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Daqo New Energy Corp (DQ) Q4 2018 Earnings Conference Call Transcript

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Daqo New Energy Corp  (NYSE: DQ)
Q4 2018 Earnings Conference Call
March 13, 2019, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, and welcome to the Daqo New Energy Fourth Quarter and Fiscal Year 2018 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 event is being recorded.

I would now like to turn the conference over to Kevin He, Investor Relations. Please go ahead.

Kevin He -- Investor Relations Officer

Hello, everyone. I am Kevin He, the Investor Relations of Daqo New Energy. Thank you for joining our conference call today. Daqo New Energy just issued its financial results for the fourth quarter and fiscal year of 2018, which can be found on our website at www.dqsolar.com. To facilitate this conference call, we have also prepared a few PPT presentation for your reference.

Today, attending the conference call, we have Mr. Longgen Zhang, our Chief Executive Officer and Mr. Ming Yang, our Chief Financial Officer. The call today will feature an update from Mr. Zhang on market and operations and then, Mr. Yang will discuss the company's financial performance for the fourth quarter and fiscal year of 2018. After that, we will open the floor to Q&A from the audience.

Before we begin the formal remarks, I would like to remind you that certain statements of today's call including expected future operational and financial performance and industry growth are forward-looking statements that are made under the Safe Harbor provisions of the US Private Securities Litigation Reform Act of 1995. These statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement. Further information regarding these and other risks is included in the reports to -- or documents we have filed with or furnished to the Securities and Exchange Commission.

These statements only reflect our current and the preliminary view as of today and maybe subject to change. Our ability to achieve these projections is subject to risks and uncertainties. All information provided in today's call is as of today and we undertake no duty to update such information, except as required under applicable law. Also during the call, we will occasionally reference monetary amounts in US dollar terms. Please keep in mind that our functional currency is the Chinese RMB. We offer these translations into US dollars solely for the convenience of the audience.

Without further ado, I now turn the call over to our Mr. Zhang, our CEO.

Longgen Zhang -- Chief Executive Officer

Hello, everyone, and thank you for joining us today for our earnings call. I would like to thank our entire team for their hard work and dedication for delivering another outstanding quarter in which we successfully completed the Phase 3B project and ramped production up to full capacity by the end of November 2018, three months ahead of schedule.

During the quarter, we achieved a new record both in production volume and sales volume which were 7,301 metric tons and 7,030 metric tons, respectively. With the successful ramp up of our new Phase 3B facility and efforts of our operating team, both production volume and cost reduction targets were achieved with excellent results. During the fourth quarter of 2018, we successfully reduced our total production cost to $7.94/kg and our cash cost was lowered to $6.64/kg, representing our lowest cost structure in history. With our Xinjiang production facilities now running at full capacity, we expect to produce approximately 8,500 metric tons to 8,700 metric tons of polysilicon during the first quarter of 2019. Furthermore, with reduction in unit utility usage, operating leverage and other cost savings, we expect to further reduce our total production cost approximately $7.50/kg. In addition, we plan to conduct a capacity debottlenecking project to gradually upgrade several old CVD furnaces with improved technology, allowing us to increase production capacity by additional 5,000 metric tons. We plan to start this project in mid-March and complete it by the end of June. The debottlenecking project will have limited impact on production volume, therefore we expect to produce 7,600 metric tons to 7,800 metric tons of polysilicon during the second quarter of this year. Subsequent to completion of the debottlenecking project, we anticipate the Company will reach total annual production capacity of 35,000 metric tons.

The Phase 4A capacity expansion project is progressing smoothly and will increase our production capacity to 70,000 metric tons by the end of the first quarter of 2020 with an even lower cost structure once fully ramped up. In February 2019, we received approval from Bank of China for a RMB400 million 5-year fixed-asset capital project loan and a RMB50 million working capital loan. The Company has obtained a total of RMB830 million additional banking loans, including the loans from the Bank of China and credit facilities from other domestic Chinese banks, to support our capacity expansion and working capital needs. These loans will support capital expenditure for our Phase 4A project and enable us to complete it on schedule.

2018 was a challenging but also promising year for solar PV industry. The policies issued by the Chinese government on March -- on May 31, 2018 immediately impacted the market and resulted in a significant price decline across the entire value chain. However, this fall in price significantly stimulated demands from markets outside of China, especially when grid-parity has already been reached. The global solar PV market recovered rapidly in the following months and has since achieved equilibrium again, even with very limited contribution (ph) from China, the world's largest individual solar PV market.

A draft of China's solar policy for 2019 has already been released with the final version yet to be confirmed. The draft indicates a new incentive program based on a fixed subsidy amount rather than a fixed quota system as was previously done. The fixed subsidy amount is expected to be in the range of approximately RMB3 billion and could cover approximately 30 gigawatts to 35 gigawatts of installations. Poverty alleviation projects will be subsidized and funded separately. In addition, the market anticipates some grid-parity projects which will not require central government subsidies. Based on industry research, China's installation target for 2019 is anticipated to be approximately 40 gigawatts to 45 gigawatts, but there could be some variations in the final version of China's policy in 2019. Grid-parity and cost reduction will continue to play a key role in driving global demand from developed markets such as Europe and the US to developing markets like India, South Asia, Africa and South America. We expect global solar installations in 2019 to be approximately 120 gigawatts to 140 gigawatts.

We believe demand for polysilicon, which is the key ultra-pure raw material for crystalline-silicon solar PV module, will keep growing as solar PV becomes more and more competitive compared to other energy sources. We believe the current market challenges are temporary and should be resolved during the second half of 2019, especially when demand and installation from China recovers. Looking forward, we believe the solar PV industry has become much stronger and increasingly independent of policies and is expected to grow substantially -- sustainably over the long-term with better stability. The pace of new capacity expansion within the polysilicon industry will smooth out going forward. As a leading polysilicon manufacturer, we believe Daqo New Energy is ideally positioned to benefit from this fast growing market and will continue to outperform its peers with lower cost and better quality.

Outlook and guidance for this year. The Company expects to produce approximately 8,500 metric tons to 8,700 metric tons of polysilicon and sell approximately 8,400 metric tons to 8,600 metric tons of polysilicon to external customers during the first quarter of 2019. For the full year of 2019, the Company expects to produce approximately 37,000 metric tons (ph) to 40,000 metric tons of polysilicon, inclusive of the impact of the Company's annual facility maintenance.

This outlook reflects Daqo New Energy's current and preliminary view as of the date of this press release and may be subject to change. The Company's ability to achieve these projections is subject to risks and uncertainties.

With that, I will turn the call over to Ming, our CFO, who will go over our financials for the quarter. Ming, please go ahead.

Ming Yang -- Chief Financial Officer

Thank you, Longgen, and good day, everyone. Thank you for joining our call today.

Before I begin, I would like to remind everyone that the Company discontinued its Chongqing business subsidiary in the third quarter of 2018. The operational results of the Chongqing business have been excluded from the company's financial results from continuing operations and have been separately presented under discontinued operations.

Retrospective adjustments to the historical statements have also been made to provide a consistent basis of comparison for the financial results. Going forward, the Company will focus all of its resources and expertise on its core polysilicon manufacturing business.

For the fourth quarter of 2018, revenues from continuing operations were $75.6 million compared to $67.4 million in the third quarter of 2018. The sequential increase in revenue was primarily due to higher polysilicon sales volumes are partially offset by lower ASPs.

Gross profit was $16.9 million compared to $12.8 million in the third quarter of 2018. Gross margin was 22.4% compared to 19.1% in the third quarter of 2018. The sequential increase was primarily due to lower average polysilicon production cost partially offset by lower ASPs.

Selling, general and administrative expenses were $8.2 million for the quarter, compared to $7.6 million in the third quarter of 2018.

R&D expenses were approximately $1 million for the quarter, compared to $1.4 million in the third quarter of 2018. R&D expenses could vary from period-to-period and reflect R&D activities that took place during the quarter.

Other operating income was $12.5 million for the quarter, compared to $0.1 million in the third quarter of 2018. Other operating income was mainly composed of unrestricted cash incentives that the Company received from local government authorities, the amount of which vary from period-to-period.

During the fourth quarter of 2018, the Company received national innovation and technology development brands related to PV silicon materials as well as other government subsidies and incentives.

Income from operations was $20.3 million, compared to $4 million in the third quarter of 2018. Operating margin was 26.8%, compared to 5.9% in the third quarter of 2018.

Interest expense was $1.9 million, compared to $2.1 million in the third quarter of 2018.

EBITDA from continuing operations for the quarter was $29.5 million, compared to $14.8 million in the third quarter of 2018. EBITDA margin was 39.1%, compared to 22% in the third quarter of 2018.

During the third quarter of 2018, the Company decided to discontinue its solar wafer manufacturing operations. Results of the discontinued operations of the previous quarter and comparative quarter were represented accordingly. Loss on discontinued operations was $5.7 million in the fourth quarter of 2018, compared to $22.4 million in the third quarter of 2018.

Net income attributable to Daqo New Energy shareholders was $11.4 million in the fourth quarter of 2018, compared to net loss attributable to Daqo New Energy shareholders of $18.3 million in the third quarter of 2018.

Earnings per basic ADS was $0.86 in the fourth quarter of 2018, compared to loss per basic ADS of $1.39 in the third quarter of 2018.

Now, I will discuss the balance sheet. For the -- as of December 31, 2018, the Company had $94 million in cash and cash equivalents and restricted cash, compared to $113.2 million as of September 30, 2018. As of December 31, 2018, the accounts receivable balance was $1.2 million, compared to $1,000 as of September 30, 2018. Most of our polysilicon sales were made with customer payments prior to product deliveries and without payment terms. We continue to manage our accounts receivables prudently. As of December 31, 2018, the notes receivable balance was $8.1 million, compared to $22.5 million as of September 30, 2018. As of December 31, 2018, total bank borrowings were $171.5 million, of which $133.3 million were long-term borrowings, compared to total borrowings of $165.3 million, including $119.4 million of long-term borrowings, as of September 30, 2018. Our bank loan to asset ratio stood at a low of $0.20 (ph).

For the 12 months ended December 31, 2018, net cash provided by operating activities was $95.6 million, compared to $142.7 million in the same period of 2017.

For the 12 months ended December 31, 2018, net cash used in investing activities was $164.7 million, compared to $67.9 million in the same period of 2017. The net cash used in investing activities in 2018 and 2017 was primarily related to the capital expenditure on Xinjiang Phase 3B and 4A polysilicon expansion projects.

For the 12 months ended December 31, 2018, net cash provided by financing activities was $86.7 million, compared to net cash used by financing activities of $37.4 million in the same period of 2017. The company completed a follow-on offering of over $110 million in April 2018.

Now, I will discuss full year 2018 results. For the year of 2018, revenue from continuing operations were $301.6 million, compared to $323.2 million in 2017. The decrease in revenue was primarily due to lower average selling prices, partially offset by higher polysilicon sales volumes.

Gross profit for the full year of 2018 was $98.1 million, compared to $144 million in 2017. Gross margin was 32.5% in 2018, compared to 44.6% in 2017. The decrease in gross profit and gross margin was primarily due to lower polysilicon ASPs.

SG&A expenses were $27.1 million in 2018, compared to $16 million in 2017. The increase in SG&A expenses was primarily due to an increase of non-cash share-based compensation costs related to the Company's 2018 share incentive plan.

R&D expenses were $2.7 million in 2018, compared to $0.7 million in 2017. R&D expenses vary from period-to-period to reflect the R&D activities that took place during such period.

Operating income was $13.2 million in 2018, compared to $3.7 million (ph) in 2017, which mainly consisted of unrestricted cash incentives that the Company received from local government authorities, which vary from period-to-period at the discretion of the government.

Income from operations was $81.5 million in 2018, compared to $131.1 million in 2017. Operating margin was 27% in 2018, compared to 40.6% in 2017.

Interest expense was $10.8 million in 2018, compared to $16.3 million in 2017.

Net income attributable to Daqo New Energy shareholders were $31.1 million in 2018, compared to $92.8 million in 2017. Earnings per basic ADS were $3.06 in 2018, compared to $8.76 in 2017.

Adjusted net income non-GAAP attributable to Daqo New Energy shareholders was $71.6 million in 2018, compared to $99.5 million in 2017. Adjusted earnings per basic ADS non-GAAP were $5.74 in 2018, compared to $9.38 in 2017.

This concludes our prepared remarks. We would now like to turn the call over to the operator to begin the Q&A session. Operator, please begin.

Questions and Answers:

Operator

We will now begin the question-and-answer session. (Operator Instructions) The first question comes from Philip Shen of ROTH Capital. Please go ahead.

Philip Shen -- ROTH Capital Partners -- Analyst

Hi, everyone. Thanks for taking my questions. The first one, I would like to express for Q4 you reported $75.6 million of revenue, but if you take the volume of shipments times the average ASP for the quarter, I think we get $68 million, so can you help us understand the difference in that revenue. Because I think wafer you guys recognized -- its discontinuing operation now, so the wafer revenue I am guessing is not upon on that revenue number.

Longgen Zhang -- Chief Executive Officer

Hi, Phil, good to hear from you and thanks for joining our call. So as we have said before, so in the third quarter we discontinued our (inaudible) business subsidiary and then the operational results of Chongqing is now excluded. And so some of the revenue that we have recognized in Q4 has to do with revenue and financial adjustments related to the continuing and discontinuing operations and including some of the progress -- revenue recognition and profit allocation. So for example when we shutdown our Chongqing subsidiary still had for example, polysilicon ingots and polysilicon blocks. Now these were sold -- internal transfer without revenue recognized, but lot of the profit and revenue should have gone to Chongqing went after the wind down then we sold some of these ingots and blocks then the revenue and the profitability would go to the Chongqing and that happened in the fourth quarter. So that's where you are seeing the difference between the sales volume and the ASPs primarily (inaudible).

Philip Shen -- ROTH Capital Partners -- Analyst

Okay. Okay.

Ming Yang -- Chief Financial Officer

Yeah, the difference is around $7 million.

Longgen Zhang -- Chief Executive Officer

Yes. Right.

Philip Shen -- ROTH Capital Partners -- Analyst

Okay. Thanks for that. That's helpful. So on a go forward basis we probably will not see that, is this a fair thing to say, I am guessing (inaudible) that inventory?

Longgen Zhang -- Chief Executive Officer

Yeah. We would not expect that starting in 2019.

Philip Shen -- ROTH Capital Partners -- Analyst

Okay. And what kind of margin did you get on the ingots and blocks?

Longgen Zhang -- Chief Executive Officer

I don't have that -- if we exclude that $7 million, you can use the calculation the gross margin like 17%, right? Our extra gross margin 18%.

Philip Shen -- ROTH Capital Partners -- Analyst

Yes. We can calculate -- using your numbers. Thanks.

Ming Yang -- Chief Financial Officer

Yeah, we can calculate it.

Philip Shen -- ROTH Capital Partners -- Analyst

And then, also on Q4, you guys had other income about $12.5 million, which is bigger than I think you guys have had in the past.

Longgen Zhang -- Chief Executive Officer

Yes.

Philip Shen -- ROTH Capital Partners -- Analyst

So, can you talk to us about what -- how did you guys get that for the quarter? And then, I know you said in your prepared remarks that can vary, but do you expect to get that kind of benefit in Q -- anytime in 2019? Is that something we should actually factor into our models, or was this more of a one-time $12.5 million benefit for Q4?

Longgen Zhang -- Chief Executive Officer

Philip, let me answer that question. Basically, if you look at the history, every -- I think, Q4, we got some -- the subsidy -- I think, payback -- the governments payback some tax refund, OK. Basically, in October, we've received around US$11 million from local governments, which is we paid the tax, income tax, value-add tax in 2017, that tax belongs to local governments and they're supposed to back to us that we have contract signed with local government in 2015, so basically that will occur every year until 2020.

Philip Shen -- ROTH Capital Partners -- Analyst

Okay.

Longgen Zhang -- Chief Executive Officer

Is that clear?

Philip Shen -- ROTH Capital Partners -- Analyst

I think this is the biggest -- I'm looking through the Q4 past since 2015, it's definitely the biggest one.

Longgen Zhang -- Chief Executive Officer

Yes, 2017 we paid -- yes, 2017, we paid -- I think big amount of tax value -- VAT, all those, so refund in 2018, then this year, we'll get a refund from 2018 figure and the figure is not decided.

Ming Yang -- Chief Financial Officer

And let me follow up on what Longgen says, so because of the local government budget and fiscal year and planning, so most likely, most of the government incentives that we receive from government will generally occur in Q4, will generally occur in Q4. And then, we also apply for -- for example, technology grants and technology incentives. For example, this time we happen to receive pretty significant amount related to R&D for PV Silicon Materials from a National Technology Innovation grant. So, we continue to apply for these projects from time-to-time, and when these awards are given to us, then we will recognize those as well.

Philip Shen -- ROTH Capital Partners -- Analyst

Okay, great. Both of those responses are very helpful. Thanks. Shifting gears to kind of some more big picture perspective. Can you talk about how you guys see the polysilicon capacity ramping up on a -- for the industry and competitors, in Q1, Q2, we believe that it could be -- capacity in Q1 or production in Q1 could be up 40% year-over-year relative to the last year given all the expansions that we're seeing. Can you comment on kind of that expansion that you see ahead and then also how much at this current pricing level capacity could possibly exit the landscape and then we'll -- after that maybe we'll shift to demand? Thanks.

Longgen Zhang -- Chief Executive Officer

Okay, Philip, I think it's a good question. Basically, I think it's a lot of information data you see flies. And if you look the new capacity, I think we are the first one -- I think the 3B ramp up the production for -- production. Then other people most I think starting production like Tongwei, I'm not going specific, OK, they're going to ramping up maybe on the Q2 of this year, then other maybe ramping up in Q3. So basically, first of all, it's not all capacity will -- fully expected to run in this year, but definitely I think for next year, yes, a lot of new capacity will come in.

But total, add together, if you can see that, I think, even this year, I think the good quality, the better quality, and the lower cost maybe is around like 270,000 tons for this year. So basically, I'm not saying demand side, just say production side, I think the domestic high good quality products is not too much there. For example, I can say an example, in Q4 our monosilicon supply is around 61%. So, if you look our gross margin, our monosilicon price ASP is around like $10 and the multi is around $6.30 or whatever. Our ASP is around like, renminbi is around like -- US dollar maybe around like $9.50.

So, we see in Q1, we will get more improved on gross margin, the reason because -- first of all, the monosilicon percentage will increase to around 77% to 78%, then we didn't see the monosilicon price go down, because we think it's already lower, right now $10, because a lot of people actually the cost is probably above that even the foreign producer.

So then on the other side, yes, I think on the multi-silicon side, oversupply situation is coming, OK, we got the pressure and we still can -- the case of the quality today we're still selling above $9/kg. So, basically, from our side, we're still very optimistic, the reason because -- we see the Chinese -- I think the new policy is going to installation in more detail and in the second half of this year, we see the good picture there.

Secondly, the global market is there. And right now the downstream if you look at the module price right now, renminbi, the foreign currency maybe around like $0.25 -- $0.26 on the mono you see is very lower, actually grid-parity is there. So, basically, I'm not worried about that, because basically right now the ASP is already a lot of producer in China is consolidation. Even in foreign producer as they applies, we may be making gross margin 20%, our competitors right now I think is bleeding.

Philip Shen -- ROTH Capital Partners -- Analyst

Yes, on that point, Longgen, how many -- how much capacity do you think could go offline current pricing in the industry (Multiple Speakers)

Longgen Zhang -- Chief Executive Officer

In China, maybe around 250,000 tons, 270,000 tons.

Philip Shen -- ROTH Capital Partners -- Analyst

Okay. I just want to clarify. So, you think 250,000 tons could go away. Okay, great. And then, in terms of ASPs looking ahead, our checks suggest that there could be some upside to pricing near-term, let's say by 5% to 10%. Do you think that could be true? And if so why and then, how do you expect poly ASPs to trend by quarter through 2019?

Longgen Zhang -- Chief Executive Officer

Okay, basically, we right now is two forecasts. One is for the monosilicon to focus on the quality, to increase the monosilicon percentage go up. So Q1, we're around 77% to 78%. So, we see right now the monosilicon price is around renminbi is around like RMB81 to RMB83, in March it already increased one gram per kg, OK.

Then for the multi-silicon right now, we're selling around RMB70 to RMB72, but we -- yes, we got the pressure, because too much we supply, especially some new capacity right now, majority of the new products -- if the trial product is multi-silicon, OK. So, in Q2, we don't think the price will go up dramatically, maybe monosilicon is go up a little slightly, but not like you said 10% or 5%, I don't think so. And we hope already Q2 can continue to keep the price stable and then all of a sudden it continue -- monosilicon percentage continue to go up, so we can keep the ASP stable or slightly go up, but definitely we think second half of this year the ASP will go up. I'm not sure, because I cannot projecting whether it's 5% or 10%, it all depend on demand and supply.

Philip Shen -- ROTH Capital Partners -- Analyst

Okay. So, and a lot of that -- I think the demand part of the picture is something I think is not well understood. You mentioned in your prepared remarks that global demand is very strong and that number of countries are seeing that grid-parity and that China demand should support that. Can you talk to us about which specific countries perhaps your customers are highlighting as sources of strength, certain countries in Europe or Latin America, Southeast Asia, which countries in particular are you guys seeing as place -- places of surprise, if you will, of that upside of demand?

Longgen Zhang -- Chief Executive Officer

Okay. First of all, Philip, I'm not selling module, OK, I'm selling silicon. So, only I can tell is very strong demand from all clients downstream. Today every -- I think as you see that, LONGi, (inaudible) Jinko, Canadian Solar, all these company right now. But to answer your question I think in the script, I already say right now globally almost everywhere you see from developed countries to developing countries, especially, developing countries like India, South Africa, I think even South America we see that, then the developing country especially in Europe we see strong demand is there. I think you maybe can see Canadian Solar, I think in Jinko Solar, they are earning release, I think they may be around in later, I think the market is there.

So, the only thing I can tell you right now, LONGi, Jinko, as I know, I think Canadian Solar they're right now at full capacity running it right now.

Philip Shen -- ROTH Capital Partners -- Analyst

Okay. Thank you, Longgen, and thank you, Ming. I'll pass it on.

Longgen Zhang -- Chief Executive Officer

Thank you, Philip.

Operator

The next question comes from Gary Zhou of Credit Suisse. Please go ahead.

Gary Zhou -- Credit Suisse -- Analyst

Hello, gentlemen -- thank you management for talking my questions. It's Gary from Credit Suisse. So firstly, on the -- I have three questions. So firstly, on the policy side, so the management mentioned that you expect around 40 gigawatts to 45 gigawatts China solar demand this year. So, does management has a rough estimate and so how much of this demand may come out in this first half and how much in the second half? And secondly, so given the likely stronger demand into the second half of this year, so does the management can give us some color on the what kind of polysilicon price can shoot up into the second half this year? And lastly, so just of the company's electricity tariff cut at the end of last year, so what is the company's latest cash cost currently? Thank you.

Longgen Zhang -- Chief Executive Officer

Okay, Gary. I think, first of all, to answer your question, I think, China right now -- we estimated around 40 gigawatts to 45 gigawatts. Basically, the new policy is fixed to the subsidiaries amount. I think RMB3 billion as you know that, right, if they -- old system is fixed quarter, so we believe that will support around the 30 gigawatts. I think, pioneer projects or whatever. I think that -- those I think the majority we'll do second half of this year. And then plus, I think the poverty alleviation we believe we should be around like 5 gigawatts to 8 gigawatts, then plus grid-parity, I think around, maybe I think another 5 gigawatts to 8 gigawatts. So, basically to answer your question we are based on that, I think basis we're projecting that.

Then to answer your question. I think first of the year maybe around 10 gigawatts to 15 gigawatts, majority I think with second half of this year. So, I think second half maybe go to the 30 gigawatts to 35 gigawatts, even 40 gigawatts, because first half this year it's not too much there, only the last year's projects going to finish, that's to your first question.

To answer your second question is, how about the polysilicon price. As I just said, you see because as we -- I think the monosilicon especially, I think the module -- module took high efficiency, module demand is hot. We believe this year the mono and module will account around 60% to 70% even, so the monosilicon demand is hot. So basically, in the history, there's not too much Chinese producer can provide the monosilicon, majority is import as you can see there. Last year, the total consumption in polysilicon is around 41 metric tons, of which 140,000 tons (ph) is import, last year 400,000 tons, OK. So, this year I think the import should be below 100,000 tons. So, but the mono silicon total demand, I think it should be around like 250,000 tons to 300,000 tons.

So, basically, I think monosilicon price should go up. I think right now count is around 80% to 82% (ph), but I think reasonable second half of this year maybe go to about 85 to 90 (ph), but I don't think go beyond too much, because it's not good for the whole industry. And for the multi-silicon because of the supply and demand situation and still a lot of small producers in China, especially state-owned companies is still running -- even they are bleeding they are still running the money from governments.

So, I think they have suffered right now from last year Q4, Q1, Q2, hopefully some company should stop, should shutdown. So hopefully we can send you that. So, I don't think the multi-silicon price will import in Q2, but maybe in second half of this year, the price maybe will come back I think back to 75, around 75, so I think it will answer your second question.

The third question, I only can answer is Daqo last year we are successfully ramping up the 3B projects. So all of the electricity cost right now last year since the November 20, our oil cost is around $0.24 per kWH. And so right now Q1 we think oil cost will continue to go down, because of the -- I think the electricity costs continue to come down. So, the cash cost per Kg will control maybe below RMB41 per Kg. And by October 15 for the 4A, we are starting production. If we can ramp up then we can enjoy electricity cost around $0.20 per kWH. So, I think by the end of this year, if we can successfully reach or even ramping up for the first quarter of next year, 70,000 capacity, so oil costs will dramatically go down, so you can't see our cash cost is around like $6.50 -- even $6. Did I answer your question, Gary?

Gary Zhou -- Credit Suisse -- Analyst

Yes. Thank you very much. Just a very quick follow-on question, so can management share with us the latest progress of your first -- sorry Phase 4A expansion. And so also is that any kind of guidance on when we can have an estimate on when the Phase 4B -- the possible Phase 4B expansion will start? Thank you.

Longgen Zhang -- Chief Executive Officer

For Phase A, I think basically right now because Chongqing right now is in battle with that. So, our construction right now almost finished 18% and for the old design approval (inaudible) all finished. I think for the equipment, I think procurement, the contract we signed, total today, we've signed around RMB2.6 billion. The total project cost -- total cost is around below RMB2.9 billion. So basically our schedule starting to trial production is October 15. Up to to-date we are still thinking we are on the schedule and ramping production in the Q1 2020.

And for the 4B, we need to depend on the market see what's going on and also to see our future cash flow. So basically we are not determining when or whether we will go to starting 4B.

Gary Zhou -- Credit Suisse -- Analyst

Okay. That's helpful. Thank you.

Longgen Zhang -- Chief Executive Officer

Okay. Thank you, Gary.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Kevin He for any closing remarks.

Kevin He -- Investor Relations Officer

Thank you everyone again for participating in today's conference call. Should you have any query please don't hesitate to contact us. Thank you very much. Bye-bye.

Operator

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

Duration: 44 minutes

Call participants:

Kevin He -- Investor Relations Officer

Longgen Zhang -- Chief Executive Officer

Ming Yang -- Chief Financial Officer

Philip Shen -- ROTH Capital Partners -- Analyst

Gary Zhou -- Credit Suisse -- Analyst

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