Bitterfeld-Wolfen, Germany, 10 August 2011 – Q-Cells SE was able to increase sales revenues significantly compared to the extremely weak first quarter, but recorded another operating loss in the second quarter due to the continuing price drop and considerable one-off effects. The Company expects a negative EBIT for the full year 2011 despite signs of a recovery in the markets. A package of measures, which includes streamlining the organisational structure and optimising costs, should help the Company return to operating profit in 2012, which is still expected to be a difficult financial year.
Q-Cells SE was able to significantly increase sales revenues in the past quarter compared to the first quarter of 2011. The Company generated sales revenues of €316.0 million in the second quarter (Q1 2011: €125.1 million), mainly on account of strong systems business. Due to the difficult market situation and further price drops in the second quarter however, Q-Cells recorded a negative EBIT. In addition, significant one-off effects had a negative impact on operating income in the second quarter of 2011. Considerable impairment charges were carried out on property, plant and equipment as well as write-downs on inventories to account for changed market conditions. In the second quarter, impairment charges on property, plant and equipment of the German production sites amounted to €139.7 million, and €73.2 million for Group inventories. One-off effects, including expenses in connection with onerous contracts of €43.6 million, came to €256.5 million in the second quarter. The Company recorded a total operating loss of €307.7 million in the second quarter (H1 2011: €-318.3 million), as a result of idle costs due to low capacity utilisation and the price drop for cells as well as modules. Adjusted by one-off effects and idle time costs the operating profit (EBIT) in the second quarter amounted to €-24,4 million. After interest and taxes, the loss for the second quarter of 2011 amounted to €354.8 million (H1 2011: €-395.8 million).
“In the first half of the year, the difficult situation in the European market hit us particularly hard. I expect competition to remain tough in the coming year with no significant changes to demand, but we will be in a much better position to deal with it,” said Nedim Cen, CEO of Q-Cells SE. “I am convinced that the strategy of further developing Q-cells into a photovoltaic solutions provider is the right way to go.”
Package of measures to be implemented
In response to the difficult market situation and negative results in the first half of the year, the board of directors today decided on a package of measures for the further strengthening of the Company’s competitiveness. This program is subject to approval by the supervisory board. At the end of last year, Q-Cells completed a comprehensive restructuring programme, during which the Company focused on its core business, generated significant savings and expanded its module portfolio. After production was cut back in the second quarter of 2011, the now planned package of measures resharpens.
The planned measures aim to significantly reduce the production costs of solar cells and modules. To achieve this, Q-Cells is focusing production on high-performance systems, particularly at the Company’s Malaysian site, which will run at full capacity in the second half of the year. Production capacities for solar cells at the Company headquarters in Bitterfeld-Wolfen will be permanently reduced to 50 %. The module production line for crystalline Q.PEAK high-performance modules is currently being ramped up in Bitterfeld-Wolfen. With immediate effect, Q.SMART thin-film modules with CIGS technology are being produced at full capacity again on the blueprint production line at the subsidiary Solibro. The Company is aiming for total production capacities between 1.0 to 1.2 gigawatt in 2012.
Research and development is being expanded to include the full spectrum from solar cells to solar systems and applications to become even quicker at developing marketable products with competitive system costs. System solutions such as flat roofs, car ports and system kits are to be used in particular in the business segments Residential and Commercial & Industrial, which Q-Cells aims to expand significantly. Sales activities will also focus even more strongly on customer groups and international target markets and sales structures will be simplified.
The overall objective of the package of measures is to reduce complexity. In addition, Q-Cells is constantly working on reducing costs for production as well as for the procurement of raw materials and solar wafers. In Administration, 25 % to 30 % of costs are to be saved by pooling tasks and streamlining the organisational structure and processes. The Company aims to avoid enforced redundancies when streamlining the organisational structure and adjusting production. Temporary workers are no longer being employed since adjusting production in April. Around 90 employees are currently changing over to the new solar module production that was started up in July.
Changes to the Executive Board
In its meeting on 11 August 2011, the supervisory board is to decide over changes in the board of directors. Andreas von Zitzewitz is to assume the position of COO with immediate effect . In that function he will be responsible for Production, Research & Development, Purchasing, Logistics and Quality. CEO Nedim Cen had temporarily assumed these tasks since Gerhard Rauter left the Company in May 2011. Andreas von Zitzewitz has extensive management experience in the fields assigned to him, which he had gathered in his last position as an Executive Board member of the solar company Conergy and prior to that at the semiconductor producer Infineon Technologies and at Siemens. The 51-year old electrical engineer, who graduated with a doctorate, will focus on strengthening Q-Cells’ competitive position with regard to crystalline solar cells, solar modules and solar systems as well as CIGS thin-film modules of the subsidiary Solibro.
“I am pleased that Andreas von Zitzewitz provides himself to Q-Cells as an experienced executive manager. He shall focus on strengthening our innovative power and productivity as well as professionalising our business processes. He and the Company will be able to fall back on his knowledge of the photovoltaic and semiconductor industries,” said CEO Nedim Cen.
Market recovers – and inventories are full
The success in recent weeks confirms that Q-Cells is on the right way with its strategic focus – and that the solar market will recover again. However, product prices are still under a lot of pressure as inventories are still full. While the market almost came to a complete standstill in the first quarter, demand started increasing again at the end of the second quarter. This is reflected in the steep sales revenues growth in the second quarter compared to the previous quarter. In the systems business, the sale of the German solar park Finsterwalde II & III was successfully concluded, and the first two sections of solar park Zerbst were also completed. In the third quarter, Q-Cells received an order for the construction of the following three sections of this project with a volume totalling 26 MWp.
In Ontario, Canada, Q-Cells received another order for a 10 MWp solar project by Starwood Energy Group Global and will therefore realise a total volume of 60 MWp in this region. Q-Cells is presently expanding its Malaysian production site into a new regional sales hub so as to position itself in the future markets of Asia/Pacific. In addition, Q-Cells received its first large order for 20 MWp of Q.SMART thin-film solar modules in the third quarter. Q-Cells currently has order backlog in excess of €200 million.
The company has also entered into a sponsoring partnership with BVB Dortmund to strengthen the Q-Cells brand as well as sales. According to the motto “SolarChampions”, the German soccer champion and participant in the Champions League chose Q-Cells from 20 companies to advertise for sustainable solar power. A solar system of the roof and facade of the stadium forms an integral part of this agreement, giving Q-Cells the opportunity to prove its competence in the field of commercial rooftop systems – to a selected audience of experts. Together with the partnership programme PRO.MAP, this measure is aimed at enhancing sales.
“We offer our customers an attractive portfolio of reliable high-quality and high-performance products. Our new solar application for flat roofs shows that we can save significant system costs with our clever solutions,” commented Nedim Cen. “We will continue to pursue this path with our customers and partners, which trust in our technological competence and our know how when it comes to finding solutions.”
According to medium-term market forecasts, competition in the global photovoltaic industry will be intense in 2011 and 2012 due to high surplus production capacities. Solar power will only become increasingly competitive – even without government subsidies – and tap new markets at a later date. Q-Cells is using the current measures to prepare itself in terms of strategy for this scenario.
Q-Cells SE expects sales revenues of around €1 billion and an operating loss in the three-digit million euro range for the full year 2011, as it will incur more one-off effects for the planned package of measures in the second half of 2011. At the end of 2011, Q-Cells plans to have cash and cash equivalents of between €300 million and €350 million among others on the basis of a reduction in working capital.
By implementing the current package of measures, continuously improving its cost positions and further developing the strategic segments Residential and Commercial & Industrial, Q-Cells aims to generate positive operating income (EBIT) again in 2012.
“We are convinced that the medium-term prospects of the solar industry are positive. Together with our customers and partners, we wish to be part of this development,” said Nedim Cen.