OCI Holdings Company Ltd. (A010060) Earnings Call Transcript & Summary

Good afternoon. My name is Jae-Young Lee, and I am the CSO of OCI Holdings. Thank you for joining our earnings call of the third quarter of 2024. I will present with the materials posted on our website. Page 6, let's begin by reviewing the consolidated financial results for the third quarter. For quarter 3, OCI Holdings reported consolidated sales of approximately KRW 909 billion and an operating income of KRW 21 billion. Compared to the previous quarter, this represents a decrease of 4% in sales and a significant decline of 77% in operating income. The main reasons for the decline in earnings compared to the previous quarter include the underperformance of OCIM solar grade polysilicon business and increased cost in our urban development projects. As shown in the earnings analysis by subsidiaries on the bottom right, OCIM sales and operating income have decreased significantly. Additionally, the increased construction cost of KRW 38.6 billion (sic) [ KRW 37.6 ] from DCRE were reflected in Q3, resulting in a shift to an operating loss. Page 7 is the consolidated statement of financial position. At the end of the third quarter, we hold assets of KRW 7.93 trillion and liabilities of KRW 3.79 trillion (sic) [ KRW 3.079 trillion ]. Both assets and liabilities increased compared to the previous quarter. The main reason for the increase in assets was the increase in current assets due to OCIM's inventory and noncurrent assets from CapEx investment. Despite the decrease in borrowings, the debt ratio increased due to the increase in account payables related to urban development construction and the receipt of long-term advanced payment from OCIM customers. Starting on Page 8, I will explain the earnings by each major subsidiary. Page 8 is OCIM. Uncertainties related to the AD/CVD investigations in 4 Southeast Asian countries have led to a decline in operating rates among our key customers located in those countries. This has resulted in a loss of sales volumes for our non-China polysilicon. Looking ahead to Q4, we anticipate that our customers' operation strategy will become visible following the outcome of the presidential election and the AD tariffs result. Nonetheless, we expect to see a demand recovery for non-China polysilicon for the U.S. utility projects in 2025. Page 9. For Ocean Enterprise, both revenue and operating income increased and turned profit. In fourth quarter, we will conclude the sale of another 206-megawatt solar project and with additional projects in OCI Energy's pipeline, we expect to secure stable revenues moving forward. Page 10 is the earnings from OCISE, our cogeneration power plant. In third quarter, as the marginal price increased, both sales and operating income improved. Q3 sales reflected both increases in new steam supply and REC, while falling raw material prices helped profitability. Page 11 is the result of DCRE, the urban development project. In Q3, as mentioned in the consolidated earnings part, this share return rose due to the recognition of additional construction cost of KRW 37.6 billion settled with construction consortium for the presold complexes. Fortunately, the presale of Phase 4, Phase 6 was successfully completed, and we are set to begin recognizing related revenue. Page 12. Finally, regarding OCI's performance, they announced their results yesterday, and I encourage you to refer to the relevant materials for detailed information. Next, moving on to management update. I will briefly explain solar value chain trends and U.S. solar market impacting our polysilicon business. Page 14. In brief, the solar market continues to face challenges due to oversupply from China. The third quarter saw a decline in transaction volumes and falling prices while end demand remained weak compared to supply. In Q3, both China and non-China spot price indexes remained stable, while prices in China saw a slight increase due to uncertainties surrounding antidumping duties in the U.S. on solar products from 4 Southeast Asian countries, major solar manufacturers in that region are continuing with operation suspension while maintaining limited operations strategy. As for the U.S. solar market, imports of solar panels from the 4 Southeast Asian countries decreased in the third quarter. However, low-cost solar modules continued to flow in the U.S. market and along with accumulated inventory, prices for U.S. models continue to decline. From Page 16, you can refer to update for major subsidiary. Page 16 is about the growth of ERCOT, electricity market in Texas, where OCI Enterprise is located. Page 17 is about OCI Energy's solar business strategy and project pipelines. And Page 18 details of OCIM's investments that are progressing despite short-term headwinds. Page 20 shows the presale results for DCRE Phase 6. The last page, Page 21. For the last, I will highlight on our stance on shareholder returns. The KRW 40 billion worth of treasury shares purchased in the second quarter was retired on October 18 and the KRW 20 billion purchase under new trust agreement is currently underway. We will complete this KRW 20 billion buyout within the fourth quarter. OCI Holdings plans to continue its proactive shareholder return policy, including additional treasury share purchases based on a stable financial structure. This concludes our third quarter earnings presentation. If you have any questions related to the results, please reach out to our IR team. Thank you for joining. Have a nice evening. Thank you.