March 20, 2009

Munich, Germany: CentroSolar Reports 2008 Results

According to full-year results announced today, CENTROSOLAR Group AG succeeded in increasing its annual revenue beyond its target level for the previous year to a new record figure of EUR 332.6 million (+51 % from EUR 220.3 million in 2007). The export ratio increased from 33% to 54%. As CENTROSOLAR Group AG has decided against entering into long-term purchase agreements for cells, it was not able to maintain its gross margin on revenue at the previous level in view of the difficult conditions in the procurement market, and this ratio fell from 21.0% to 19.3 %.

Improved efficiency in the areas of distribution costs and overheads compensated for this downturn almost in full, with the result that the EBITDA operating margin remains between 6 and 7%. The higher year-on-year operating depreciation and amortisation of EUR 3.2 million (2007: EUR 1.7 million) was counterbalanced by the fall in IFRS 3 depreciation from EUR 8.6 million to EUR 6.2 million, with the result that EBIT more than doubled to EUR 12 million in 2008, compared with EUR 4.8 million in the previous year. EPS accordingly rose from EUR 0.10 to EUR 0.31 last year, despite the dilutive effect of the capital increase.

The Solar Integrated Systems business segment, which concentrates mainly on roofs of residential and industrial properties, posted revenue of EUR 241 million, representing a rise of +44% compared with the previous year. The main driving force behind this growth was the expansion in the group's operations in Spain, France and Italy. The proportion of export revenue virtually doubled from 25% to 49%. The high cell purchasing prices experienced under the short-term procurement strategy in the first half and the write-down of inventories at the end of the second half of the year nevertheless eroded the gross margin, with the result that the segment's operating profitability fell short of expectations despite improved efficiency in personnel and other expenses, and EBITDA slipped to EUR 8.2 million (previous year EUR 9.5 million). An optimization program to enhance sales and reduce costs of distribution and overheads has therefore now been implemented.

External revenue for the Solar Key Components segment was boosted by 74 %, from EUR 52.4 million in the previous year to EUR 91.4 million. This rate of increase, which is way above the industry average, was made possible by the increase in manufacturing capacity for solar glass since 2007, in conjunction with the successful marketing of special solutions for roof mounting systems. EBITDA for this segment even rose by 140 %, from EUR 5.6 million in the previous year to EUR 13.3 million in 2008.

More restricted access to financing and the lower payment tariffs for ground-mounted systems will hold back the growth of the photovoltaic market in 2009. CENTROSOLAR itself actually expects to maintain volume growth at a high level in 2009 thanks to its focus on roof systems, which attract higher subsidies internationally, and the easing of the situation on procurement markets. The current decline in wafer, cell and module prices will, however, reduce the impact of this volume growth on revenue.

Overall, CENTROSOLAR therefore expects to post a similarly high level of revenue for 2009 as in the record-breaking year of 2008. 2009 will, however, bring non-recurring costs for the Solar Integrated Systems segment. The optimization program now under way, the production ramp-up of the new Itarion solar cell plant and the reduction in inventories in the first quarter of 2009, possibly combined with further write-downs if prices continue to fall, will nevertheless put a strain on the operating result in the short term. On the other hand leaner structures and more attractive purchasing terms for solar cells will pave the way for a rise in the profit margin from operations permanently above current levels from 2010 on. The continuation of the joint venture with Qimonda Solar GmbH should likewise be clarified shortly, removing the uncertainty that may be depressing the share price.

Further details about: CentroSolar AG