Deterioration of prices continues to have significant negative impact on profitability
Solar module sales volumes affected by production bottlenecks
In the first three months of the current fiscal year, operations of Sunway AG (SWW:GR, SWWG.DE, ISIN DE0007332207) experienced a weak development. Reductions of solar subsidies announced in Germany and other European markets were not reflected in Sunways’ sales revenues in the form of corresponding pull-forward effects. This was due to the limited availability of solar modules resulting from production bottlenecks. In addition, pressures on selling prices, in particular for solar modules but also for inverters, continued and even increased during the first three months of 2012. In the first three months of 2012, the Sunways Group’s sales revenues declined by more than half against the prior year quarter to € 10.4 million (Q1/2011: € 22.2 million). The operating result (EBIT) was negative at € 6.8 million (Q1/2011: € -3.5 million).
Weak international business
In the period under review, Sunways generated international sales revenues in the amount of € 3.3 million (Q1/2011: € 12.8 million). Business developments in Italy and Spain, where sales in each case declined by more than 90 % against the prior year quarter, were particularly disappointing. As of 1 January 2012, the Spanish government suspended solar subsidies. However, due to the intensified cooperation with the LDK Solar Group, sales in Asia increased to € 0.4 million (Q1/2011: -) in the first quarter of 2012. In all, Sunways AG’s international sales decreased by 74.2 % or € 9.5 million against the first quarter of 2011 (Q1/2011: € 12.8 million).
Module supply affected by production bottlenecks
Due to the deterioration of market prices, sales in the solar cell segment fell below the figure reported in the comparable prior year quarter. Sales revenues declined by 46.7 % from € 7.5 million in the prior year quarter to € 4.0 million in the first quarter of 2012. Sales volumes also decreased markedly by 28 % to 4.9 megawatts peak in the first quarter after 6.8 megawatts peak in the first quarter of 2011.
Due to materials bottlenecks in the module production at LDK Solar in China, the supply of Sunways solar modules in the first quarter was inadequate. This could partially be offset by the use of LDK merchandise. Sales volumes of solar modules only amounted to 6.4 megawatts peak in the first quarter of 2012 and thus fell by 45.3 % against the relevant figure for the prior year quarter of 11.7 megawatts peak. The deterioration of selling prices achievable in the market (which declined by more than 40 % within a period of 12 months) also contributed to this development. Accordingly, sales in the first quarter of 2012 dropped by 68.9 % to € 5.1 million (Q1/2011: € 16.4 million).
Compared to the first quarter of the fiscal year 2011, the Sunways Group’s sales in the solar inverter segment increased by 32.0 % to € 4.1 million (Q1/2011: € 3.1 million). The sales volume of 24.3 megawatts peak in the first three months of the current year almost doubled from the 12.6 megawatts peak sold in the first quarter of 2011. On the other hand, the prices for solar inverters also decreased markedly (decline by about 30 % within a period of 12 months).
LKD Solar’s acquisition of a stake in the company as an anchor investor was successfully completed
In the first quarter of 2012, Sunways AG’s capital increase from authorized capital resolved on 31 December 2011 was successfully completed. Only LKD Solar German Holding GmbH, an indirect subsidiary of LDK Solar Co., Ltd., was permitted to subscribe for shares. Upon completion of the capital increase, the interest of LDK Solar Germany Holding GmbH amounted to about 33 %. Simultaneously with the resolution on the capital increase, LDK Solar Germany Holding GmbH announced a voluntary public takeover offer with respect to all outstanding shares of Sunways AG. From the point of view of the Management Board and Supervisory Board of Sunways AG, the acquisition of a majority stake in the Company by the LDK Solar Group involves competitive advantages and promising international prospects for Sunways. Therefore, they recommended that shareholders should accept the offer. Upon completion of the takeover offer on 12 April 2012, LDK Solar Germany Holding GmbH published the total number of voting rights attributable to it: with about 71 % of the share capital and voting rights it had become Sunways AG’s majority shareholder and sole shareholder with a reportable voting interest.
Prospects for the fiscal year 2012
The situation in the global photovoltaics markets will continue to be marked by significant pressure on prices and competitive pressures in the current fiscal year. „Our objective for the fiscal year 2012 is to stabilize our sales revenues“, says Michael Wilhelm, Chairman of the Management Board of Sunways AG. „As far as the operating result (EBIT) is concerned, we expect to reduce our losses.“
As a member of the LDK Solar Group, Sunways will have access to the Chinese market and other international growth markets and customer segments. Purchasing benefits with respect to primary products from the LDK Solar Group and the access to production plants in China may significantly improve the Sunways Group’s profitability“, says Wilhelm. In addition, LDK Solar and Sunways are planning to complement each other’s product portfolio and to jointly develop new products, such as e.g. high-performance solar modules and inverters for new markets and requirements.
The LDK Solar Group also supported our funding activities“, adds Michael Wilhelm. „In particular, we appreciate LDK’s support in financing the Company by extended payment terms for goods and services from China.“
Key figures Q1/2012
Group
Sales revenues: € 10.4 million (Q1/2011: € 22.2 million)
EBITDA: € -5.1 million (Q1/2011: € -1.9 million)
EBIT: € -6.8 million (Q1/2011: € -3.5 million)
Consolidated net income/loss: € -7.3 million (Q1/2011: € -2.7 million)
Earnings per share: € -0.42 (Q1/2011: € -0.23)
Sales revenues Germany: € 7.1 million (Q1/2011: € 9.4 million)
Sales revenues rest of Europe: € 2.9 million (Q1/2011: € 12.8 million)
Number of employees (31/03/2012): 299 (31/03/2011: 348)
Solar cell segment
Sales revenues: € 4.0 million (Q1/2011: € 7.5 million)
EBIT: € -1.6 million (Q1/2011: € -0.8 million)
Sales volume: 4.9 MWp (Q1/2011: 6.8 MWp)
Solar module segment
Sales revenues: € 5.1 million (Q1/2011: € 16.4 million)
EBIT: € -2.5 million (Q1/2011: € -1.1 million)
Sales volume: 6.4 MWp (Q1/2011: 11.7 MWp)
Solar inverter segment
Sales revenues: € 4.1 million (Q1/2011: € 3.1 million)
EBIT: € -2.7 million (Q1/2011: € -1.6 million)
Sales volume: 24.3 MWp (Q1/2011: 12.6 MWp)