PRESENTATION
Disclaimer
SECOND QUARTER 2018
This presentation includes and is based, inter alia, on forward-looking information and statements that are subject to risks and uncertainties that could cause actual results to differ. These statements and this presentation are based on current expectations, estimates and projections about global economic conditions, the economic conditions of the regions and industries that are major markets for REC Silicon ASA's (including subsidiaries and affiliates) lines of business. These expectations, estimates and projections are generally identifiable by statements containing words such as "expects", "believes", "estimates" or similar expressions. Important factors that could cause actual results to differ materially from those expectations include, among others, economic and market conditions in the geographic areas and industries that are or will be major markets for REC Silicon ASA's businesses, energy prices, market acceptance of new products and services, changes in governmental regulations, interest rates, fluctuations in currency exchange rates and such other factors as may be discussed from time to time in the presentation. Although REC Silicon ASA believes that its expectations and the presentation are based upon reasonable assumptions, it can give no assurance that those expectations will be achieved or that the actual results will be as set out in the presentation. REC Silicon ASA makes no representations or warranties, expressed or implied, as to the accuracy, reliability or completeness of the presentation, and neither REC Silicon ASA nor any of its directors, officers or employees will have any liability to you or any other persons resulting from your use.
This presentation was prepared for the second quarter 2018 results on July 19, 2018. Information contained herein will not be updated. The following slides should be read and considered in connection with the information given orally during the presentation.
REC Silicon ASA shares have not been registered under the U.S. Securities Act of 1933, as amended (the "Act"), and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Act.
| REC Silicon Q2 Financial Results |
T. Torvund, CEO |
| Financial Overview |
J.A. May II, CFO |
| Market Outlook |
T. Torvund |
| Trade Update |
T. Torvund |
Yulin
JV Update |
T. Torvund |
| Short Term Strategy |
T. Torvund |
| Guidance |
T. Torvund |
|
|
Q & A
Highlights 2018
| Revenues: |
(\$58.9M |
| EBITDA: |
(\$ 9.6M) Loss |
Continued Strong Silicon Gas Sales Volumes
- Sales Volume of 918MT (2.4% Increase vs. Q1'18)
- 2.1% Silane Gas Price Increase vs. Q1'18
June 30, 2018 Cash Balance of \$42.4M
- Cash Decrease of \$69.6M
- Debt Repayment of \$59.5M (Net)
- Cash Outflows from Operations \$7.1M
FBR Cash Cost of \$13.4/kg
- FBR Capacity Utilization Decreased to ~25% in June
Yulin JV Operating at Reduced Capacity Utilization
- ~1,000MT of Granular Produced in Q2'18 (Secondary Quality)
- ~1,800MT Produced YTD vs. Target of 8,000MT for 2018
Impairment Charges of \$340.4M
- Market Disruption Due to Curtailment of Solar Incentives in China
- Market Barriers Prevent Access to Primary Polysilicon Markets in China
- ~30% Workforce Reduction in Moses Lake on July 2, 2018
Polysilicon
Sales Volume ** |
|
| Total |
2,077MT |
| Inventory Increase |
401MT |
| FBR Production |
|
| Actual |
2,078MT |
| Guidance* |
2,280MT |
| Deviation |
-8.8% |
| Total Polysilicon Production |
|
|
| Actual |
2,491MT |
|
| Guidance* |
2,660MT |
|
| Deviation |
-6.4% |
|
| Semiconductor Production |
|
|
| Actual |
267MT |
|
| Guidance* |
270MT |
|
| Deviation |
-1.0% |
|
| Silicon Gases Sales Vol. |
|
|
| Actual |
918MT |
|
| Guidance* |
910MT |
|
| Deviation |
0.9% |
|
** Guidance Presented April 26, 2018
** Excludes Fines and Powders
5 © REC Silicon ASA. All rights reserved. Confidential July 19, 2018
FINANCIAL REVIEW
| (USD million) |
Q2 2018 |
|
Q1 2018 |
|
YTD 2018 |
|
|
Revenues |
EBITDA |
Revenues |
EBITDA |
Revenues |
EBITDA |
| Solar Materials (Moses Lake) |
20.4 |
(15.9) |
32.7 |
8.4 |
53.1 |
(7.5) |
| Semiconductor Materials (Butte) |
38.6 |
14.4 |
37.7 |
17.5 |
76.3 |
32.0 |
| Other |
- |
(8.1) |
- |
(10.8) |
- |
(19.0) |
| Eliminations |
(0.0) |
(0.0) |
(0.8) |
(0.4) |
(0.9) |
(0.5) |
| REC Silicon Group |
58.9 |
(9.6) |
69.6 |
14.6 |
128.6 |
5.0 |
Key Financial Results 2018
Solar Materials
Revenues: \$20.4M (37.7% Decrease vs. Q1'18) EBITDA Contribution: (\$15.9M) Loss
- › Polysilicon Sales Volumes 1,742MT (32.0% Decrease vs. Q1'18)
- (7.2%) Average Price Decrease vs. Q1'18
- (5.0%) Prime Grade Solar Price Decrease vs. Q1'18
Semiconductor Materials
Revenues: \$38.6M (2.3% Increase vs. Q1'18) EBITDA Contribution: \$14.4M
- › Polysilicon Sales Volumes 335MT (1.9% Decrease vs. Q1'18)
- 7.7% Average Price Increase vs. Q1'18
- 5.9% Semiconductor Grade Price Increase vs. Q1'18
- › Silicon Gas Sales Volumes 918MT (2.4% Increase vs. Q1'18)
- 2.1% Silane Price Increase vs. Q1'18
Other and Eliminations
Net Cost: \$8.2M(27.7% Decrease vs. Q4'17)
› Higher Expenses in Q1'18 Due to Efforts to Monetize Non-Core Assets and Re-Finance Debt
EBITDA Loss of (\$9.6M)
- › Solar Grade Polysilicon Price Decrease of 7.2%
- › Lower Production Volumes FBR Cash Cost of \$13.4/kg
- › Includes Bad Debt Expense of \$2.2M
- › High Silicon Gas Sales Volumes
Revenues EBITDA
SECOND QUARTER Cash Flows 2018
Cash Outflows From Operating Activities (\$7.1M)
- › EBITDA Loss of (\$9.6M)
- › Working Capital Decrease \$11.1M
- Inventories \$8.9M; Receivables \$6.4M; Payables (\$4.1M)
- › Interest Payments (\$6.2M)
- › Other (\$2.4M)
- Currency Loss of (\$1.9M) (Stronger USD)
Cash Outflows From Investing Activities (\$3.0M)
- › Capex \$0.6M (Included in Other)
- › Increase in Restricted Cash (\$2.3M)
Cash Outflows From Financing Activities (\$59.5M)
- › (\$ 56.6M) Repurchase and Maturity of REC03
- › (\$111.3M) Repurchase of USD Convertible
- › \$110.0M Issue of Senior Secured USD Bond
- › (\$ 1.6M) Loan Costs
Liquidity at June 30, 2018
Nominal Debt - \$136.0M
- › Decreased by (\$58.3M) in Q2'18
- (\$108.5M) Repayment of USD Convertible
- (\$ 58.6M) Repayment of REC03
- (\$110.0M) Issue of USD Senior Secured Bond
- (\$ 1.2M) Due to Weaker USD Relative to NOK
Nominal Net Debt - \$93.6M
- › Increased by \$11.3M in Q2'18
- Decrease in Cash of \$69.6M
- Increase in Nominal Debt of (\$58.3M)
Indemnity Loan - \$25M
- › Callable Beginning in February 2016
- › Has not Been Called
- › Due Date is Uncertain
Reassessment of Tax - \$31M
› Uncertain Timing and Outcome
MARKET OUTLOOK
GTM Global PV Installation Forecast 2018
- › Global Installations to Fall in 2018 After Changes from China, US, and India
- › China Announced Policy Changes that Will Severely Impact Installations in 2018
- › US 201 Went into Effect in February Pulling Down Imports
- › India Has Proposed Anti-dumping Duties on Modules/Cells From China, and Malaysia
- › All Other Markets Have Demand But Have Put Purchases With Expectations of Lower Prices
Source: GTM Research, PV Pulse (July 2018)
IHS Predicts Lower Demand for Q3 But Rebound in Q4 2018
IHS Markit, Technology Group, IHS Markit PV installations Tracker - June 15, 2018
Polysilicon Prices Dropped Sharply in Q2'18 2018
- › Market Prices Declined Due to Reduced Demand in China
- › REC Prime Grade Solar Price Decreased 5% vs. Q1'18
- Contracted Early in the Quarter
- › REC Expects Prices to Remain at Current Levels During Q3'18
Copyright © 2018 PVinsights.com All rights reserved
SECOND QUARTER
四、 "531"新政背后的深意 Implications of "531" PV New Policy
SECOND QUARTER 2018
- 到2020年光伏发电平价上网之后,中国光伏电站年度新增安装量会接近100GW,全球安装量在200GW左右
- By 2020, when the PV power generation achieved grid parity, China's annual PV installation will be close to 100GW, and global PV installation will be around 200GW.
Source: Shaanxi Non-Ferrous July 2018
China Continues to Dominate Investments Within Polysilicon, Ingots and Wafers
SECOND QUARTER 2018
PV-Tech : Solar Media Market Research May 2018 (Report 2018/9)
More Diversity
Competitor View on Cost of FBR vs. Siemens 2018
- › FBR Power Consumption ↘62%
- › FBR Labor Cost ↘58%
- › FBR Capex and Depreciation ↘27%
- › FBR Production Cost is 41% Lower Than Siemens
SECOND QUARTER FBR is the Most Cost Competitive Way to Produce Polysilicon for the Solar Industry
© REC Silicon ASA. All rights reserved. Confidential July 19, 2018
TRADE WAR UPDATE
US & China are Potentially Preparing for a Negotiation on Trade Relations
- › Section 201
- Affects all Imported Cells & Modules into US from all Countries
- 4 Year Remedy Announced Effective in Early February 2018
- 30% Tariff on Cells & Modules, Stepdown to 5% Over 4 Years
- 2.5 GW Cell Quota
- › Section 301
- Chinese Solar Cells & Modules Named on Recent Section 301 List
- › Potential Tariffs in Excess of 90% for Chinese Cells and Modules
- Section 201 Tariffs Cumulative to Existing AD/CVDs on Chinese & Taiwanese Cells and Modules, Any Section 301 Tariff Also Cumulative
- Chinese Solar Cell & Modules Now Less Than 1% of Total US Solar Product Imports (in 2018)
- › President Trump Express Commitment to Pursue Settlement for US Polysilicon
- New USG is Focused on Value of US Polysilicon Industry
- Section 201 Announcement Noted "The U.S. Trade Representative Will Engage in Discussions…that could lead to positive resolution of the separate antidumping and countervailing duty measures currently imposed on Chinese solar products and U.S. polysilicon..."
The Solar Trade War Has Created Turmoil For The US Solar Industry
SECOND QUARTER 2018
21 © REC Silicon ASA. All rights reserved. Confidential July 19, 2018
YULIN JV UPDATE
Yulin JV Current Production Status 2018
Fluid Bed Reactor Status:
- › ~1,800 MT Granular Polysilicon Produced Through End of June 2018
- › Remaining FBR Reactors Ready to Start
Silane Unit Status:
- › Silane 20 Unit Running at Half Capacity
- › Silane 10 Unit Started on July 10, 2018
Siemens Reactor Status:
- › Siemens Reactors Finishing Pre-production Preparations
- › Commercial CZ Production Continues
- › FZ Production Started Up
Total Investment Within Budget of \$1.25 Billion
SHORT TERM STRATEGY
25 © REC Silicon ASA. All rights reserved. Confidential July 19, 2018
Butte Semiconductor Materials Business Status 2018
- › Strong Silicon Gas Market
- TFT
- Semiconductor
- › Semiconductor
- Float Zone
- Only 2 Companies Able to Meet Quality Requirements
Global EV Outlook 2017
Semiconductor Grade Polysilicon Sales 2018
- › Semiconductor Polysilicon Sales Increased 17.6% Compared to Q1'18
- › Successfully Qualified for Semiconductor Grade Customers
- Float Zone
- Semiconductor CZ Grade
- › Expect to Sell ~280MT in Q3'18
SECOND QUARTER
Strong Silicon Gas Sales 2018
› Silicon Gas Sales Volumes 918MT
- 2.4% Increase Compared to Q1'18
- 13.7% Increase Compared to Q2'17
- › Continued Strong Demand in Silicon Gas Markets
- › Expect to Sell ~900MT in Q3'18
Moses Lake Solar Materials Business Strategy 2018
Actions Taken:
- › Reduced FBR Utilization
- Operating at ~25% Capacity
- Manage Inventory Levels
- › Layoffs on July 2, 2018
- Workforce Reduction of ~85 Employees (~30% of Moses Lake)
- › Reduced Costs
- Match Spending to Current Production Levels
Next Steps:
FBR Production Aligned with Sales 2018
29 © REC Silicon ASA. All rights reserved. Confidential July 19, 2018
| FBR Production |
|
FBR
Cash Cost |
|
|
| Q3 |
1,200MT |
Q3 |
\$15.9/kg |
|
| Q4 |
1,200MT |
Q4 |
\$15.2/kg |
|
| 2018 |
7,606MT |
2018 |
\$12.4/kg |
|
|
|
|
|
|
|
Total Polysilicon Production |
| Q3 |
1,630MT |
| Q4 |
1,640MT |
| 2018 |
9,284MT |
| Semiconductor Production |
|
|
| Q3 |
300MT |
|
| Q4 |
320MT |
|
| 2018 |
1,137MT |
|
| Silicon Gas Sales |
|
|
| Q3 |
900MT |
|
| Q4 |
960MT |
|
| 2018 |
3,675MT |
|
2018 CapEx
* |
|
| Maintenance |
\$3M |
|
|
** Additions to Property Plant and Equipment
Q3 2018 Reporting October 24, 2018
Have a nice summer!
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