Quarterly Report September 30, 2009

Transcription

1 Quarterly Report September 30, 2009 Solar-Fabrik Aktiengesellschaft für Produktion und Vertrieb von solartechnischen Produkten Freiburg im Breisgau

2 Preface from the management board Re-sharpened focus generates best net result ever in Q3 for business segment "Solar Power Systems", billing supports sustainable market development for PV modules made in Germany Dear shareholders, ladies and gentlemen! Solar-Fabrik AG (ISIN: DE ) reports 3 rd quarter net results of million euros or million euros EBIT corresponding to 0.19 EUR earnings per share. The corporate revenue of the first nine months was million euros (previously million euros) with a corresponding EBIT from the continuing business segments (Solar Power Systems and Solar Cells) of million euros (previously million euros). The total net result of the first nine months, incl. all segments, particularly including those discontinued or divested, is million euros (previously million euros). The business segment Solar Cells reports results of million euros (previously million euros) with further improvements anticipated for the rest of the year. Financial returns on solar investments have become extremely attractive after the early 2009 price erosion. The market has particularly requested PV modules made in Germany since mid year. In order to satisfy the surging demand Solar-Fabrik has ramped up all three production sites to full three-shift operation. With its focus on further sustainable success Solar-Fabrik is working on productivity improvements combined with strategic sourcing as well as establishing its brand in emerging markets. The revenue in the business segment Solar Power Systems reached million euros (previously million euros) with September 30, The corresponding segment result of million euros (previously million euros) has improved by million euros compared to the six months result. This is the best quarterly result ever for the Solar Power Systems segment. Solar-Fabrik anticipates similar results for the forth and remaining quarter. Freiburg, November 2009 Günter Weinberger CEO at Solar-Fabrik Aktiengesellschaft für Produktion und Vertrieb von solartechnischen Produkten 2

3 NOTES ON THE INTERIM REPORT 1. Generalities The present interim IFRS report for the period from January 1 to September 30, 2009 concerns the consolidated financial statements of the Solar-Fabrik Stock Corporation for the Production and Sale of Solar Technology Products (referred to hereinafter as Solar-Fabrik) Freiburg, Germany. This interim report as at 30 September 2009 was drawn up in compliance with the regulations in IAS 34 for interim reports and in compliance with Section 315a of the German Commercial Code in accordance with the European Union regulations applicable on the balance sheet date and recognized International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) of London as well as the interpretations of the International Financial Reporting Interpretations Committee (IFRIC). All monetary values in the consolidated financial statements are in euros. Unless otherwise indicated, all figures are rounded. The income statement was prepared in accordance with the type-of-expenditure format. All figures are rounded to the second decimal place. This rounding can lead to slight differences. The intermediate financial statements and intermediate report as at 30 September 2009 were not audited, as allowed in Section 317 of the German Commercial Code. 2. Accounting policies In the compilation of this interim report and the determination of comparable figures from the previous year, the itemization of the consolidated report as at 31 December 2008 was adopted without modifications based on the accounting method used there. A detailed description of each individual policy was attached as an appendix to the financial report for This interim report does not contain all information required for the consolidated financial statements at the end of a fiscal year and therefore should be read pursuant to the consolidated financial statements as at 31 December The IASB standards and interpretations applicable for the first time in the period under review did not affect the Group's financial position and financial performance. The following exchange rates were used for the company s foreign currency translation processes: Average rate Country Currency Conversion rate for income statement USA USD Singapore SGD India INR Average rate Country Currency Conversion rate for income statement USA USD Singapore SGD India INR

4 NOTES ON THE INTERIM REPORT 3. Seasonal effects on business Regional weather conditions affect sales at Solar-Fabrik AG. Specifically, sales generally grow and results are greater in the last two quarters of each fiscal year than in the first two. 4. Scope of consolidated financial statements Solar Fabrik and the following subsidiary companies are included in the consolidated interim financial statements as at 30 September 2009: Solar Application GmbH (SA), Freiburg/Germany (100 percent holding) Solar-Fabrik Services Pte. Ltd. (SFS), Singapore (100 percent holding) Solar Energy Power Pte. Ltd. Singapore (90 percent holding) The following changes has taken place within the consolidated group since the first quarter of 2008 and the consolidated financial statements as at 31 December 2008: Effective 1 January 2009, Solar-Fabrik AG sold all of its shares in KOSTAL Solar Electric GmbH (KSE) to Kostal Industrie Elektrik GmbH in an agreement to transfer the holding signed on 5 December KSE therefore effectively left the consolidated group effective 1 January As at 31 December 2008, the Group held 49 percent of the company's shares. In the consolidated financial statements as at 31 December 2008, the firm is consolidated at equity. Discontinued Operations Global Expertise Wafer Division Ltd./Global Expertise Wafer Division Inc. The management of the former subsidiary Global Expertise Wafer Division Ltd. (GEWD Ltd.) filed for bankruptcy on 31 March On 11 May 2009, insolvency proceedings began; on that day, control of the firm was transferred to the liquidator. GEWD Ltd. therefore effectively left the consolidated group effective 11 May As at 31 December 2008, the Group held 100 percent of the company's shares. In the consolidated financial statements as at 31 December 2008, the firm is fully consolidated. The beginning of insolvency proceedings at GEWD Ltd. means that Solar-Fabrik AG no longer has control of the 100 percent subsidiary of GEWD Ltd., Global Expertise Wafer Division Inc. (GEWD Inc.). GEWD Inc. therefore also effectively left the consolidated group effective 11 May As at 31 December 2008, the Group held 100 percent of the company's shares. In the consolidated financial statements as at 31 December 2008, the firm is fully consolidated. Solar-Fabrik Silicon Services Ltd./Poseidon Solar Services Ltd. In June 2009, the management at Solar-Fabrik AG received an offer for the sale of its shares in Solar-Fabrik Silicon Services Ltd. (SFSS) and its 100 percent subsidiary Poseidon Solar Services Ltd. (Poseidon). Up to now, both of these companies handled wafer preparation within the Solar- Fabrik group. At a supervisory board meeting on 12 June 2009, the supervisory board gave the management its consent to begin negotiations. As of August 6, 2009, Solar-Fabrik sold its stake in SFSS. Hence, both SFSS and Poseidon effectively left the consolidated group effective 6 August As at 31 December 2008, the Group held 80 percent of SFSS's shares and 100 percent of Poseidon s shares (which equals 80 percent from a group perspective). In the consolidated financial statements as at 31 December 2008, both companies are fully consolidated. 5. Earnings In the three quarter of 2009, Solar-Fabrik AG posted million euros in revenue for continued operations, some 31.3 percent ( million euros) less than the amount posted in the first three quarters of 2008 ( million euros). This drop was the result of the following: In the first two quarters of 2008, the Spanish market was still booming. After Spanish law was revised in the fall of 2008, the Spanish market practically collapsed. On the German market, which remains the most important sales market for photovoltaics, the unexpectedly severe, long winter meant that the number of photovoltaic arrays newly installed did not meet expectations because of weather conditions in the first quarter of

5 NOTES ON THE INTERIM REPORT Furthermore, the expansion of capacity along downstream stages of the value chain within the photovoltaics industry in 2008, the plummeting demand for silicon from the semiconductor industry, and the financial/economic crisis brought sales prices for solar cells and, in turn, also for solar panels down far below the level of Q1 to Q These price reductions have led consumers in the first half of 2009 to postpone purchases in the hope that prices will continue to fall. Plummeting silicon prices mean that there is no interest in recycled silicon material from the semiconductor industry. This fact prevented the Wafer Preparation Division from reaching its target for sales outside the Group. In Q1 to Q3 2008, the Wafer Division (which has now been abandoned) posted million euros, but in the fourth quarter of 2008 the collapse of the spot market for silicon and the announcement of plans to file for bankruptcy in a press release on 12 March 2009, followed by the actual filing for bankruptcy at GEWD Ltd. on 31 March 2009, mean that the Wafer Division only posted 935,000 euros in revenue in the period under review up to the point it left the Group. As a result of this low sales volume and the concomitant low purchasing volume, the average valuation price of solar cells fell much slower than the price paid for cell procurements in the first two quarters of As a result of the increasing demand for solar panels starting in Q3 2009, the purchasing volumes of solar cells increased which caused the average valuation price of solar cells materially to drop. In turn, the gross margin (= cost of materials / total revenue * 100) in the continued operations improved from 10.9 percent in the previous year to 14.6 percent in Staff costs in the continued operations increased from million euros for the first three quarters in 2008 by million euros or 5.4 percent to million euros in the corresponding period in The increase in staff costs is mainly due to the additional personnel associated with the startup of the new Fab 3 as well as general salary and wage increases. Depreciations in the continued operations increased from million euros by million euros to million euros. This increase is also mainly the result of investments in the new Fab 3. The financial result in the continued operations worsened from million euros in the first three quarters of 2008 by million euros to million euros in the first three quarters of 2009, mainly because of overdrafts which were used more frequently and bank commissions. At the same time, significant liquidity was available at the beginning of fiscal 2008 after the capital increase of September 2007, and this liquidity resulted in great interest income, which further improved financial results in The tax result of the continued operations as of 30 September 2009 is mainly associated with the reduction of deferred taxes on tax losses brought forward (0.800 million euros). The tax result for the continued operations in the previous year was mainly affected by deferred taxes on temporary differences. Solar Power Systems For the reasons described above, (third-party) revenue in the Solar Power Systems Division fell by million euros or 31.1 percent from million euros to million euros. Considerable price reductions that even exceed the drop in sales prices as a percentage were attained in purchasing. Nonetheless, the average valuation price, especially for solar cells, dropped more slowly than sales prices due to the lower production volume, so that the gross margin in the Solar Power Systems Division only improved from 10.5 percent in the previous year to 12.4 percent. Due to the reduced sales volume the division's EBIT therefore worsened by million euros from million euros in the previous year to million euros. However, EBIT for Q materially improved by million euros compared to Q Since the beginning of Q3 2009, sales volumes have significantly increased which led to a strongly improved gross margin for the Solar Power Systems Division. As a result, the gross margin in September 2009 amounted to 19.0 percent compared to 10.6 percent in September

6 NOTES ON THE INTERIM REPORT Solar Cells The Solar Cell Division improved its result by million euros from million euros in the first three quarters of 2008 to million euros. This division benefited from the considerable drop in purchase prices, the reliable supply of materials, and the expansion of production volume in As a result of these effects, the gross margin improved significantly to 30.7 percent after 13.3 percent for Q1-Q Wafers (discontinued operations) Because of the losses incurred in the previous year as a result of plummeting silicon prices and the collapse of the spot market, the management at the former subsidiary Global Expertise Wafer Division Ltd. (GEWD Ltd.), filed for bankruptcy on 31 March On 11 May 2009, insolvency proceedings began; on that day, control of the firm was transferred to the liquidator. GEWD therefore effectively left the consolidated group effective 11 May EUR '000 Sales to third parties 935 Intragroup sales 145 Total sales 1,080 Other revenue 1,990 Expenditures 3,071 Result before taxes -1 Income tax expenses -1 After-tax result -2 Loss posted at fair value minus cost of sale -428 Income tax expenses 0 Wafer Preparation (sold business segment) While nearly all sales came from intragroup transactions with GEWD Ltd. in the previous year, only third-party sales were to be generated starting in the second quarter of 2009 because GEWD Ltd. filed for bankruptcy on 31 March Plummeting silicon prices meant, however, that there is no interest in recycled silicon material from the semiconductor industry. This fact prevented the Wafer Preparation Division from reaching its target for sales outside the Group. Based on a purchase price offered to Solar-Fabrik AG for 80 percent of its shares in SFSS, the fair value minus the cost of the sale has already been the valuation basis for the depreciation of assets for the interim report as of 30 June The final sale of the business segment occurred at 6 August EUR '000 Sales to third parties 90 Intragroup sales 120 Total sales 210 Other revenue 3 Expenditures -4,075 Result before taxes -3,863 Income tax expenses -3 After-tax result -3,866 Loss posted at fair value minus -3,322 cost of sale Income tax expenses 0 Cashflow from current business 281 Cash flow from investments -18 Cash flow from financing 0 Cashflow from current business -380 Cash flow from investments 0 Cash flow from financing 0 6

7 NOTES ON THE INTERIM REPORT 6. Depreciation As of September 30, 2009, a total of million euros (1.175 million euros in Q1-Q3 2008) in fixed assets had been written off, million euros (0.981 million euros) of which was for the continued operations, with million euros (previous year million euros) reported for the discontinued operations. Of this million euros in depreciations (previous year million euros), million euros (0.226 million euros in the previous year) concerned amortization of intangible assets, with million euros (previous year million euros) concerning depreciation of tangible assets. At the end of September 2009, investments in fixed assets amounted to million euros after million euros in the first three quarters of Balance sheet Total assets decreased over the level of 31 December 2008 by million euros. This reduction on the assets side is mainly the result of a reduction in inventory ( million euros) caused by the decreased purchase prices for raw material and the improved working capital management as well as a reduction in trade receivables ( million euros) stemming mainly from the change in consolidation scope (GEWD Ltd.). In contrast, fixed assets increased by million euros when the new Fab 3 was constructed. On the liability side, the negative result for the period under review and the deconsolidation of the Wafer and the Wafer Preparation Division reduced equity by million euros from million euros to million euros. The equity ratio is now 65.0 percent after 57.7 percent on 31 December Furthermore, trade liabilities decreased from million euros by million euros to million euros as well ass other liabilities from million euros by million euros to million euros, in particular as a result of the deconsolidation of the Wafer Division. 7. Cash flow Cash flow from operating activities in the amount of million euros improved over the previous year (30 September 2008: million euros), despite the clearly negative periodic result. This advancement is mainly due to an improved working capital management. The amount reported under cash flow from investments of million euros (prior year: million euros) mainly concerns investments in the new Fab 3. The change in financial resources as at 30 September 2009 was mainly the result of the aforementioned greater payment flows from current business and investments. Financial resources are reported at million euros at the end of the quarter. The million euros in financial resources recorded at the end of Q was mainly the result of the capital increase from September Employees At the end of September 2009, 305 people (30 September 2008: 341) were employed at Solar-Fabrik AG (including management). 10. Segmental reporting For the purposes of the corporate management, the Group is organized in the following two reporting business units (continued operations) by product and service: Solar Power Systems This division includes module production and sales of all components for high quality solar power systems. The division includes Solar-Fabrik AG and Solar Application GmbH. Solar Cells This division includes the production of solar cells sold exclusively within the Group to supply the Solar Power Systems Division. This division includes Solar-Fabrik Services Pte. Ltd. and Solar Energy Power Pte. Ltd. 7

8 NOTES ON THE INTERIM REPORT Discontinued operations: Wafer GEWD procured and sold high-quality solar wafers manufactured from reclaimed wafers from the semiconductor industry. The Wafer Segment included the GEWD Ltd. based on the British Virgin Islands with an office in Kuala Lumpur, Malaysia, as well as the American subsidiary GEWD Inc. and an office in China. Wafer preparation This line of business handled the preparation of wafer material purchased by the Wafer Segment from the IT sector for further use in solar cell production or resale through wholesalers. The Wafer Preparations Segment included SFSS, an 80 percent holding of Solar-Fabrik AG, and its 100 percent subsidiary Poseidon. Figures for individual divisions for the period from 1 Jan to 30 September 2009 (all figures in '000): Reconciliation Solar Solar Wafers Wafer Preparation operations and (discontinued Power Cell production (discontinued Sales revenue Systems operations) (Held for sale) held for sale) Elimination Total External sales 89, , ,016 Sales with other segments 0 6, ,443 0 Sales revenue 89,016 6,443 1, ,290-6,443 89,016 Other operating income 1, , , ,976 Segment expenses -90,978-5,363-2, ,579 6,275-90,066 Depreciation -1, ,433 3, ,078 Segment result (= EBIT) -1, ,865 3, ,152 Figures for individual divisions for the period from 1 Jan to 30 September 2008 (all figures in '000): Reconciliation Solar Solar Wafers Wafer Preparation operations and (discontinued Power Cell production (discontinued Sales revenue Systems operations) (Held for sale) held for sale) Elimination Total External sales 129, , , ,626 Sales with other segments 78 3,687 18,087 12,717-30,804-3,765 0 Sales revenue 129,262 4,129 47,205 12,719-59,924-3, Other operating income Segment expenses -129,870-4,170-42,786-12,283 55,069 3, Depreciation Segment result (= EBIT) , ,

9 NOTES ON THE INTERIM REPORT 11. Related party transactions Solar-Fabrik AG In the first half of 2007, a consulting agreement was reached with GS Consult GmbH, which was directed by Georg Salvamoser, former CEO of Solar-Fabrik AG. GS Consult assisted Solar-Fabrik AG in questions concerning partnerships, restructuring, and acquisitions. Furthermore, GS Consult GmbH represented the Solar-Fabrik Group in associations and organizations. In the interim period under review, 7,000 euros in consulting fees is reported. 12. Outlook Financial returns on solar investments have become extremely attractive after the early 2009 price erosion. The market has particularly requested PV modules made in Germany since mid year. In order to satisfy the surging demand Solar-Fabrik has ramped up all three production sites to full three-shift operation. With its focus on further sustainable success Solar-Fabrik is working on productivity improvements combined with strategic sourcing as well as establishing its brand in emerging markets. Law firm Binder & Partners, which includes supervisory board member Norbert Binder, acted as counsel for Solar- Fabrik AG in the period under review. For the services provided, Binder & Partners received 2,000 euros in legal fees in Günter Weinberger Chief Executive Officer Solar-Fabrik Silicon Services Ltd. On 18 September 2008, the Company signed a development agreement with Dr. Laure Plasmatechnologie GmbH of Stuttgart, in which supervisory board chairman Alfred Ritter has a 20 percent holding. The Company incurred 320,000 euros in expenditures related to the signing of this development agreement. Dr. Freddy Goh Chief Technical Officer Martin Friedrich Chief Financial Officer Martin Schlenk Chief Operating Officer 9

10 Consolidated interim report for the period from 1 January to 30 September Business and legal Despite the global financial and economic crisis, the PV sector expects sustainably high growth rates in the long term. The photovoltaics industry is currently undergoing a transitional phase. Some energy policies have expired, and some new ones have been announced but have not yet gone into effect. The market for polysilicon has overcome its bottleneck, and prices are plummeting along the entire value chain. The solar industry's main goal - generating electricity at competitive prices - has come a considerable step closer, and the resulting demand will enable new levels of growth. Sarasin Bank expects an annual growth rate of 48 percent for the PV market by 2012, which will amount to a global market volume of 125 gigawatts (four gigawatts in 2008) of newly installed PV systems by Large solar arrays play a major role here, and a growing number of power providers are already directly financing such projects. For the PV industry to continue growing at such a high level, new markets will have to come about alongside the current ones. The global solar market will then have a growing number of pillars to rest on, and it will need this diversity if it is to continue growing. In light of the credit crisis, slower real economic growth, and changes in state support for the PV sector, Sarasin Bank expects installed PV capacity to grow globally by only 17 percent to 4.8 gigawatts in But in 2010, the market is expected to pick up again, so that annual growth will average 48 percent from 2007 to In Europe, growth will average of 34 percent per annum, which is below the global average. Sarasin s forecast of 125 gigawatts of newly installed PV arrays by 2020 would put the average annual growth rate at 28 percent from 2012 to In Germany, the main photovoltaics driver is the Renewable Energy Act (EEG). The goal of the EEG is to make the country's energy supply sustainable and promote the development of technologies that generate power from renewable sources. On 6 June 2008, the Bundestag revised the EEG; in particular, the degression in rates paid for power from solar arrays was increased. The new rates took effect on 1 January It is not yet clear whether or when the new governing coalition might make changes to the EEG, but the three parties involved CDU, CSU, and FDP have explicitly expressed their support for the continued expansion of renewable energy. The next few months will show what steps the new governing coalition actually takes. Spain also has legislation to promote renewable sources of energy, including photovoltaics. On 29 September 2008, this legislation was also revised. The revised legislation puts a ceiling of around 500 MWp on new installations, which will clearly slow down growth over the next few years. The current year clearly shows that the Spanish PV market has practically disappeared and no longer plays a crucial role as a growth driver. The US market has proven to be one of the most dynamic, with a growth rate of around 70 percent for PV in There is a consensus among experts that the US market will continue to grow strongly over the next few years. The share of renewables is also expected to grow considerably in the US in the next few years. Obama has already announced that he plans to double the share of renewable energy in America's energy supply. Priority is to be placed on investments in renewable energy in the battle against the economic crisis. France also offers tax incentives for the installation of PV systems. In addition, building-integrated PV arrays receive additional support, which makes the French PV market especially interesting for Solar-Fabrik. Greece has an excellent climate for photovoltaic systems and also has a stable set of energy policies. Nonetheless, bureaucratic obstacles have prevented the market from growing as fast as it could. The Greek government now hopes its revised legislation will step up the installation of PV arrays. On 15 January 2009, it adopted a new set of feed-in rates. Only time will tell whether the new legislation will have a positive effect on the development of the Greek market. Although the outlook for the solar sector remains positive for the long term, prices have dropped considerably since the fourth quarter of 2008, and pressure on prices only let up at the beginning of the third quarter of There are a number of reasons for this trend. In addition to the general financial and economic crisis, silicon has become much cheaper because the semiconductor sector has shrunk in reaction to the economic downturn, making much more of this raw material available to other markets. In addition, production capacity for solar cells and panels 10

11 Consolidated interim report for the period from 1 January to 30 September 2009 has increased considerably. Finally, Spain is no longer such a large market now that feed-in rates have been capped. Finally, customers were reluctant to make purchases in the second quarter of 2009 in the hope that prices would continue to drop. But the solar market began to change at the beginning of the third quarter. Potential investors now find the returns from solar arrays exceptionally attractive due to the plummeting prices. The reluctance to invest during the first two quarters of 2009 has been overcome, and the attractive returns have increased demand significantly, making solar modules a scarcity once again. As a result, there is no longer any price pressure. Business trends in the first three quarters of 2009 Strategic raw materials To make itself more independent of suppliers and to take advantage of purchasing potential on the current buyer's market, Solar-Fabrik now has a wide range of companies to source from. The market is currently quite challenging, making it all the more important for Solar-Fabrik to be able to react flexibly and quickly to changes on the market. Capacity expansion and utilization On 20 March 2009, Solar-Fabrik AG opened its new Fab 3 in Freiburg for the production of solar power modules. The new production plant will increase total capacity by 60 megawatts-peak (MWp) to 130 MWp and allow us to continue to improve quality. The new plant has 15,000 square meters of floor space, providing enough area for an expansion of up to 200 MWp. Up to the opening of this third plant, solar panels were mainly produced in two plants in Freiburg, Germany, with a collective production area of 5,800 square meters and a maximum useful capacity of 70 megawatts-peak. In the first two quarters of the year under review, capacity in the division of solar power systems was underutilized, but in the meantime all three fabs are running six days a week for all three shifts. Entering new markets and expanding current ones In the first three quarters of 2009, the Solar-Fabrik Group's export ratio was 29.8 percent. The main export markets in the first three quarters were France and Belgium. Solar- Fabrik positioned itself well in the segment of buildingintegrated arrays, which is especially important for the French market. One-off effects in the first three quarters of 2009 In addition to the one-off effects reported in the interim reports for Q1 and Q2 2009, the following events have taken place since. The management of the former subsidiary Global Expertise Wafer Division Ltd. (GEWD Ltd.) filed for bankruptcy on 31 March On 11 May 2009, insolvency proceedings began; on that day, control of the firm was transferred to the liquidator. As a result, GEWD Ltd. and its subsidiary Global Expertise Wafer Division Inc. (GEWD Inc.) left the consolidated group on 11 May As at 31 December 2008, the Group held 100 percent of each company's shares. In the consolidated financial statements as at 31 December 2008, both firms are fully consolidated. Effective 6 August 2009, Solar-Fabrik AG sold its 80 percent holding in Solar-Fabrik Silicon Services Ltd. (SFSS), which itself holds 100 percent of the shares in Poseidon Solar Services Pte. Ltd. Solar-Fabrik has thus given up its division of wafer preparation to focus all of its attention on its core business of solar power modules and systems. The business prospects for the wafer preparation segment were continually worsening. At present, there is a surplus supply of silicon; as a result, recycled silicon is no longer in demand. In the interim report for the first two quarters of 2009 as at 30 June 2009, assets had accordingly been written down at fair value less cost to sell. 2. Profitability In the three quarters of 2009, Solar-Fabrik AG posted million euros in revenue, some 31.3 percent less than the amount posted in Q1-Q ( million euros). This reduction is mainly the result of a drop in prices, not items sold. The significant drop in prices has a number of causes: a) In fiscal 2008, the Spanish market was still booming. After Spanish law was revised in the fall of 2008, the Spanish market practically collapsed. b) On the German market, which remains the most important sales market for photovoltaics, the unexpectedly severe, long winter meant that the number of photovoltaic arrays newly installed did not meet expectations because of weather conditions. c) Furthermore, the expansion of capacity, in particular along upstream stages of the value chain within the photovoltaics industry, the plummeting demand for 11

12 Consolidated interim report for the period from 1 January to 30 September 2009 silicon from the semiconductor industry, and the financial/economic crisis brought sales prices for solar cells and, in turn, also for solar panels down far below the level of the prior year. Moreover, these price reductions led consumers to postpone purchases in the hope that prices would continue to fall. d) The now abandoned Wafer Division contributed million euros to consolidated third-party sales in the first three quarters of the previous year. The significant increase in demand for solar modules at the beginning of Q increased purchasing volume considerably, and the lower purchasing prices for cells have improved the gross margin (= cost of material/total revenue * 100) in the remaining divisions for the long term. For instance, the gross margin was 10.9 percent for the first three quarters of the previous year but 14.6 percent in the first three quarters of 2009, and the gross margin in the third quarter of 2009 alone rose to 19.9 percent after 11.0 percent in Q Staff costs in the remaining divisions rose by 431,000 euros (5.4 percent) to million euros after million euros in the first three quarters of the previous year. This increase mainly had two causes: additional staff was recruited for the new Fab 3; and wages and salaries increased overall. Depreciations in the divisions retained increased by million euros from 981,000 euros to million euros. This increase is mainly the result of investments in the new Fab 3 and its rollout in The financial result of the divisions retained worsened by million euros from 457,000 euros in the first three quarters of 2008 to million euros in the first three quarters of This worsening is the result of the more frequent use of overdrafts. In the period under review, the tax result of the divisions retained was principally affected by the reduction in deferred taxes on tax losses carried forward in the amount of 800,000 euros. In the comparable quarters of the previous year, the tax result of the divisions retained mainly concerned deferred taxes on temporary differences. 3. Financial position Cash flow from operating activities in the amount of million euros improved considerably over the previous year (30 September 2008: million euros), in particular as a result of the clearly negative periodic result. In particular, the improvement is the result of better working capital management. Cash flow from investments is negative at (previous year ) million euros, in particular because of investments in Fab 3. The change in financial resources as at 30 September 2009 was mainly the result of the aforementioned greater payment flows from current business and investments. Financial resources are reported at million euros at the end of the quarter. As at 21 October 2009, the Group had 15 million euros in operating resources, 2.5 million euros in an investment loan, and a borrower's loan note worth 5 million euros. The operating resources applied until 30 April 2010, whereas the investment loans were payable on 30 November The borrower's loan note is payable on 20 March In other words, funds were sufficiently available for the liquidity required for business operations and investments until at least 30 April On 21 October 2009, Solar-Fabrik AG received a loan from the KfW Bank Group's special program for midsize companies via a bank consortium consisting of Deutsche Bank AG, the Sparkasse Freiburg Nördlicher Breisgau, Commerzbank AG, KBC Bank Deutschland AG and Investkredit Bank AG. With this program, the KfW promotes competitive firms with positive prospects and annual sales not exceeding 500 million euros. The overall financing volume is divided up into 7 million euros of investment loan and 12 million euros of an overdraft loan. The loans have terms of five and three years, respectively and can be utilized flexibly up to the end of Solar-Fabrik AG can use these additional operating resources to step up the planned growth, which remains strong. 12

13 Consolidated interim report for the period from 1 January to 30 September Financial situation Total assets decreased over the level of 31 December 2008 by million euros. This reduction in assets is mainly the result of: reduced inventory ( million euros) stemming from price reductions; improved working capital management; and lower trade receivables ( million euros), especially as a result of the final consolidation of the Wafer Segment. In contrast, fixed assets increased by million euros when the new Fab III was constructed. On the liability side, the negative result for the period under review and the final consolidation of the Wafer and Wafer Preparation Divisions reduced equity by million euros from million euros to million euros. The equity ratio is now 65.0 percent after 57.7 percent on 31 December Furthermore, trade liabilities decreased by million euros from million euros to million euros, while other liabilities fell by million euros from million euros to 851,000 euros as a result of the final consolidation of the Wafer Segment. 5. Business with associated parties In the first half of 2007, a consulting agreement was reached with GS Consult GmbH, which was directed by Georg Salvamoser, former CEO of Solar-Fabrik AG. GS Consult assisted Solar-Fabrik AG in questions concerning partnerships, restructuring, and acquisitions. Furthermore, GS Consult GmbH represented the Solar-Fabrik Group in associations and organizations. In the interim period under review, 7,000 euros in consulting fees is reported. Law firm Binder & Partners, which includes supervisory board member Norbert Binder, acted as counsel for Solar- Fabrik AG in the period under review. For the services provided, Binder & Partners received 2,000 euros in legal fees in Forecasts and other statements on future trends Any forecast made now would have to have a wide tolerance range in light of the worsening crisis in financial markets and the effects this crisis will have on further economic development. In addition, it is not clear how quickly the financial support provided by various governments will stabilize financial markets and markets for goods. The statements made below are based on the best prudent estimates of the executive board at Solar-Fabrik. These estimates are based on expectations of overall economic development. Expectations for business trends focus on the opportunities and risks resulting from specific market conditions and competitive situations. On 29 June 2009, the management at Solar-Fabrik AG published a press release revising its original income forecast. Since then, the general economic outlook has brightened up, and the situation in the financing sector has returned to normal. Demand in the solar module sector clearly stepped up in the second quarter and continues to grow even now. The significant increase in revenue in the third quarter over the first two quarters of 2009 reflect this increase in demand. 7. Opportunities and risks In the first three quarters of 2009, no material changes occurred with regards to the risks described in detail in the consolidated financial statements and consolidated annual report for 2008 under Risk and opportunities. On 18 September 2008, the Company signed a development agreement with Dr. Laure Plasmatechnologie GmbH of Stuttgart, in which supervisory board chairman Alfred Ritter has a 20 percent holding. The Company incurred 320,000 euros in expenditures related to the signing of this development agreement in

14 Group Balance Sheet ASSETS Solar-Fabrik Aktiengesellschaft für Produktion und Vertrieb von solartechnischen Produkten, Freiburg i. Br. Group Balance Sheet as of September 30, 2009 I. LONG-TERM ASSETS 1. Intangible assets EUR '000 EUR '000 EUR '000 EUR '000 Licences, industrial property rights and similar rights and values / licences to such rights and values 2,930 4,639 Goodwill 1,288 1,293 Advance payments Property, plant and equipment 4,236 5,932 Leasehold rights and buildings, including buildings on non-owned land Technical equipment, plant and machinery 14,529 4,717 Other equipment, fixtures, fittings and equipment 2,331 1,618 Advance payments 72 8,941 16,932 15,867 21,168 21, Deferred taxes Other long-term receivables ,168 22,828 II. SHORT-TERM ASSETS 1. Stocks Raw materials and consumables 11,579 19,962 Work in progress 3,986 2,005 Finished goods and goods for resale 6,973 6,368 Advance payments 10,756 10,463 33,294 38, Trade receivables 3,839 9, Tax receivables Other short-term operating receivables ,370 10, Cash at bank and in hand 1,794 1,616 39,458 51,318 60,626 74,146 14

15 Group Balance Sheet LIABILITIES Solar-Fabrik Aktiengesellschaft für Produktion und Vertrieb von solartechnischen Produkten, Freiburg i.br. Group Balance Sheet as of September 30, 2009 I. SHAREHOLDERS' EQUITY AND MINORITY INTEREST EUR '000 EUR '000 EUR ' Subscribed share capital 11,685 11, Capital reserves 83,105 83, Currency translation 38-4, Consolidated equity capital generated -55,419-48,575 Capital entitled to shareholders 39,409 41, Minority interest ,415 42,791 II. LANGFRISTIGE SCHULDEN 1. Financial liabilities 5,847 6, Other long-term operating liabilities Deferred taxes Long-term provisions ,650 6,568 III. KURZFRISTIGE SCHULDEN 1. Financial liabilities 9,279 6, Advance payments received on account of orders 1,931 2, Trade payables 2,500 9, Other short-term operating liabilities 851 4, Short-term provisions 0 1,468 14,561 24,787 60,626 74,146 15

16 Consolidated statement of income Solar-Fabrik Aktiengesellschaft für Produktion und Vertrieb von solartechnischen Produkten, Freiburg i.br. Group profit and loss accounts for the period Continued Operations EUR '000 EUR '000 EUR '000 EUR ' Turnover 89, ,626 40,771 53, Increase/decrease in finished goods and work-in-process 1,606 2, , Total revenue 90, ,583 40,595 55, Other operating income 1, Cost of materials -77, ,179-32,513-49, Personnel expenses -8,394-7,963-3,246-2, Depreciation of intangible assets, and plant and equipment -2, Other operating expenses -5,843-7,011-1,629-1,424-91, ,431-38,106-53, Operating income (= EBIT) -1, ,489 1, Interest and similar income 42 1, Interest and similar expenses -1, Income before tax (= EBT) -2, ,211 1, Taxes on income , , Net income from continuing operations -3,353-1,843 2, Discontinued and disposed operations 15. Net income from discontinued and disposed operations -3,956 4, Profit/loss for the financial year -7,309 2,475 2, thereof: Minority interest Group Share in profit/loss -7,309 2,420 1, EUR EUR EUR EUR Earnings per share: Undiluted (= diluted), the net profit/loss attributable to ordinary equity holders of the parent company Earnings per share - continuing operations: Undiluted (= diluted), the net profit/loss attributable to ordinary equity holders of the parent company resulting from continuing operations

17 Financial figures Solar-Fabrik Aktiengesellschaft für Produktion und Vertrieb von solartechnischen Produkten, Freiburg i.br. Financial data from consolidated IFRS statement. IFRS IFRS IFRS IFRS IFRS Sales revenue* '000 EUR 89, , ,860 49,816 32,268 Total revenue* '000 EUR 90, , ,297 56,809 32,738 Raw materials and consumables* '000 EUR 77, ,179 91,633 45,106 26,604 of total revenue* % Staff costs* '000 EUR 8,394 7,963 6,025 5,100 3,990 of total revenue* % Number of employees (Section 267 para 5 German Commercial Code) Revenue per employee* '000 EUR Operative results (=EBIT)* '000 EUR -1, ,205 3, Financial results '000 EUR -1, Earnings before tax (=EBT)* '000 EUR -2, ,767 2,762-1,841 of total revenue* % Group performance* '000 EUR -7,309 2, ,944-1,445 Number of shares '000 pieces 11,685 11,685 11,685 8,100 8,100 Net earnings per share* EUR Cash flow from operating 2,824-1,007 6,054-9,661-1,027 activities '000 EUR of revenue* % Depreciation intangible assets* '000 EUR tangible assets '000 EUR 1, , Total assets* '000 EUR 60, , ,079 60,329 44,629 Stockholders' equity* '000 EUR 39,415 83,602 84,056 40,649 38,038 of total capital* % Profitability of equity capital* % EBITDA* '000 EUR , ROI* % * Financial data for adjusted. The financial data concerns along the lines of the figures for the adjusted income statement presentation for continued operations. 17

18 Consolidated statement of cash flows Solar-Fabrik Aktiengesellschaft für Produktion und Vertrieb von solartechnischen Produkten, Freiburg i.br. Group cash flow statement for the period EUR '000 EUR ' Cash flow from operating activities Operating income (= EBIT) from continuing operations -1, Operating income (= EBIT) from discontinued operations -3,959 4,692 Operating income (= EBIT) -5,111 3,843 Taxes paid Interest paid -1,365-1,083 Interest received 44 1,179 Depreciation 5,647 1,176 Gains/losses from the disposal of assets Elimination of non-cash items Changes in operating assets 10,747 2,908 Changes in operating liabilities -8,082-9,392 Cash flow from operating activities 2,824-1, Cash flow from investing activities Proceeds from the sale of subsidiaries Payments in intangible assets Payments in tangible assets -5,109-8,858 Cash flow from investing activities -4,994-8, Cash flow from financing activities Proceeds from promissory note bond 0 4,000 Repayment of financial liabilities Proceeds from leasing liabilities 96 0 Repayment of (leasing-) liabilities Cost of capital increase 0-12 Cash flow from financing activities , Cash and cash equivalent at end of period Net-change in cash and cash equivalents -2,442-6,146 Effect of exchange rate changes Cash and cash equivalents at 1 January -4,616 26,363 Cash and cash equivalents at 30 September -7,078 20, Composition of cash and cash equivalents Cash at bank in hand 1,794 26,779 Current accounts 8,872 6,495 Cash and cash equivalents at 30 September -7,078 20,284 18

19 Consolidated equity capital Solar-Fabrik Aktiengesellschaft für Produktion und Vertrieb von solartechnischen Produkten, Freiburg Statement of changes in equity of Solar-Fabrik as of September 30, 2009 Subscribed shares capital Capital reserves Consolidated shareholders' equity generated Cash fl ow hedges Currency translation Capital entitled to shareholders Minority interest in capital Minority interest in profi ts/losses Currency translation Capital entitled to minority interestr Totall EUR '000 EUR '000 EUR '000 EUR '000 TEUR EUR '000 EUR '000 EUR '000 EUR '000 EUR '000 EUR ' January ,900 45,242-6, ,219 45, ,068 Capital increase 2,785 41,079 43, ,864 Costs of capital increase -2,995-2, ,995 Differences from currency translation -2,131-2, ,184 Profi t for the interim period September ,685 83,326-7, ,350 83, ,056 Costs of capital increase Differences from currency translation Profi t for the interim period -3,358-3, , December ,685 83,117-10, ,961 79, ,835 Costs of capital increase Financial Instruments in accordance with IAS Directly offset tax position from equity Differences from currency translation 1,006 1, ,005 Profi t for the interim period 2,420 2, , September ,685 83,105-8, ,955 82, ,602 Financial Instruments in accordance with IAS 39-1,091-1, ,091 Directly offset tax position from equity Differences from currency translation Profi t for the interim period -39,705-39, , December ,685 83,105-48, ,407 41, ,792 Financial Instruments in accordance with IAS Directly offset tax position from equity Consolidation adjustment 3,770 3, ,049 2,721 Differences from currency translation Profi t for the interim period -7,309-7, , September ,685 83,105-55, , ,415 19

20 Statement of comprehensive income Solar-Fabrik Aktiengesellschaft für Produktion und Vertrieb von solartechnischen Produkten, Freiburg i.br. Statement of comprehensive income for the period January 1 - September 30, EUR '000 EUR '000 Net loss / Net profit Unrealized gains (losses) from currency translation adjustments Unrealized gains (losses) from derivative financial instruments (IAS 39 Cash flow hedges) Income tax Other comprehensive income (loss), net of taxes Total comprehensive income (loss) thereof:: Minority interest Profit (loss) attributable to shareholders of Solar-Fabrik AG