Absence of turnaround in PV market impacts ersol's earnings in H1-09

ERFURT, BRUSSELS: ersol Solar Energy AG (ersol), a company of the Bosch Group, increased its consolidated revenue to € 72.9 million in the second quarter of 2009.
Compared with the same period of the previous year (€ 129.9 million), consolidated revenue was thus down by 43.9 percent.

The main reasons for this dramatic slump are the generally adverse market situation -- particularly in international business -– the general slackening of demand, combined with a significant drop in solar module and cell prices and the weaker project business due to the financial market crisis.

Accordingly, the distribution of the ersol Group's revenue by region shows a significant downturn in its international business. The Company's export ratio decreased by 55.4 percentage points, from 72.6 percent in the corresponding period of the previous year to 17.2 percent in the first six months of 2009.

Germany thus accounted for an 82.8 percent share of revenue in the first six months of 2009 (6 months 2008: 27.4 percent). The rest of Europe accounted for 9.6 percent of revenue. Spain's decision to limit its subsidisation of PV plant expansion to 0.5 GWp in 2009 led to a decrease in its share of revenue to 0.1 percent (6 months 2008: 17.7 percent).

The operating result (EBIT) of € -10.6 million was significantly lower than that achieved in the same period of the previous year (€ 22.4 million). Upon separate review of the second quarter of 2009, EBIT amounts to € -13.7 million, thus the decline in this result is mainly attributable to the persistently negative market trend. The EBIT margin decreased in the same way, from 17.2 percent in the year-ago period to -14.5 percent in the first six months of 2009.

Earnings before taxes (EBT) fell significantly compared with the previous year, from € 18.6 million down to € -13.4 million. Net cash flow from operating activities (operative cash flow) amounted to € 70.3 million in the first six months of 2009, corresponding to an increase of € 57.8 million, compared with € 12.5 million in the same period of the previous year.

The change compared with the first six months of 2008 is mainly attributable to the negative operating result and to the significant increase in inventories due to the poor demand for solar modules. Conversely, there was a substantial reduction in interest expenses, which almost halved due to the fall in interest rates.

Outlook
The current market situation has not left ersol unscathed. Sustained price pressure due to surplus capacities and a change in the market to a buyers' market are reflected in short-term forecasts.

"Our company's figures for 2009 will show significantly less growth than originally anticipated. We are now expecting revenue of less than € 300 million and a negative operating result (EBIT).

"This decline is mainly attributable to the slump in the overall market compared with 2008, due in particular to massive cuts in the Spanish photovoltaic market, the worst global economic crisis for decades and the considerable surplus of solar modules and cells this resulted in, which led to extreme price pressure and, ultimately, to a considerable drop in prices of up to 30 percent in the first six months of 2009.

"Furthermore, the credit crunch that persists due to the financial crisis is curbing the global project business," says ersol's CEO, Holger von Hebel, describing the current market situation and the outlook for the financial year as a whole.

Nevertheless, the medium-term and long-term outlook for the sector remains positive, since regenerative energies, and thus photovoltaics, will play an important role in the future energy mix.

In addition to Southern Europe, future markets include in particular North America and Asia, above all China, which is aiming to drive forward the expansion of renewable energies with substantial government support.

"There is no doubt that we face major challenges; but, as a highly innovative company with an integrated value chain, ersol will play a key role in the future photovoltaic market.

"We are essentially holding firm to our current expansion plans; only the run-up of the new capacities will be adjusted in line with the short-term demand situation. We have secured financing for our expansion plans through group loans, and our application for EU subsidies has been approved," he added.