NEWS WRAP: GCL Tech profit plummets on falling polysilicon prices

The maker of a key ingredient for solar panel production said its revenue fell 6.2% last year, as it recorded a 3 billion yuan loss in the second half of the year

By Doug Young

GCL Technology Holdings Ltd. (3800.HK) said on Friday its revenue fell slightly last year and its profit plunged, as booming demand for new solar power plants was offset by plunging prices for the polysilicon that is the company’s main product.

GCL said its revenue fell 6.2% for the year to 33.7 billion yuan ($4.68 billion), while its profit tumbled by 85% to 2.5 billion yuan. Calculations using company data show its revenue fell to 12.8 billion yuan in the second half of the year, down 39% from the first half. As its revenue tumbled, the company lost 3 billion yuan in the second half of the year.

GCL shares rose in Monday morning trade in Hong Kong and were up 5.4% at the midday break. The stock is still down about 28% over the last 52 weeks.

Demand for solar panels has boomed over the last two years, as countries rush to build new solar power plants to reduce their carbon emissions. At the same time, solar panel makers and their upstream suppliers have added huge amounts of new production capacity to meet the booming demand. The result has been oversupply for the overall industry, which has led to falling prices and big profit declines for most companies.

After soaring in 2022, polysilicon prices peaked last year and have been falling since then. GCL said its average selling price for polysilicon was 76.8 yuan/kg last year, less than a third of the price of 228.5 yuan/kg for 2022. GCL rival Daqo (DQ.US) last month reported its average selling price for polysilicon in last year’s fourth quarter was just $7.97/kg, less than a quarter of the $37.41/kg it was selling for a year earlier.

As a result of lower prices, GCL’s gross profit margin fell to 34.7% last year from 48.7% in 2022.

“In 2023, the price of polysilicon decreased sharply throughout the year due to the reversal of supply and demand of polysilicon and had since been lingering at the bottom. Profit contribution from the solar materials business for the year ended 31 Dec. was significantly lower than that for the year ended 31 Dec. 2022,” GCL said.

The company said its own manufacturing capacity nearly doubled last year to 420,000 MT by year-end, up by 200,000 MT since the start of the year. It added it will continue to add capacity this year, raising the total to 500,000 MT. As it boosted its capacity, the company’s production last year rose to 232,256 MT of polysilicon, more than double its 104,723 MT for 2022.

After growing 28% annually between 2019 and 2023, new solar panel installations worldwide have entered a new stage of slower growth. Wood Mackenzie predicts there will be no growth at all in new solar panel installations between 2024 and 2028, and that new installations could even contract in some of those years.

That demand slowdown, combined with the addition of so much new solar panel production capacity in such a short time, means that prices are unlikely to rebound significantly for companies like GCL for at least the next few years.

To subscribe to Bamboo Works free weekly newsletter, click here