Now we'll begin the presentation of Hanwha Solutions' Fourth Quarter Result for the Fiscal Year 2024.
Good afternoon. I am Yoon Ahn-sik , CFO of Hanwha Solutions. I'd like to thank everyone for joining the call today. I will brief you on the business performance, financials, and outlook by segment for Q4 and for the whole year 2024. First, the company's performance during the fourth quarter.
Please refer to page nine of the presentation. In the fourth quarter 2024, consolidated revenue reached KRW 4,642.9 billion, reflecting an approximately 69% increase Q- on- Q, driven by higher module sales in the Renewable segment and increased revenue from development assets. The consolidated operating profit recorded KRW 107 billion, turning profitable Q- on- Q.
This was due to the Renewable Energy segment, which remained in the black despite the reflection of approximately KRW 60 billion in one-time expenses related to overseas subsidiaries, as well as the inclusion of KRW 96.7 billion in revenue from the sales of the Ulsan company housing site and other segments. Pretax profit recorded negative KRW 276.6 billion. Net profit stood at negative KRW 124.4 billion.
For your reference, approximately KRW 300 billion in one-time expenses was reflected in other gains and losses in Q4. This includes an impairment loss of about KRW 110 billion at investment stocks such as REC Silicon, as well as about KRW 150 billion related to the restructuring of certain overseas subsidiaries in the Renewable Energy segment and impairment loss on idle assets. For detailed performance by segment, please refer to the bottom of page nine.
Now, let me brief you on the annual performance for 2024. Please refer to page 10 of the presentation. On a consolidated basis, the revenue recorded KRW 12,394 billion, down about 5% year- on- year, impacted by a decline in module shipment in the Renewable segment and the lower ASP of the key products in the chemical segments.
Consolidated operating profit turned negative, recording negative KRW 300.2 billion due to the continued weakness in the solar module prices and the worsening market conditions for the key chemical products. Pretax profit stood at negative KRW 1,342.4 billion and the net profit at KRW 1,289 billion. For detailed performance by segment, please refer to the bottom of page 10. Next, on financials. Please refer to page 11.
As of the end of 2024, the total assets of the non-financial sectors stood at KRW 29,438.3 billion, an increase of KRW 6,027.9 billion compared to the end of the previous year. Cash and cash equivalents increased by KRW 160 billion year- on- year, reaching KRW 2,242 billion. Total liabilities of the non-financial sectors increased by KRW 4,853.4 billion from the previous year to KRW 19,168 billion.
Borrowings rose by KRW 3,238 billion to KRW 12,588 billion, while net borrowings increased by KRW 3,078 billion to KRW 10,346 billion. As of the end of 2024, the debt-to-equity ratio of the non-financial sector increased by 30 percentage points year- on- year to 187%, while the net debt ratio rose by 21 percentage points to 101%. Next, I'll brief you on the performance by segment for the fourth quarter of 2024. First, Renewable Energy.
Despite the impact of the one-time expenses from the certain overseas subsidiaries in Q4, operating profit turned positive, recording KRW 60.6 billion, driven by the revenue from the development asset sales. In the first quarter, revenue improvement is expected in the module and other business due to the base effect of the one-time expenses incurred in the previous quarter.
However, revenue from the development asset sales and the EPC segment is anticipated to decline. The development asset sales and EPC are expected to maintain a steady growth trajectory, with annual revenue for 2025 projected at approximately KRW 4 trillion and a Q1 revenue estimated at around KRW 500 billion. Next, on C hemical segment. The Q4 operating profit recorded negative KRW 54.2 billion, with continued operating losses due to prolonged market weakness and the cost burden following the electricity rate hike in October.
In Q1, operating losses are expected to persist as sales volume is projected to decline due to the scheduled maintenance. Next, Advanced Materials. In Q4, despite the absence of the summer holiday effect from the previous year, the operating profit turned negative, recording negative KRW 2.2 billion. This was due to the weaker solar material prices and increased fixed costs from the initial operation of the U.S. new plant.
While revenue increased Q- on- Q, the OP declined. In Q1, profitability is expected to be impacted by rising raw material costs for lightweight materials. However, as the initial fixed cost burden of the new plant stays, overall performance is projected to improve compared to the previous quarter. Next, on equity-method gains. In Q4, equity-method losses increased Q- on-Q , recording negative KRW 125 billion.
Though Hanwha Impact posted a profit, this was offset by widened losses at YNCC and other equity-method affiliates. In Q1, excluding the one-time expenses incurred in the previous year, the scale of the equity-method losses is expected to decrease. However, as the recovery of the petrochemical market remains sluggish, the overall deficit trend is likely to continue.
Lastly, I'd like to brief you on the company's mid-term long-term shareholder return policy and the dividend plan based on the 2024 fiscal year results. In February 2024, the company revised the mid-term long-term shareholder return policy to strike a balance between the growth investment for long-term corporate value investment and the short-term shareholder returns. Under this updated policy, we plan to distribute dividends based upon the greater of the 20% of the consolidated free cash flow for 2024 or KRW 300 per common share.
However, the final dividend proposal for the 2024 fiscal year will be confirmed following the BOD meeting scheduled for February 20th and will be disclosed through the cash and in-kind dividend declaration announcement. The final approval will be determined at the annual general meetings of shareholders. This concludes the earnings presentation. Thank you.
[Foreign language ]. Now, Q&A session will begin. Please press star one, that is, star and one if you have any questions. Questions will be taken according to the order you have pressed star and number one For cancellation, please press star two, that is, star and two on your phone. [Foreign language] . The first question will be presented by Jae-Sung Yoon from Hana Securities. Please go ahead with your question.
[Foreign language]
I have three questions for you. First is that you have mentioned about the one-time expenses multiple times during the earnings presentation. I'd like to know more about these one-time expenses or the gains. Can you please provide us with this summarization of them? The second question is about the U.S. solar module. What are the current levels of inventories, and when do you forecast the ASP will begin to rise again? The third question is about the YNCC, and there have been reports about the EOD issues, and I'd like to learn more about the company's response.
[Foreign language] .
Let me explain to you about the one-time expenses that have occurred in the fourth quarter of last year. So in the operating expenses or the operating profit side, there have been about KRW 60 billion expenses that were associated with the restructuring of some of the overseas subsidiaries associated with the Renewable segment. And there was the gain of KRW 96.7 billion won associated with the sales of the company housing in Ulsan. So with those reflected, operating profit for the fourth quarter has recorded KRW 107 billion.
[Foreign language] .
From the non-operating profit side, there was the cost of KRW 150 billion associated with the restructuring of the overseas subsidiaries of the renewable division, and the share price of REC Silicon went down. So that was reflected in the impairment loss of the investment securities, and the amount is KRW 60 billion. So all of those reflected, so the operating profit or the loss and the non-operating profit loss in the fourth quarter was KRW 300 billion.
[Foreign language] .
So let me respond to you about the question on the U.S. module inventory. As you are aware, there is no official data. So I believe that it is the practice of both investors and analysts to actually predict the inventory amount or to calculate the inventory amount based upon the volume that goes into the U.S. market and the amount of installation in the market.
So what we can tell you is that, of course, we cannot disclose any U.S. module inventory because we use the similar logic to actually calculate the inventory. And I believe that it is a hope for the market as well as the company that the overall module inventory for the U.S. market goes down so that the price ASP starts to rebound.
But unfortunately, the inventory data that we do have and that is being calculated by the investors and analysts cannot be relied upon 100%. So what we believe will be more relevant in this scenario will be the inflow of the modules that goes into the U.S. market. It seems that it peaked in May or the second quarter of last year, and it seemed to decline afterwards.
[Foreign language] .
So the decline in the volume that goes into the U.S. market means that the inventory that has been accumulated during those periods earlier than that are starting to decline. So we want that to lead to the higher ASP. But so far, for the fourth quarter last year, we have not witnessed any major change in the ASP.
And it seems that the ASP of the module for the U.S. market has been maintained at a very low, almost the lowest point in the market. But that might suggest that it will give rise to the increase in the ASP, hopefully in the near future. And one welcoming development is that we have not witnessed any dumping related or the dumping-like volume movement into the U.S. market.
So just to correct the last statement is that the dumping-like volume that goes into the U.S. market is declining, not disappeared completely.
[Foreign language] .
Regarding your question about the YNCC, as a major shareholder, we are keeping a very keen eye on its management conditions and the financial standings. And if there is any change, then we will act swiftly.
[Foreign language] . The next question will be presented by Dong-jin Kang from Hyundai Motor Securities. Please go ahead with their question.
[Foreign language] .
So the next question is to do with the Renewable segment. I understand that with the introduction of the Trump administration, so there has been massive change, or the changes are forecasted for the IRA and other associated policies, and some of the execution of the funds allocated are suspended or forecast to be suspended. So I'd like to learn more about the demand from the U.S. side.
Was there any change after this new administration taking its place? And the second question is about the new facility in the United States, about the wafer and the cell, and when do you expect the ramp-up in full scale will begin? And next is about the AMPC. So can you give us any guidance of the whole year? And if you had any guidance for the 2025 on the total shipment of the Renewable Energy, and that would be appreciated.
[Foreign language] .
So as you have mentioned in your question yourself, so there are many variables in the U.S. market and uncertainties. So that is why I believe that still many of the industry newsletters and the information sources do not necessarily reflect those rumored policy changes because it is not confirmed yet. So for now, so nothing has changed.
So it will be too premature for us or anyone else to assume what's to happen in the future when it comes to the U.S. renewable policy. So that is why many of the industry information sources use the U.S. installation as the baseline number, and as of the end of 2024, the installed volume for the U.S. market is 40 gigawatts, and for the year 2025, the forecasted growth for the whole market is around 10% or less. We expect that the baseline scenario for the market for the year 2025 will be in the 400 gigawatt range, quite similar to that of the previous year.
[Foreign language] .
Your second question about the timing of when the wafer and the cell facility that we have in the United States will be fully ramped up. So the timing has not changed as to what we have disclosed earlier. So we expect those facilities, the construction of those facilities, to be completed in the middle part of 2025. And we expect the full ramp-up or the full utilization of the facility to take place sometime in the second half.
[Foreign language] .
With regards to the AMPC, we have reflected KRW 190.1 billion for the fourth quarter of last year. So that makes the total AMPC for 2024 KRW 555.1 billion. For the year 2025, we forecast the AMPC to be somewhere around KRW 900 billion to KRW 1 trillion.
[Foreign language] .
As for the total shipment, the guidance that we have given you for the 2024 was eight gigawatts, and the actual was quite similar to that figure, and the guidance that we can share with you for the year 2025 will be nine gigawatts plus.
[Foreign language] .
Let me give you the guidance on the development asset sales and the EPC as well. The guidance figure that we have shared with you in terms of the revenue for the year 2024 was KRW 2.5 trillion, but we actually overperformed that, and we ended the year with a KRW 2.9 trillion. For the year 2025, we expect the total revenue for the year will be somewhere around KRW 4 trillion, but the first quarter revenue is expected at around KRW 500 billion because it has a tendency to pick up towards the later parts of the year. We expect the quarterly revenue will increase towards the second half or afterwards.
[Foreign language] . The next question will be presented by Jinho Lee from Mirae Asset Securities. Please go ahead with your question.
[Foreign language] .
I have two questions. First, about the net debt and the CapEx. Net debt as of the end of third quarter was KRW 10.5 trillion, but it went down to KRW 10.4 trillion at the end of the fourth quarter. It declined by KRW 0.1 trillion or 100 billion won. Considering the CapEx and the free cash flow and the ramping up of the new facility, can you share with us the guidance of the free cash flow and other related figures?
The second question is actually a follow-up question about the guidance that you have shared with us for the sales of the development asset. You said that for the first quarter of 2025, you expect the revenue from the segment will be about KRW 500 billion. Does that include the sales of the development asset, or does it only compose of the EPC sales?
[Foreign language] .
So let me respond to your second question first. In the KRW 500 billion guidance figure that we have shared with you just now for the first quarter of this year, it includes not only the EPC sales and also the sales of the development asset.
[Foreign language] .
Let me share with you the CAPEX for the year 2024. We have invested KRW 3.1 trillion. That includes the facility investment into the U.S. When you look into five segments, the renewable accounted for KRW 2.2 trillion, and the chemicals accounted for KRW 4.9 trillion.
[Foreign language] .
For the year 2025, we expect the CapEx of KRW 2 trillion, which can be divided into KRW 1.6 trillion for the renewables and KRW 0.4 trillion for the chemicals and others.
[Foreign language] .
One additional comment about the Free Cash Flow. As you're aware that we are continuing to invest into the Solar Hub in the United States, which will continue towards the middle part of 2025. Afterwards, we expect the CAPEX and the amount of CAPEX that is required to decline, and therefore the increased cash flow or the improvement of the cash flow.
[Foreign language] . The next question will be presented by Parsley Ong from J.P. Morgan. Please go ahead with your question.
Hi, thank you for the chance to ask questions. So I have a couple. I think firstly on your Renewable Energy division, the fourth quarter we saw pretty good performance for development asset sales, and you guided KRW 4 trillion revenue for 2025.
But historically, the margins for this division are quite volatile depending on the type of projects. So could you give us some kind of color on the major projects behind this KRW 4 trillion, and therefore what kind of margin should we be expecting? Negative margin, break even, 5%, 7%, 10%? And I guess in the longer term, I think in the past, this is part of Hanwha's longer-term strategy to grow its solar division. So is there a 2030 target in terms of revenue for this division that you can share with us? And what would be the longer-term margin target that you have for this division?
The second question is on Hanwha Impact and Total. I joined the call a little late, so sorry if you already covered it earlier, but could you give us some color on the fourth quarter, what drove the fourth quarter earnings improvement, and whether you think this is sustainable for 2025? How much of it are you expecting to continue into 2025? So those would be the two questions. Thank you.
[Foreign language] .
[Foreign language] .
We can share with you the revenue or the sales guidance, but we cannot do the same with the margin. I hope you can understand the challenges that are associated with those margin figures. What we can share with you is our mid- to long-term strategic direction, which you can find in detail on page 22 of the earnings presentation.
Our aspiration is to reinvent ourselves from module producers and expand our business areas into more downstream areas such as installation and deliveries so that we can secure the higher margin in a more stable fashion. With our focus on the development asset sales, we are confident that we are generating these opportunities for higher value add.
[Foreign language] .
So on a mid- to long-term basis, when we look into the module, instead of selling the module to the external parties, we will be able to consume the larger volume for our EPC asset and the development asset rather than the EPC, so down the road, we will be selling out an extremely small amount of module outside, and we will be able to consume the majority in-house.
[Foreign language] .
Just to reiterate our mid to long-term strategy is that we want to move away from the simple module sales company, and we are in the process of restructuring our business structure so that we can be the total solution provider.
[Foreign language] .
So the response to you about the Hanwha Impact and the equity method gain and loss is that Hanwha Ocean, the method of treatment in the accounting has changed so that the differences between its book value and the fair market value are reflected in the investment asset. So that actually led to the equity method gain of KRW 100 billion.
So in the past, was there any change in the Hanwha Ocean's share price that impacted the performance of Hanwha Impact? But with those changes in the accounting treatment, it will no longer affect the quarterly or the performance of Hanwha Impact. But before eliminating that share price impact on the performance of Hanwha Impact, we had to do this one-time treatment, and that is the reason for this equity method gain and loss.
[Foreign language] . The next question will be presented by Joo-won Ahn from DS Investment & Securities. Please go ahead with your question.
[Foreign language] .
I have one question for you. What is your forecasted production volume for the N-type for the year 2025?
[Foreign language] .
So regarding the N-type, we have started the production and the sales in the second half of 2023. So the total sales and the production volume for the whole year 2024 is not that large, but we plan to continue to increase both the production and the sales volume in 2025. So we have given you the guidance for the whole year, which was 9 gigawatts, but I cannot give you the detailed breakdown because the transition into the N-type, the TOPCon is still underway, but the company is targeting around 30% of the total volume when it comes to the production and the sales.
[Foreign language] .
This concludes the earnings briefing for the fourth quarter of 2024 for Hanwha Solutions. Thank you very much for joining the call and hope to meet all of you with a better performance in the next quarterly call. Thank you and goodbye.