At the beginning of last year, Daqo Energy (688303. SH, share price of 18.99 yuan, market value of 40.737 billion yuan) A "sky-high" lawsuit with suppliers attracted great attention from the market, and at that time, the plaintiff demanded compensation of 1.959 billion yuan from Daqo Energy.

After more than a year in this lawsuit, there is now a new "twist". On the evening of April 16, Daqo Energy announced that the company recently received a summons and a complaint from the Intermediate People's Court of the Eighth Division of the Xinjiang Production and Construction Corps. The company's suppliers, Xinjiang Xian'an New Materials Co., Ltd. (hereinafter referred to as Xian'an New Materials, also known as Plaintiff 1) and Xinjiang Dengbo New Energy Co., Ltd. (hereinafter referred to as Dengbo New Energy, also known as Plaintiff 2), applied for a change in their litigation claims, requesting the court to order the termination of the Business Cooperation Agreement signed between Xian'an New Materials and Daqo Energy in January 2022, and ordering Daqo Energy to pay Dengbo New Energy 541 million yuan for profit losses, with a total amount of 743 million yuan.

The reporter of "Daily Economic News" noticed that for the litigation dispute with the supplier, Daqo Energy has always insisted that "the plaintiff's litigation claims are not recognized". Since the lawsuit has been remanded for retrial and the plaintiff has not yet held a trial after changing the claim, the final actual impact on Daqo Energy's current and future profits and losses has not yet been determined.

The plaintiff's claim amount: 388 million yuan→ 1.959 billion yuan→ 1.848 billion yuan→ 743 million yuan

The reporter of "Daily Economic News" learned that this lawsuit is a litigation dispute between the company and the supplier on the performance of the contract and the quality of the subject product.

It is reported that Plaintiff 1 and Plaintiff 2 are affiliated enterprises, both of which are silicon core processing services provided by Daqo Energy, with Daqo Energy providing polysilicon materials, Plaintiff 1 is responsible for silicon rod crystal pulling, and Plaintiff 2 is responsible for silicon core cutting.

This contract dispute originated in 2022. In January of that year, Daqo Energy and Plaintiff 1 signed a Business Cooperation Agreement, agreeing to use the outsourcing mode to hand over the polysilicon to Plaintiff 1 and its related parties for silicon core processing. At the same time, it is agreed that on the premise of ensuring compliance with the quality index requirements of Daqo Energy, when the paid-in registered capital of Plaintiff 1 reaches RMB 33.49 million or more, Daqo Energy and its affiliates shall have exclusive procurement obligations to Plaintiff 1 and its affiliates. In July 2022, Daqo Energy signed the Annual Contract with Plaintiff 2.

However, after the expiration of the validity period of the Annual Contract (April 30, 2023), Daqo Energy did not renew the new contract with Plaintiff 2 and did not issue a purchase order to Plaintiff 2. The plaintiff claimed that it had reason to believe that Daqo Energy and its affiliates had switched to cooperating with other suppliers on their own, which constituted a fundamental breach of the Business Cooperation Agreement, so they filed a lawsuit with the court demanding that Daqo Energy compensate it for economic losses totaling 388 million yuan.

In September 2023, the plaintiff applied to the court to change the claim and increase the amount of compensation from 388 million yuan to 1.959 billion yuan. In January 2024, Daqo Energy officially entered the response procedure for contract disputes with two suppliers; In May last year, the plaintiff changed and withdrew some of the claims, and the amount involved was adjusted to 1.848 billion yuan.

In July last year, the results of the first instance of the case were released, and the court ruled that Daqo Energy should compensate the plaintiff a total of 3.1581 million yuan, and rejected the plaintiff's other claims, and the two plaintiffs continued to appeal against the judgment. In March this year, the Production and Construction Corps Branch of the Xinjiang Uygur Autonomous Region High People's Court ruled that the case was remanded for retrial.

Recently, the plaintiff once again changed its claim and requested an order to terminate the "Business Cooperation Agreement" signed between Xian'an New Materials and Daqo Energy; Daqo Energy was ordered to pay Dengbo New Energy RMB 541 million for the loss of profits caused by the defendant's breach of the Business Cooperation Agreement, and Daqo Energy was ordered to pay two third parties a total of RMB 190 million for the equity transfer price for the acquisition of all the shares of Xian'an New Materials. According to the announcement, the total amount of the plaintiff's five claims is temporarily 743 million yuan.

In 2024, the performance will turn from profit to loss, and many senior executives and core technical personnel will leave

Up to now, the above-mentioned case has been remanded for retrial, and the first instance is pending. Daqo Energy said that the case is not expected to adversely affect the company's daily production and operation. "The company always attaches importance to operating in accordance with the law, does not recognize the plaintiff's litigation claims, and will assert its legitimate rights and interests in accordance with the law, and take relevant legal measures to effectively protect the company's reputation and shareholders' interests."

According to public information, Daqo Energy is one of the four giants of polysilicon in China. In 2022, Daqo Energy made a net profit of 19.1 billion yuan by virtue of the high price of polysilicon.

However, then the polysilicon industry fell into a cold winter, and Daqo Energy's performance began to "change its face". According to Daqo Energy's 2024 annual performance report released at the end of February this year, as the domestic polysilicon industry was still facing the dilemma of supply and demand imbalance last year, product prices even fell below the company's cash cost, and the company's performance decreased significantly compared with the same period in 2023. After preliminary accounting, the company will achieve operating income of 7.411 billion yuan in 2024, a year-on-year decrease of 54.62%; The net profit attributable to the parent company was -2.718 billion yuan, a year-on-year change from profit to loss.

At the same time, the reporter of "Daily Economic News" also noticed that since 2024, many senior executives and core technical personnel of Daqo Energy have resigned. At the end of October last year, Wang Xiyu, the company's director, general manager and core technical personnel, resigned as the company's director, general manager and member of the special committee due to job adjustment. At the beginning of January this year, Wang Xiyu applied for resignation from the company's position for personal reasons and no longer held any position in the company.

In March this year, Ma Xiaoliang, the company's core technical personnel, resigned due to the expiration of the labor contract and no longer renewed the labor contract with the company for personal reasons.

Cover picture source: Photo by Liu Guomei, Daily Economic News