REC Silicon ASA - Fourth quarter 2015 results

Fornebu, Norway - February 12, 2016: REC Silicon ASA (REC Silicon) reports fourth quarter revenues of USD 74.9 million, compared to USD 87.5 million in the previous quarter. The corresponding EBITDA during the fourth quarter was a loss of USD 29.6 million compared to a loss of USD 14.1 million for the previous quarter. The decrease in revenue and EBITDA can be attributed to lower sales volumes, the recognition of USD 7 million in bad debt expense and approximately USD 6.1 million of write down of finished inventories to estimated net realizable values during the fourth quarter.

 

Fourth quarter total polysilicon production volumes were 3,022 MT, or 2% over guidance of 2,980 MT. FBR production was 2,321 MT, exceeding guidance of 2,220 MT, and semiconductor production was 288 MT, compared to guidance of 300 MT.  FBR cash cost was $16.50/kg for the quarter, compared to guidance of $17.10/kg.

 

Silicon gas sales volumes were 709 MT, slightly above guidance of 700 MT.  However, silicon gas sales prices were 2% lower than the previous quarter.

 

REC Silicon will also recognize an impairment of USD 151.5 million, due to anticipated lower future prices caused by the uncertainty from the solar trade war been the US and China and the impact of Moses Lake production curtailments and the oversupply in the polysilicon industry.

 

Due to ongoing negative effects from the trade war between the US and China, the company has been prevented from accessing the Chinese market during the fourth quarter, which has resulted in lower sales than previously anticipated.  As a result, fourth quarter polysilicon sales volumes were 2,740 MT, compared to guidance of 4,855 MT, and finished goods inventory decreased by 131 MT, compared to guidance of 1,700 MT of inventory depletion.  Additionally, average sales prices for solar grade polysilicon declined by 4% compared to the previous quarter.

 

In order to reduce existing inventory levels and maintain a healthy cash position, given the current market conditions in the ongoing solar trade war, the company will shut down the Silane IV unit and remaining FBR production in Moses Lake.  Production is currently expected to be shut-down from February until June of this year, dependent on the ongoing negotiations towards a resolution in the solar trade war and the general market development outside China.  The company intends to perform equipment inspections and preventative maintenance on Silane IV while the unit is shut-down and will utilize current employees to perform this inspection and maintenance work. Additionally, also on account of existing inventory levels, Silane III, which has been out of production since July 2015 and was previously expected to resume production in January 2016, is also expected to remain out of production until there is a resolution to the solar trade war.  The company will continue to limit capital expenditures to critical maintenance.

 

Butte operations will be unaffected, as its product lines are not affected by the solar trade war.