Good morning and good evening. First of all, thank you all for joining this conference call. Now we will begin the conference on the Fiscal Year 2022 Q1 Earnings Results by OCI. This conference will start with a presentation, followed by a divisional Q&A session. If you have a question, please press asterisk and one. That is asterisk one on your phone during the Q&A. For cancellation, please press asterisk and two, that is asterisk two on your phone. Now we shall commence the presentation on the Fiscal Year 2022 Q1 Earnings Results by OCI.
Good afternoon. This is Woo-Hyun Lee of OCI. I would like to go with the 2022 Q1 earning announcement. I'll go to... I'll start with the page four, consolidated income statement section. 2022 Q1 , we have recorded slightly over KRW 1 trillion, which is about the similar the number compared to the last quarter, which is 2021 Q4 . However, our operating income went down by 26%, quarter to quarter from KRW 218 billion to KRW 162 billion. Mostly it was due to our planned maintenance of our Malaysia polysilicon factory. We haven't done any turnaround maintenance for Malaysia facility due to the corona pandemic.
However, this February and March, we have conducted six to seven weeks long the regular maintenance for our polysilicon facility that inevitably lowered our production volume. That somewhat negatively impacted our earnings because the production went down, so the total sales went down, however although the maintenance and operating costs went up. That was a negative impact, which was the main cause of this operating income decrease. Also, our petrochemical and carbon products experienced quite a skyrocketing raw material cost increase, and that also made a certain level of negative impact, which I'm going to discuss in more detail at a later stage. I'll go to page five in the basic chemical sector.
The polysilicon business account for quite substantial portion of our basic chemical business, so we would like to focus more on the polysilicon side. As I mentioned earlier, we have conducted the six to seven weeks long regular maintenance on Malaysian factory. This has been, I mean, quite substantial, the event because this is not only for our regular maintenance activity, however, this we have conducted the hooking up work for our 5,000 ton expansion that we currently is undergoing. After maybe one quarter later, we should be able to complete our 5,000 ton mechanical completion of our new capacity, which should be on stream by Q3 of this year.
However, during this year, due to the maintenance activity, overall production of polysilicon went down by 44% quarter-over-quarter. That also related to approximately 40% decrease in sales because of this maintenance. In addition to that, we normally have approximately two months of the lead time from the main raw material cost increase or decrease to the final pricing of the product. We have experienced quite rapid increase in metallurgical silicon price in last quarter, which means Q4 of 2021. That increase in raw material actually made a negative impact on our Q1 operation, and that also made a certain impact.
However, we were normalized most of metallurgical silicon purchasing during the Q1 of this year, so we do not expect any further impact on metallurgical silicon and this quarter, means Q2 of 2022. As I mentioned earlier, during this Q2 , we anticipate that we should be able to complete 5,000 ton capacity expansion in Malaysia factory, and hopefully we can go into the commercial scale operation of this additional capacity in Q3. Next is page six on our petrochemicals and carbon materials. If you look at the chart, the revenue is about the same from the last quarter of KRW 414 billion to KRW 417 billion. However, operating income went up from KRW 23 to KRW 34 billion. There are many things happen, especially the most substantial event was Winter Olympic Games.
One is the Winter Olympic Games in China, and also the Paralympics in China. During those Olympic periods, Chinese government has recommended many of those industry operation to minimize their operation rate in order to keep the clean air. That obviously made a negative impact on our operation in three manufacturing operation in China. OCI has two core chemical refinery business in China and one carbon black operation in China. We were only able to maintain approximately 50% of the operation rate during the Olympic Games. That inevitably increased our operating costs quite substantially.
In addition to that, due to the war in Ukraine, many of our raw materials went up quite substantially in the first quarter, and we were not fully able to pass through on this the raw material cost increase. However, we successfully managed diversifying our sales to many different areas. Despite all of these many negative issues in the Q1 , we were able to have some increased and improved performance during the Q2 . However, in the second quarter, we have another planned maintenance in our Pohang and Gwangyang factory, which are two large-scale factories.
Even though this is gonna be two weeks, however, that will inevitably also make some negative impact on our operations, or hopefully we can expedite this maintenance facility so we can minimize those the cost increase impact on our Q2 . I will go to page seven with Energy Solution business. If you look at the chart below, the revenue went up from KRW 140 to KRW 156 billion, mainly due to the increased price in SMP, which is the substantial portion of our revenue from the Energy Solution business. SMP normally decided by the electricity wholesale the trading market. Normally the SMP pricing is function of underlying energy cost, which is normally natural gas and the crude oil and also the coal pricing.
During the Q1 , due to the war in Ukraine, there was substantial increase in most of energy source globally. That made a substantial increase in raw material purchasing price. That inevitably impact on the SMP price. There was a 45% increase in SMP price in Q1 compared to the last quarter. That made us some positive impact on our operation. Also there was a 33% of increase in REC, which is renewable energy credit sales. The both factors made a positive impact on the performance segment of energy solution.
When you look at the next one, our SMP price in the second half of the Q1 , and during February, it went up all the way to KRW 200, which was pretty much the highest level since 2012. So long as the energy costs stay high, we expect it's actually quite a positive impact on our energy solution side. In Q2 , the LNG price is expected to go up even further, and normally it takes one or two quarters of some lag for the pricing. The outlook for energy market is actually going to be quite tight market. That might actually cause some positive impact on this energy solution segment.
While energy segments performed well during the Q1 , our page eight on the urban development sector. The urban development sector didn't go very well as planned. The Q1 , it stayed normal. As we successfully completed three times of our residential apartment sales unit of last year, as we announced earlier, we have sold over 3,700 apartment unit last year. That actually provide progressive revenue recognition that provide very solid revenue and earnings increase. If you go to Q2 outlook, we anticipated actually 1,700 apartment unit sales in this Q2 . However, due to some regulatory issue, inevitably we had to postpone our residential sales plan for approximately six months.
We originally planned to initiate 1,700 apartment unit sales in the Q1 , and we anticipate another 1,500 sales next quarter, and we anticipated another 1500 apartment sales in November. However, we changed these plans that we now change our schedule for going to one-time sales of more than 4,000 apartment sales in either October or November. Our revenue and the earning portion will be delayed by the six months from Q2 to the Q4 . That was somewhat disappointing event, but we didn't have much choice to follow the government the policy. That was the some downside for our some operation. In page nine, we're talking about financial position.
As we haven't done any of the apartment unit sales that which normally made a substantial impact on accounts receivable and inventory and accounts payable issue. Especially whenever we sell apartment unit, that made quite a difference in inventory numbers because now all those apartment volume will be recognized as a working inventory. However, this quarter, we did not have any sales, and Q2 we will not have any apartment sales units. Inventory numbers will actually stay pretty much the same. Accounts receivable number actually went up mostly because overall, as most of raw material globally went up substantially, so there was quite an increase in so all of our underlying final product pricing also went up.
As we have more sales in higher pricing, obviously, that caused some increase in the accounts receivable numbers. That was pretty much on those financial position. I will go with some market overview of the solar PV market in 2011. Until this quarter, polysilicon prices stayed relatively strong, mostly due to supply-demand imbalance. Still, I mean, there is some shortage of polysilicon as the market stays strong. The war in Ukraine that caused substantial energy cost increase and also Russia's somewhat actually unstable supply to many of the European countries, that sparked much more unprecedented demand in the EU sector for renewable energy, especially for solar energy. That creates some unexpected demand in Europe.
In China, they announced quite ambitious market growth plan, especially for 200 gigawatts of renewable energy project in remote desert area, so for this year and next year. This is a five-year plan in China. I mean, both of these plan actually caused very strong market rebound on overall demand. However, all of those raw material supplier has not been meeting all of this strong demand. I think in short to medium term, this strong polysilicon market will likely remain unchanged.
However, some of the downside is because of the war in Ukraine, it caused unusual surge in the many of those raw material, especially steel and nickel and graphite, carbon product and many things. That made an unexpected and also quite substantial impact on overall cost of construction of any manufacturing facility around the world. Polysilicon is no exception. While many company has been actually undergoing the expansion project, recent spike in this raw material made some negative impact on overall construction phase. Hopefully, we can minimize this cost rise, so we can actually stay competitive.
When you go to the page 12, as we mentioned earlier, the PV market stays strong because all of the increase in demand from the RE100, the movement, global carbon neutral policy, and as the rapid transition to eco-friendly renewable energy, this movement will lead much stronger demand in the solar side. That's so, as I mentioned earlier, polysilicon supply-demand imbalance will likely continue throughout this year. Another important noticeable change is corporate PPA contracts become much bigger portion compared to last year or year before. Normally, especially in the U.S., the PPA market, the corporate PPA only account for less than 10% to15% of the overall PPA market.
However, due to the increased demand in corporate sector, now the corporate PPA market actually account for over 20% in the U.S. market, and this will likely rise due to the strong demand from RE100 at the carbon neutral so the movement. Also in Europe, it has been mostly FIT-driven market. However, like the U.S., the many corporation and many municipal government decide to launch some of the PPA contract, which is higher than normal the low cost bidding the pricing. Especially any of the developer use non-China sourced material, and the recipients are willing to pay higher PPA to compensate all of the increased the cost. This will be a very promising, actually, news to non-China-based supplier, and so hopefully, I mean, so we can materialize, I mean, this the market trend.
As you can see on those, the right side in the bottom, the European PPA market price rose to almost EUR 80 euro dollar per megawatt an hour. That's almost like a double compared to three years ago. This is a positive impact on overall some of the solar industry. OCI will do our best to try to capture this movement. Page 13 is a brief description of our new long-term polysilicon supply. Our client is Korea-based, the solar giant, Hanwha Solutions. Hanwha has been the market leader in energy sector, especially solar PV sectors. OCI and Hanwha made a 10-year supply contract. The overall contract amount is $1.2 billion.
This is a 10-year contract, and overall, this is strategically very important because for our further growth in Malaysia, we need also strong customer and also for Hanwha in order for them to continue their growth plan and in order for them to secure the polysilicon from non-Chinese source, and this would be actually very meaningful arrangement for both companies. Page 14 is a brief description of our investment in Bukwang Pharmaceutical. In February, OCI has invested 7.7 million shares of Bukwang, which account for approximately 11% of the company shares. We become the largest shareholder of the company, and we have invested KRW 146 billion.
Our rationale for this investment is, pharmaceutical and bio industry has a large potential for growth, and the Bukwang has a very strong, open innovation-based R&D capability. OCI, it will be, we believe this is a good opportunity for growth, the further together with this strong R&D-based company like Bukwang. Rather than we make an investment by ourselves, we believe we should be able to create much bigger synergy, the working together with the Bukwang. Right now, we would like to having some of the wider range of collaboration with the Bukwang, and hopefully we can provide our some know-how and experience in developing the international market.
The Bukwang management can continue to focus on this R&D activity, so both parties are making some positive impact to each other, so we can make some win-win arrangement. Page 15 is the business update. This is, we have announced it several times before, and as we announced earlier, OCI has formed a joint venture with POSCO Chemical. The name is PNO Chemical, 49% owned by OCI, 51% owned by POSCO. We pretty much completed our expansion of 50,000 ton hydrogen peroxide plant in this quarter. Out of this 50,000 ton capacity, approximately 60%, that means 30% of those, the volume will be going to electronic grade in the market that should serve for the growing semiconductor and many other electronic field.
This will be another the growth potential for both OCI and POSCO, and we should be able to generate some commercial operation within this Q2 . Hopefully we can provide some much better performance in the Q3 . Next is our shareholder value maximization corporate policy. From this shareholders meeting, we have agreed to provide the 2,000 KRW per share dividend. Like we did in this March, we plan to maintain approximately 2% of the dividend yield policy for the corporate and with approximately minimum 30% of the payout ratio. Hopefully we can provide some maximum value to the shareholder.
In line with this, the dividend policy, we also made some approval for a trust contract for our treasury stock acquisition program. Total amount will be KRW 50 billion, and this is to enhance our shareholder value. Whenever there's any stock market fluctuation, the company will be actively engaged in acquiring our treasury stocks, you know, so we can minimize the market fluctuation. Next page 16. This is how we're going to deal with unusual market uncertainties. First is the CapEx, the cost management issue. As I mentioned earlier, due to the war in Ukraine, it increased so much, the pricing and cost for many raw materials, especially steel and nickel.
The carbon steel, which is the biggest portion of whatever anyone making some the construction, both in residential or commercial or even some industrial facility. Carbon steel price went up by almost 80% year-over-year, and nickel, in particular, it went up by 2.5x compared to year-over-year. Nickel is a very vital portion of stainless steel. Any of the fine chemical or pharmaceutical, many of the highly engineered facility, it requires lots of stainless steel. Currently, the stainless steel price almost double compared to last year. That made a quite substantial burden on whoever, including OCI, in many of those, the company who plan or has currently making an expansion of the manufacturing facility.
Right now we try to closely monitor any of our capital expenditure from the program, whether we would like to make sure that this is critical that we make some purchase order based upon this, such as high pricing, whether we can possibly postpone some of those purchases. Or if we have to make the purchase at this quarter, then we need to also come up with some backup plan in order to minimize the sudden price increase. The second issue is not just only cost increase, but also logistics disruption. Mainly two factors, the war in Ukraine and strong lockdown policy by the Chinese government in mainland China.
These are making a quite substantial burden to any large scale the company with global business. Especially OCI, almost 40% of our business activities somewhat relate to China as the Chinese government lockdown on Shanghai, which is the biggest entrance in and out for the Chinese market. Because of lockdown, there has been very serious disruption in many of the supply chain issue. Also many of the Southeast Asian market there has been negative impact on many of the quarantine and lockdown policy by many countries. Like especially in our Malaysian factory, for the past two years, the Malaysian government enforced almost one year of MCO, that's movement control order. That's pretty much a lockdown on most of the cities and towns.
All of our staff working in Malaysia, they were not even able to to travel more than two years because of this very strong quarantine policy. It's extremely difficult to predict such a unplanned and also sudden change in the government policy. We have to do lot of scenario analysis. Whenever there's any unexpected things happen, we have to come up with this some measure that can minimize those the impact. The third the sector would be the business risk on urban development and energy project due to policy change and tightened regulation. Unlike many other manufacturing business OCI, the urban development side and this the power generation business, these are somewhat regulated business.
For the apartment residential, the business. For example, we cannot decide our final unit sales pricing, per square meter or per square foot. Normally, government agency provide actually suggested pricing. That's pretty much the ceiling over some of the pricing we can go for. For energy sector, even though all those underlying raw material like the coal or gas or some crude oil went up substantially, there's always one or two months of delay in the passing through all of these, the cost increase. If there's any external factor that regulate the pricing increase of SMP, which is basic electricity pricing, then this business is somewhat exposed to certain some of the market mismatch.
We have experienced these sort of risks from time to time and going forward, we have to come up with some solution. Even though this may not clear all the issues 100%. However, we need to come up with a certain measure that can minimize any of those, the government policy risk. These are somewhat vague and also somewhat not clear, the measure. However, this risk factor is something we cannot pre-plan or we can figure out in advance. In normal times we will try to analyze whatever the uncertainties going forward, and hopefully we can come up with multiple alternative plans.
Whenever we face with uncertainties, we can come up with any countermeasure that can potentially minimize our business risk. This is it for our OCI's 2022 Q1 earnings announcement. If you have any question, I'm happy to answer to any question.
Now Q&A session will begin. Please press asterisk one, asterisk and one if you have any question. For cancellation, please press asterisk and two, that is asterisk two on your phone. Currently, there are no participants with questions. Please press asterisk one, asterisk and one to give your question. Once again, if you have a question, please press asterisk one, asterisk and one. The first question will be given by Mr. Johannes Bernreuter from Bernreuter . Please go ahead, sir.
Hi, this is Johannes Bernreuter from Bernreuter Research in Germany. I would have two questions. First, can you translate the contract amount with Hanwha into shipment volume? The second would be, what is your current state of planning for the expansion of the polysilicon plant in Malaysia? Thank you.
Thank you for question, Johannes. Unfortunately, and this is a request from the customer, Hanwha, that we decide not to disclose some contract volume or the contract pricing. I mean, for the sake of some, this, the business, the policy. Apologize that we cannot share this, the pricing. No, sorry, but this, the volume. Expansion program, we planned it much earlier, the expansion of our Malaysia facility. However, as I mentioned earlier, Malaysia has conducted very strong, the quarantine policy. In fact, I mean, and they just opened the border as of 1st April . For the past two years, there has been very significant, some quarantine policies. Whoever travel into Malaysia, they normally have to stay in Kuala Lumpur for two weeks.
When they travel to Sarawak, where our factories are, they need to go through another two weeks of quarantine, which normally requires four weeks of quarantine. There has been a very difficult for us to move around some of the people. Also, in order to accelerate those, the construction program, we need some foreign workers to conduct the actual some construction work. Since mid-2020, Malaysian government stopped issuing some working visa for foreign workers. That actually made somewhat difficult, some, for us to expedite the process.
5,000 ton capacity expansion, we were able to do it among ourselves with those staff in Sarawak. However, in order to conclude and in order to expedite our next phase, which is a 30,000 ton capacity expansion, this will inevitably require more and more detailed engineering study that which requires more involvement from more number of engineers. We also need a lot more construction worker to be closely engaged. Now they just open the border, so we'll be having more people and go in and out. I think in the next several months, we should be able to conclude our expansion program in more details. Hopefully we can announce some of our additional expansion program in details.
However, there has not been there has been somewhat restrictive business environment for us to do anything. In fact, I was in Malaysia for the past 10 days, and I just come back this morning, and we had a very constructive meeting with both the Sarawak regional government and also the vendors in Sarawak. Hopefully we can come up with some the expansion program, which I'm also very look forward to doing so.
Short follow-up. At last quarter you said you could possibly start production with expanded capacity in early 2024. Considering what you said now, would it be more reasonable to assume that production could start in late 2024?
Actual construction will only take about 14 to 18 months because we are moving many substantial portion of our facility equipment from Korea to Malaysia. We do not have many long delivery items. That's why if we can complete all of the engineering work and the local clearance with power supply in the regional government. If we can complete those the homework in the early stage, we still be able to meet those the commercial operations schedule in 2024, maybe for one quarter, or maximum two quarter discrepancy. However, since many thing has been somewhat disrupted, we have to clear all of this issue in time.
Considering our experience of moving our 5,000 ton capacity factory, the actual construction and revamping and commissioning, it only take 10 months. For 30,000 capacity, this will take about 14 to 18 months. Now we have a track record, and we now feel more confident. However, now we need to make sure, so we don't have any surprise. This is.
Okay.
I mean, as I mentioned earlier, we never dealt with this kind of uncertainties so far. I never had to consider this pandemic in our business plan and also the war in Ukraine. This was something we could not pre-plan. That was somewhat not an easy issue, because sometimes we cannot find the right vessel to move certain equipment.
Okay. Thank you.
Thank you.
Currently, there are no participants with questions. Please press asterisk one, asterisk N one to give your question. As there are no further questions, we will now end the Q&A session. If you have any additional inquiries, please contact our IR department. This concludes The Fiscal Year 2022 Q1 Earnings Results by OCI. Thanks for the participation.
Thank you very much.