Germany’s big boys release Q3 results

Conergy, which has had an interesting year to date, following company CFO, Sebastian Biedenkopf being struck by lightening, production closures at its Frankfurt (Oder) solar cell and wafer manufacturing plant, and the decision taken to sue four of its former board members, is remaining relatively upbeat.

While it acknowledges that Germany, in particular, has suffered from weak demand, the company reports increased international sales, which have grown from €330.2 million in the first three quarters of 2010, to €414.5 million in the first three quarters of 2011.

However, like many of its peers, its Q3 2011 EBIT and EBITDA data suffered significant losses, having fallen from €7.7 million in 2010, to €-28.2 million, and €1 million to €-104.9 million, respectively. As such, for the first nine months of the year, EBITA fell from €13.1 million in 2010, to €-136.4 million, and EBITDA dropped drastically, from €33.6 million to €-47.2 million. The main reasons cited were one-off effects due to the strategic realignment of the module plant (€-14.3 million), and the "still difficult" market environment in the third quarter.

Conergy’s earnings after taxes from continuing operations, meanwhile, fell massively from €0.8 million in the first nine months of 2010, to €-103.2 million. Its Q3 turnover also decreased, from a healthy €275.3 million in Q3 2010, to €182.4 million in Q3 2011. At 19.5 percent, Q3 gross margin remained sequentially stable, but represented a drop from Q3 2010, which achieved 23.3 percent.

Conergy board member Alexander Gorski commented, "We see ourselves as being well positioned for the future with the strategic realignment of our module production in Frankfurt (Oder) … Also, we will continue to consistently reduce our staff and material expenses in all areas." The company added in a statement released that although it has succeeded in expanding its total sales volume in the first three quarters of the year, it was unable to offset the sharp drop in prices. Consequently it expects 2011 sales to decline on 2010s.

Overall, Conergy expects to see sales of between €750 million and €800 million for the full year 2011. "This decline along with the gross profit margin will have a disproportionally negative effect on the company’s earnings," it said. EBITDA is expected to remain negative, at between €-50 million and €-55 million. Looking ahead to 2012, it believes the market will remain "stagnant", with sales remaining at 2011 levels. However, it said, "At the same time, the measures initiated should improve EBITDA such that it is slightly in the black."

Solid progress

Unlike many, S.A.G. Solarstrom has weathered the industry storm rather well this year. In the first nine months of the year, it achieved sales of €211.2 million, in comparison to €139.5 million in the same period last year. Meanwhile, its EBIT rose from €7.5 million in 2010, to €11.7 million in 2011.

Similar to Conergy, the company says it achieved the majority of its sales – 83.5 percent – abroad. It adds that its Project Planning and Plant Construction business area achieved the largest share of the growth, with sales of €175.4 million and an EBIT of €8.9 million (Q1 to Q3 of 2010: €80.8 million sales; €2.5 million EBIT). Partner Sales, however, suffered, particularly due to the weak German market. With sales of €19.7 million, it achieved just under half of the sales in the previous year’s period, which reaped in €44.9 million. EBIT fell to €-0.4 million, and EBIT margin was minus two percent. This is in comparison to the first nine months of 2010, which saw an EBIT of €2.6 million and an EBIT margin of 5.7 percent.

Overall, S.A.G. Solarstrom has confirmed that it expects to achieve sales of between €260 million to €280 million, and an EBIT of between €16 million and €18 million. Meanwhile, in 2012, it believes it is well positioned in the market, even if the conditions remain challenging.

Inventory impairment

Phoenix Solar was upbeat in reporting its Q3 2011 sales volume. The company reports that it achieved a "significant" increase in this area, with volumes having exceeded figures from the previous year. As with the other two companies, it adds that international sales were strong. However, due to the accelerated price decline in the quarter, it "incurred substantial inventory impairment".

Consequently, while Phoenix Solar generated consolidated revenues of €113.1 million in Q3 2011, compared to €95.3 million in Q3 2010, EBIT fell considerably from €4.3 million in Q3 2010, to €-13.2 million in Q3 2011. EBIT margin also decreased to minus 11.6 percent, down from 4.5 percent in Q3 2010. "The large losses resulted mainly from inventory impairment of €9.6 million necessitated by the downward spiral in prices over the quarter," said the company in a statement.

In terms of sales, the German market, which had formerly represented the lion’s share of the company’s sales, dropped 24.4 percent, from €42.5 million in Q3 2010, to €32.1 million this Q3, due to a decrease in photovoltaic installations.

Phoenix further reported that its Components & Systems segment boosted revenues by 22.3 percent to €65.8 million in Q3 2011, from €53.8 million in Q3 2010, thereby contributing 58.2 percent to consolidated revenues. The Power Plants segment also showed slight improvement, having generated revenues of €47.3 million in Q3 2011, compared to €41.5 million in Q3 2010.

Looking at the first nine months of the year then, the company’s consolidated revenues fell almost 45 percent, from €459.3 million in 2010, to just €253.9 million in 2011. In contrast, revenues generated by international business climbed 53.4 percent to €149.6 million, in comparison €97.5 million in the same period in 2010. Consolidated EBIT, meanwhile, dropped from a healthy €31.2 million in 2010, to a depressing €-39.5 million at the end of the 2011 nine-month period. EBIT margin posted -15.6 percent, as opposed to 6.8 percent in 2010.

Phoenix’s order book, on the other hand, showed that consolidated orders in hand stood at €237 million at the end of the third quarter, down from the €271 million seen in Q3 2010. Adjusted for projects currently under construction, the order book came to €98 million (Q3 2010: €147 million). ?

As the company already announced on October 11, 2011 guidance for revenues and the results has been revised downwards. As such, revenues in the range of between €350 million and €400 million, and an EBIT of between €-42 million to €-49 million are expected. Phoenix concludes by saying that "measures to cut costs and optimize its business model have been initiated, in order to return to the profit zone in the financial year 2012."