April 9, 2008

Hamburg, Germany: Conergy Plans Sales of Over 1 Billion Euro in 2008

Five months after the start of its restructuring program, Conergy AG says that the company is significantly more tightly and efficiently organised and is making good progress with its strategic repositioning.

In 2007 the company increased sales by 4% to EUR 706 million. The costs of restructuring Conergy into a profitable solar energy group, as well as the changes in accounting methods have had – as already communicated on February 5th – a detrimental effect on last year’s results.

As was reported when the provisional figures were published, EBIT amounted to EUR –210 million, of which the major part resulted from one-time restructuring costs and write-offs and which is for the most part not cash-effective. Because deferred tax assets were lower than those estimated in the provisional results, the net result was EUR –248 million. This change in relation to the provisional figures is also not cash-effective. These key data, as well as the accounts as a whole, also reflect the switch by the company to more conservative accounting methods. These reflect tougher standards, especially concerning the deconsolidation of large-scale projects – i.e. the inclusion of project companies within the scope of consolidation until they have been sold – and constitute significant one-off charges for 2007 as a result of the strategic and operational change of course by the new Management.

Conergy CEO Dieter Ammer: “A tough period lies behind us all and with it an unbelievable show of strength. We have rescued Conergy from the worst of the storm and repositioned it. We have changed the team and we are on course to make the company efficient and profitable again. We need a few more months to achieve this – but initial successes point in the right direction. We are on our way up again!”

Due to the change in accounting methods for major projects, as well as the accounting for businesses which will not be continued as “discontinued operations”, the corporate accounts for 2006 have been restated accordingly. This means that sales for 2006 have been reduced from EUR 752 million to EUR 682 million. Further adjustments in accordance with IAS 8 that do not affect sales led to a reduction of the 2006 EBIT by EUR 17 million. The adjustments as a whole mean that Conergy now has a reduced EBIT for 2006 of EUR 2 million, compared with the EUR 52 million previously reported. The restatement for the 2006 business year reflects the current state of talks with the German Financial Reporting Enforcement Panel (DPR). According to what Conergy knows at present, the DPR’s investigations will not necessitate any further changes for 2006.

While in 2007 both the SunTechnics and Conergy divisions saw strong growth in sales, EPURON, the large-scale project business, saw a decline of 28% to EUR 150 million, also as a result of the change in accounting method. SunTechnics (business with retail customers) increased sales by 18% to EUR 235 million in 2007 and Conergy’s sales to large customers increased by 17% to EUR 321 million. Business abroad developed particularly favourably for Conergy; sales outside Germany rose by 54% to EUR 382 million and thus accounted for 54% of group revenues for the first time. In this context, the Spanish and US markets proved particularly strong in sales.

Although the current year will be significantly affected by the turnaround measures, Conergy plans growth in sales to over EUR 1 billion for continuing operations in 2008, supported by continued organic growth as well as by the postponement at EPURON because of the change in accounting method.

According to the company’s plans, all key success indicators will improve significantly: while the aim is to achieve breakeven before special items at EBITDA level (2007: negative EUR 168 million), a considerable double-digit negative EBT is planned, again before special items and one-time effects, but after depreciation and financial expenses. Conergy plans a further upturn in sales for 2009, as well once again a positive EBIT well into the double-digit millions.

In early November 2007 Conergy introduced a package of measures with which the company wants to achieve improved profitability. Following the first five months of implementation, initial successes have been achieved. The “Measure Control Office”, set up early in 2008 by two well-known business consultancies, defined many measures with an impact on profitability; it also assists and supervises their implementation in detail. Among others, the following packages of measures have been launched or have already been implemented:

As part of the focus on the profitable core business, Conergy has been able to divest the first non-core activities; the company has thus sold its heating activities in Belgium, the Netherlands and Austria. Further sales have been initiated.
The withdrawal from unprofitable countries (e.g. The Netherlands, South Africa) has been initiated
The process of consolidating sales offices in the core countries has been initiated
The product portfolio has been significantly simplified
The reduction in the number of legal entities is proceeding according to plan.
Standardization and optimization of payment terms with suppliers
Management appointments in the independently operating divisions have been completed
The number of staff has so far been reduced by over 550 full-time employees globally.

The ramp-up of the Conergy solar factory in Frankfurt (Oder) is also proceeding according to the plans announced in early February. The plant is currently in the ramp-up phase. 90% of all machines have been installed and are being brought into operation successively. Conergy has secured the quantities of raw materials necessary for the start-up and trial run through short-term supply contracts.

However, in the next three months there could be fluctuations in production because of bottlenecks in the supply situation. From July this year Conergy will obtain larger quantities of silicon-based raw materials from its partner MEMC, sufficient to secure partial capacity utilisation in 2008. The long-term contract with MEMC includes steadily increasing supplies so that Conergy will be able to run its plant at full capacity from the second half of 2009.

Further details about: Conergy