions. The first question is that our people are talking about a potential cut-off [indiscernible] of solar at the beginning of the year 2015. So if that’s true, there could be some interesting rush orders in Q3 and Q4. So do you guys have any ideas about that? That’s one question. And question two, is that based on your understanding, is that in a new capacity coming up in China, I mean locally? So, probably two questions there.

Second question is we do have very solid things for 2015, as we will increase 6,000 metric tons. And we know the Asia silicon, maybe will increase some but their positives not finished yet. So it’s maybe, they will add on maybe 3,000 metric tons capacity, that’s what we know. As I know because GCL is fully FBR, but how much they can add now is the other question we don’t know. With regard to tariff cutting, actually I didn’t hear any official announcement. But normally for any reasons, just for the financial reasons, Q4 always is rushing quarter in China regarding the tariff conditions. But the tariff cutting is something I never will officially find anywhere. But I don’t know. I don’t know those. Fourth is always a rush quarter in history. Yeah.

Okay. Okay. Cool. Thanks. So, we can expect any stronger stock price for poly?

We’re expecting Q3, Q4 as very good quarter but next year is hardest. Okay.

Okay. Thanks. Thanks. Thanks.

This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Bing Sun, CFO, for any closing remarks.

Again, thanks everybody for joining us in this call. And as always, if you guys have any further questions afterwards, just feel free to contact me directly or talk to Kevin. Thanks again.

Thank you.

Good morning. Bye-bye.

Bye.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.