REC Silicon ASA Trading Update
REC Silicon ASA (REC Silicon) reports that due to ongoing negative effects from the trade war between the US and China and the recent decline in PV market conditions, lower sales than previously anticipated have occurred in the third quarter. As a result, third quarter polysilicon sales volumes (excluding fines and powders) are now expected to be approximately 1,800 MT. There continue to be ongoing negotiations between the US and China towards a resolution of the trade war. But, as it is a political process, timing and outcome of such a resolution remain uncertain.
Third quarter revenues are currently expected to be USD 45-50 million, compared to USD 71.1 million in the previous quarter. The decrease in revenue can be mainly attributed to lower FBR sales volumes.REC Silicon’s cash balance as of September 22, 2016 is USD 81 million.Third quarter total polysilicon production volumes (excluding fines and powders) are forecasted to be roughly 3,900 MT, compared to guidance of 4,490 MT. FBR production is forecasted at 3,300 MT, compared to guidance of 3,830 MT. FBR cash cost is expected to be in line with guidance of USD 12.0/kg.
Semiconductor production and silicon gas sales volumes are expected to be in line with guidance of 250 MT and 800 MT respectively. The company is taking measures to maintain a healthy cash position and manage inventory levels. The company will adjust production capacity utilization according to market demand and currently anticipates running at approximately 50% of full capacity at Moses Lake by October 1, 2016. Production is expected to run at reduced rates until market conditions improve. The company will continue to limit capital expenditures to critical maintenance.
Semiconductor polysilicon and silicon gas production in Butte will be unaffected, as those product lines are not affected by the solar trade war or the recent negative PV market developments. Construction and spending on the Yulin joint venture plant remains on track for start-up in the second half of next year. With regard to the company’s joint venture payment obligations, the relevant agreements permit deferral of the $15 million second capital contribution until at least July 2017, and negotiations are underway with the joint venture partner to defer the company’s second and third capital contributions, totaling $169 million, beyond 2018. Without a resolution to the trade war and if REC is unable to make its contributions, the agreements also permit the company to forego making its remaining contributions, in which case, its equity position in the joint venture would be diluted accordingly.
