TIDMPVCS
RNS Number : 2165A
PV Crystalox Solar PLC
28 March 2012
PV Crystalox Solar PLC
Preliminary Results
For the year ended 31 December 2011
PV Crystalox Solar PLC and its subsidiaries (the "Group"), one
of the world's leading providers of photovoltaic ('PV') silicon
wafers, today announces preliminary results for the year ended 31
December 2011.
Market overview
-- 2011 global module installations estimated at 27.7GW up 70% from 2010
-- Unprecedented wafer spot pricing reduction of 69% during 2011
Overview of results
-- Wafer shipments 384MW (2010: 378MW)
-- Revenues EUR210.4m (2010: EUR252.6m)
-- EBIT before exceptional items of EUR4.1m (2010: EUR33.3m)
o Exceptional impairment of plant of EUR27.8m
o Exceptional inventory writedown of EUR22.8m
o Exceptional onerous contract charge & provisions of
EUR20.9m
-- EBIT loss of EUR67.5m (2010: profit of EUR33.3m)
-- EBT loss of EUR67.1m (2010: profit of EUR33.7m)
-- Net Cash EUR22.6m (2010: EUR54.8m)
Maarten Henderson,Chairman, commented
"We remain committed to the solar industry and believe that the
long term outlook for solar installations remains positive. In the
medium-term we expect that market conditions will return to levels
that allow companies to operate profitably. In parallel the Group
will accelerate its cost reduction programmes, continue its cash
conservation strategy, whilst preserving the Group's operational
capabilities. The Board will continue to take the decisions
necessary to maximise shareholder value."
Iain Dorrity, Chief Executive Officer commented
"2011 has been an extremely challenging year the for the global
PV industry. We believe that our cash conservation measures and
internal cost reduction programme are the most appropriate approach
to protect shareholder value in the current turbulent
environment."
Enquiries:
PV Crystalox Solar PLC +44 (0) 1235 437188
Iain Dorrity, Chief Executive Officer
Peter Finnegan, Chief Financial Officer
Matthew Wethey, Group Secretary
FTI
James Melville-Ross / Sophie McMillan
/ Tracey Bowditch +44 (0) 20 7831 3113
About PV Crystalox
PV Crystalox Solar is a leading supplier to the world's major
photovoltaic companies, producing multicrystalline silicon wafers
for use in solar electricity generation systems.
Our customers, the world's leading solar cell producers, process
these wafers into solar modules to harness the clean, silent and
renewable power from the sun. We are playing a central role in
making solar power cost competitive with conventional hydrocarbon
power generation and, as such, continue to seek to drive down the
cost of production whilst increasing solar cell efficiency.
Chairman's statement
PV Crystalox Solar has navigated a very difficult 2011, which
was a very challenging year for the PV industry. Worldwide
production capacity continued to increase dramatically particularly
from companies in China, which led to sharp falls in pricing across
the PV value chain and drove wafer sales prices below production
costs.
Despite the problems faced by the industry during 2011, growth
in the global PV market was significantly above industry
expectations, with strong demand in the second half of the year
driven by the 40% fall in module prices and the continuing market
incentive programmes in Europe. The European Photovoltaic Industry
Association (EPIA) estimates that global installations grew to
around 27.7GW in 2011, which represents a 70% increase over the
previous year.
In response to the challenging market environment, the Board has
taken action to manage the business through these difficult times
and in particular to conserve the Group's cash. Production output
was significantly reduced at our ingot and wafer operations in the
UK and Germany and polysilicon production was suspended at our
facility in Germany. Employment costs were reduced through the
introduction of short time working, a reduction in the number of
temporary workers in Germany and, regrettably, redundancies in the
UK.
The Group's shipment volumes of 384MW in 2011 were slightly
above the 378MW achieved in 2010. However, Group revenue was 17%
lower at EUR210.4 million due to the effect of lower average
selling prices which impacted profitability leading to earnings
before interest and taxes (EBIT), before exceptional items, of
EUR4.1 million, representing a margin of 1.9%. As a result of the
dramatic reduction in wafer and polysilicon spot prices and the
challenging market environment, the Group recognised exceptional
charges of EUR71.6 million in 2011. These comprised: a EUR27.9
million impairment charge in relation to the Group's polysilicon
facility at Bitterfeld; a EUR22.9 million inventory write down; and
a EUR20.9 million write down in relation to onerous contracts with
our external suppliers. Once these exceptional items are taken into
account, total EBIT loss was EUR67.5 million for the year.
The loss after taxes was EUR60.9 million, equating to a loss per
share of 15.0 euro cents. The Group retained a positive net cash
position of EUR22.6 million at the year end.
In view of the current challenging market conditions that
continue to be experienced in the first three months of 2012, the
Board has decided not to declare a dividend. The Board continues to
recognise the importance of dividends to shareholders and the
directors will review the potential to reinstate dividends based on
the future performance and prospects of the Group.
We remain committed to the solar industry and believe that the
long term outlook for solar installations remains positive. In the
medium-term we expect that market conditions will return to levels
that allow companies to operate profitably. In parallel the Group
will accelerate its cost reduction programmes, continue its cash
conservation strategy, whilst preserving the Group's operational
capabilities. The Board will continue to take the decisions
necessary to maximise shareholder value.
Maarten Henderson
Chairman
27 March 2012
Operational review
Summary
PV market conditions in 2011 were extremely challenging, with a
combination of increasing industry production capacity and high
inventory levels leading to pressure on pricing, which grew in
intensity as the year progressed.
Our wafer shipment volumes of 384MW in 2011 were marginally
above the 378MW achieved in 2010. Although our long term wafer
supply contracts provided some protection from the worst of the
market pressures, average sales prices (ASPs) fell by 18% and
adversely impacted our margins. Fierce price competition resulted
in the market pricing falling below our production costs in the
second half of the year, and has resulted in inventory write-downs,
onerous contract provisions and impairment of assets.
The Group has responded to market oversupply and lower selling
prices by adopting a cash conservation strategy. Accordingly, in
December 2011 production was suspended at our polysilicon facility
in Bitterfeld and production output was significantly reduced at
our UK ingot and German wafer operations.
Market
Overall global PV installations grew by 70% in 2011 to reach
27.7GW according to the European Photovoltaic Industry Association
(EPIA), with Europe continuing to be the major market and
accounting for 75% of the installed capacity.
PV end-market demand was sluggish in the first half of the year,
particularly in the two key markets Germany and Italy. PV
installations in Germany, hitherto the largest global market, were
only around half the level installed in the same period in 2010. In
Italy, uncertainty due to delays in finalising revisions to feed in
tariffs ("FIT") froze demand during the first half of the year.
In the second half both markets rebounded strongly, stimulated
by lower pricing, and showed remarkable growth with Germany
installing 3.0GW in December alone to reach a full year total of
7.5GW, slightly above the 2010 level. Italy overtook Germany to
become the largest market with installations of 9.0GW in 2011.
The turbulent times in the PV industry have created difficulties
for many PV companies as market prices for cells and modules also
fell below production costs. Spot prices across the value chain
remained stable until April 2011 but had fallen by 40% for modules,
69% for wafers and 59% for polysilicon by the year end. The turmoil
has taken its toll of PV companies both in Europe and in the USA,
with several filing for bankruptcy including SpectraWatt, one of
our long term contract customers in a key strategic market.
Operational Review of 2011
In light of the weak pricing environment, in October the Board
decided to take action to conserve the Group's cash. Accordingly
the Group reduced production output at its UK ingot and German
wafer operations and also suspended production temporarily at its
polysilicon facility in Bitterfeld, Germany. Regrettably, these
actions led to redundancies in the UK, short-time working in
Germany and a reduction in temporary workers in both countries. In
addition, the Group continued to have discussions with its
suppliers in order to reduce costs and will continue to seek
further methods of achieving greater efficiencies within the
Group's operations.
During 2007-2008, Group companies entered into a number of long
term agreements with customers to supply wafers at prices which are
considerably above today's market levels. In most cases we have
been able to reach agreement with our customers to continue supply
of contracted volumes, albeit at reduced prices. However the Group
has been unable to reach any agreement with two customers who no
longer wish to take delivery of wafers and so resolution is being
sought under the jurisdiction of the International Court of
Arbitration. If these actions are successful, they will result in
significant cash settlements in the Group's favour, during the
latter part of 2012.
While the Group was successful in managing the effect of the
difficult market environment during the first half of the year, the
more intense pressure during the second half impacted pricing and
to a lesser extent volumes. Demand for our products continued to be
strong during the first four months of the year and although demand
weakened during May and June, shipment volumes for the first half
of 2011 totalled 204MW, a 23.6% increase on the 165MW shipped in
the same period in 2010. Our average sales price (ASPs) during the
first half was approximately 9% below that reported for the full
year 2010 but the impact on margins was offset by the accelerated
progress in our wafering and internal polysilicon production cost
reduction programmes. Our ASPs fell more sharply during the second
half as market pressures intensified but shipment volumes of 180MW
were only 8.8% down on the first half. This represented a
creditable performance in the context of the unprecedented 69%
decline in wafer spot market prices which was seen during the
year.
The Group continues to respond to the global shift in PV
manufacturing to Asia. Shipments to customers in Asia exceeded 80%
(2010: 75%) with China overtaking Japan to become our largest
geographical market. Sales to customers in Taiwan also grew
significantly and were up by almost 50% on those in 2010. However,
shipments to this region were predominately achieved during the
first half as sales were lower during the second half as market
conditions and pricing deteriorated sharply.
Strategic Developments
The interim Group strategy focuses on cash conservation and
retention of capabilities, at the expense of emphasis on growth. We
will review this strategy on a regular basis while monitoring
market conditions.
The Group remains committed to systematically enhancing its
position in the PV industry as an independent producer of
multicrystalline silicon wafers. By focusing on the wafer and not
competing with our customers in cell production, we are able to
develop strong relationships with solar cell producers. It is our
intention to remain one of the PV industry's cost leaders and to
supply quality wafers.
The chart below shows how our priorities are being adapted to
address the current market conditions.
Previous priorities Current priorities
------------- ----------------------------------------------------------- -----------------------------------------------------------
Continued
focus on * Operating Bitterfeld polysilicon facility at full * Temporary suspension of production at Bitterfeld;
operating capacity;
cost
reductions * Negotiate improved polysilicon pricing;
* Other supplier price reductions;
* Production efficiencies; and
* Production efficiencies; and
* Higher yields.
* Higher yields.
------------- ----------------------------------------------------------- -----------------------------------------------------------
Retaining
flexibility * Diversity in sourcing polysilicon supply; and * Diversity in sourcing polysilicon supply; and
of
production
* Diversity in wafer Production. * Diversity in wafer production.
------------- ----------------------------------------------------------- -----------------------------------------------------------
Continued
focus on * Enhanced relationships with existing customers; and * Enhanced relationships with existing customers; and
major PV
companies
* New customers in the major markets of Taiwan and * New customers to retain operational capabilities.
Korea.
------------- ----------------------------------------------------------- -----------------------------------------------------------
Focus on
further * Working with customers to increase product quality * Working with customers to increase product quality
developments and develop the next generation of wafer technology. and develop the next generation of wafer technology.
of the
leading
silicon
processing
technology
------------- ----------------------------------------------------------- -----------------------------------------------------------
Cash
conservation * Temporary reduction in production output;
* Trading excess polysilicon; and
* Working capital management.
------------- ----------------------------------------------------------- -----------------------------------------------------------
Bitterfeld
Further progress was made at our internal polysilicon production
facility in Bitterfeld where improvements in both electricity and
SiCl(4) consumption per kg Si were achieved. Since operation
started in July 2009 production has ramped up steadily and a
significant increase in output to 1218MT was achieved during 2011
(823MT:2010). However, output of the plant was restricted to some
extent by a bottleneck identified in part of the plant and has led
us to reduce the name-plate capacity from 1800MT to 1600MT. The
fully loaded production cost remained below the average price of
our contracted polysilicon from external suppliers throughout
2011.
The Group's decision to cut back on ingot and wafer production
and the associated reduction in internal polysilicon requirements
necessitated a temporary suspension of production from December
2011 onwards. After taking this unscheduled shutdown into account,
annualised output in 2011 was equivalent to 1330MT per annum or 83%
of the current name plate capacity. It should be noted that further
investment of EUR4m on debottlenecking would enable capacity to be
expanded to 2000MT. No expenditure is under consideration whilst
current market conditions persist.
Flexibility in production
The Group maintains its strategic focus on its core technology
and undertakes all ingot production in-house but retains
flexibility with regard to polysilicon and wafering. The Group has
invested in the Bitterfeld facility to produce its own polysilicon
but also retains relationships with external polysilicon suppliers
and obtains significant quantities of polysilicon from them. Whilst
production at Bitterfeld has been temporarily suspended the Group
has the flexibility to restart production should market conditions
be favourable.
The Group wafers its ingots through a combination of its in
house wafering facility at Erfurt, Germany and wafering
sub-contractors in Japan.
Capacity expansion
The expansion of the Group's ingot production capacity is
approaching completion and following implementation of productivity
improvements, the capacity will reach 750MW during Q2 2012 rather
than the originally planned 670MW. The Group had earlier indicated
an intention to expand capacity further to reach 1GW by 2013 but
this capital expenditure has been postponed until there is a
recovery in market conditions.
Cash conservation focus in 2012
The Group will continue with its cash conservation strategy
while current market conditions persist. Wafer and ingot production
volumes will be maintained at reduced levels, consistent with the
retention of our operating capabilities, and maintain a strong
focus on cost control and inventory management including trading of
excess polysilicon. At the same time we will prioritise our own
internal cost reduction programmes.
The decision to restart production at our polysilicon facility
in Bitterfeld will depend on the development of market wafer
pricing, the Group's internal polysilicon requirements and on
polysilicon pricing.
The Group has long term contractual commitments for purchase of
polysilicon but has been successful in negotiating improved pricing
for deliveries in the first half. Price reductions have also been
negotiated with other key suppliers including wafering
subcontractors which will enable direct wafer production costs to
be reduced significantly (in excess of 20%) during the first half
of the year.
Outlook
There continues to be great uncertainty regarding short term
market developments and most industry forecasts predict little if
any growth in global PV demand in 2012. Increases in installations
are expected in China, where the government has recently increased
its PV target from 10 to 15GW by 2015 and also in Japan where a
feed in tariff will be introduced in July 2012. However, these
increases are expected to be offset by reduced demand following
policy adjustments in key markets in Europe. Pressure on pricing is
expected to continue, resulting in an intensely competitive
environment. Accordingly we will accelerate our cost reduction and
efficiency programmes.
With the difficult trading conditions expected to persist
throughout 2012, the Group's cash conservation measures are
expected to continue. Production output is currently running at
around 40% of average 2011 levels. Shipments to customers have been
reduced accordingly and are expected to be in the range 80-100MW in
the first half. ASPs are expected to be considerably above spot
price levels.
The Group is trading excess polysilicon in order to optimise
inventory levels. The success of the strong focus on working
capital management is demonstrated by the improvement of our net
cash balance, which at the end of February 2012 was markedly higher
than at the end of 2011.
Dr Iain Dorrity
Chief Executive Officer
27 March 2012
Financial review
In 2011 Group revenue decreased by 16.7% to EUR210.4 million
(2010: EUR252.6 million) although total wafer shipments were
marginally higher than in 2010 at 384MW (2010: 378MW). The decline
was mainly due to the 18% fall in ASPs during the year. This impact
was more significant in the second half of 2011 when ASPs were 29%
lower than in the first half.
During the year the Group generated EBIT (before exceptional
items) of EUR4.1 million (2010: EUR33.3 million). Actual EBIT
(including exceptional items) was a loss of EUR67.5 million (2010:
profit EUR33.3 million). This reduction in underlying profitability
was driven primarily by the severe decline in average selling
prices during the second half of 2011. In addition, the relatively
strong Japanese Yen had a negative impact on Group EBIT due to
higher raw material and subcontracting costs in Japan.
Net interest income of EUR0.5 million (2010: EUR0.4 million) was
almost the same as that in the previous year due to continuing low
global interest rates. The Group's net cash position at year end
was EUR22.6 million (2010: EUR54.8 million). In the first half the
main impact on cash was the completion of the planned capital
expenditure programme and a balancing advance payment to an
external supplier of polysilicon. During the second half the cash
position was impacted by the effect of the poor trading environment
on inventory levels and to a lesser extent, the pressure on
margins.
Earnings after tax were a loss of EUR60.9 million (2010: profit
of EUR23.3 million) producing earnings per share at a loss of
EUR0.15 (2010: profit of EUR0.06).
These financial results generated net cash inflows from
operating activities of EUR1.6 million (2010: inflows of EUR11.3
million) and free cash outflow of EUR20.0 million (2010: outflow of
EUR6.3 million). Free cash flow is defined using the cash flow
statement as net cash from operating activities plus cash
from/(used in) investing activities less interest received. The net
operating cash flow was impacted by the absorption of EUR6.8
million into working capital (2010: EUR23.5 million). Poor sales at
the end of the year led to cash being absorbed into higher
inventories, although non cash write-downs of closing inventory led
to closing inventory levels being slightly lower than at the
previous year end. This was offset to some extent by a reduction in
debtors due to lower sales in Q4 2011 and improved payment terms,
resulting from the change in the geographical mix of customers.
The Group's capital expenditure in the year of EUR21.9 million
(2010: EUR19.9 million) was offset by grants received of EUR1.1
million (2010: EUR3.3 million), giving a net cash outflow of
EUR20.8 million compared against 2010 when the net cash outflow was
EUR16.5 million. Investment grants received were all in respect of
the German operations as capital expenditure in the United Kingdom
does not qualify for such grants.
There was a small increase in Japanese Yen loans of a net EUR0.3
million (2010: EUR11.1million). These loans were utilised as a
hedge against movements in the Japanese yen and its effect on
assets held in that currency. Dividends totalling EUR8.1 million
were paid in respect of the 2010 profit in June 2011 (2010: EUR12.1
million).
The Group's directors have put in place a cash conservation
strategy to enable the Group to manage its operations whilst market
conditions remain difficult. The following passage sets out the
rationale behind this strategy and why the Board believes it will
enable the Group to sustain adequate cash resources for the
foreseeable future.
Going concern
A description of the market conditions, the reduction in spot
prices of wafers during 2011 and the Group's actions to conserve
cash are included in the Operational Review.
As part of its normal business practice, the Group regularly
prepares both annual and longer-term plans which are based on the
directors' expectations concerning key assumptions. The assumptions
around contracted sales volumes and prices and contracted purchase
volumes and prices are based on management's expectations and are
consistent with the Group's experience in the first part of
2012.
There are several long-term wafer supply contracts for unexpired
periods of up to three years and accordingly the Group is able to
sell wafers at prices that are above current market spot prices
despite the difficult market environment. Wafer sales to customers
without long term contracts are assumed in the longer term plans at
values close to spot prices. In addition the Group is negotiating
compensation for the termination of certain wafer supply contracts
and these are expected to generate a significant cash inflow within
the next twelve months.
Likewise, the Group has long-term contracts with suppliers of
our main raw material polysilicon for unexpired periods of between
two and four years. Polysilicon used in the Group's wafer
production comes from two external suppliers and from the Group's
plant at Bitterfeld. The Group's management has been successful in
working with these suppliers to secure periodic contract amendments
through a combination of adjusted prices and volumes. As a result,
these amendments have brought the terms more in-line with current
market pricing. To manage inventory levels the Group will sell
excess polysilicon and has been successful in this respect during
the first quarter of 2012.
The nature of the Group's operation means that it can vary
production levels to match market requirements. As part of the cash
conservation measures and the associated planning assumptions,
production output has been reduced to match expected demand. At the
same time production capacity has been retained. In line with the
Group's strategy of retaining flexibility in production levels,
production can be brought back on stream when market conditions
allow. Employment costs have been reduced following the reduction
in contract labour, redundancies in the UK and government supported
short-time working in Germany. The Group expects to reduce other
costs through negotiation with suppliers and by achieving greater
efficiencies within the Group's operations.
As a result of these modeling assumptions the base plans
indicate that the Group will be able to operate within its net cash
reserves for the foreseeable future.
On 31 December 2011 there was a net cash balance of EUR22.6
million, comprising cash or cash equivalents of EUR71.6 million and
short-term loans of EUR49.0 million. The borrowings are in Japanese
Yen and are subject to certain covenants on the Japanese subsidiary
company (including interest cover, profitability, restrictions on
Group dividends and debtor cover). The Group's plans are based upon
remaining within its net cash balance and are not dependent upon
these short-term borrowings.
Therefore, whilst any consideration of future matters involves
making a judgement at a particular point in time about future
events that are inherently uncertain, the Directors, after careful
consideration and after making appropriate enquiries, are of the
opinion that the Group has adequate resources to continue in
operational existence for at least 12 months from the date of
approval of the financial statements. Thus the Group continues to
adopt the going concern basis of accounting in preparing the annual
financial statements.
Impairment
The Board has assessed the carrying values of the Group's
property, plant and equipment for impairment as at 31 December
2011. As a result of this assessment, an impairment charge has been
recognised to reduce the carrying values of plant by EUR27.9
million. The impairment charge has been recognised in the income
statement. As an impairment of fixed assets it had no impact on the
Group's cash flow.
On 31 December 2011 the Group had invested EUR100 million in its
polysilicon plant at Bitterfeld and had received grants of EUR23
million. The current difficulties in the photovoltaic industry
dictated that an impairment test should be carried out to
determined whether the plant should be impaired. The recoverable
value of Bitterfeld plant is estimated to amount to EUR47.9
million, based on an estimate of its value in use. This has been
derived from a forecast of potential cash flowsfrom the plant.
These cash flows were discounted at a post tax cost of capital of
9.67%, which was determined by calculating the Group's cost of
capital using the CAPM (capital asset pricing model). The resultant
(discounted cash flow) analysis determined the net present value of
the plant. The potential future cash flows have been estimated on
the assumption that the plant is brought into production in the
second half of 2012 and produces at full capacity thereafter. This
analysis assumes that sales of polysilicon are at prices based on
managements' expectations backed up by the forecast from an
external consultant that has a high level of experience of the
photovoltaic industry. Plant running costs were obtained from the
Group's internal planning system.
The level of impairment of the assets of our plant is
predominantly dependent upon judgements used in arriving at future
market prices, plant maintenance costs, future growth rates, the
discount rate applied to cash flow projections and successfully
operating the plant at Bitterfeld. The estimates and judgement used
in the aforementioned assessment represents management's best
estimate based on current experience and information available,
which may be different from the actual results in the future due to
changes in the Group's business and the external environment. Any
significant changes in the market price of polysilicon, $/EUR
exchange rate, or plant maintenance costs might lead to further
impairment of some or all of the capitalised assets.
The sensitivity of the valuation to these parameters is as
follows:
-- 5% increase/decrease in the sales price forecast
decreases/increases the impairment by EUR14 million
-- 5% reduction/increase in the direct cost of production
forecast decreases/increases the impairment by EUR9 million
-- 1% change in the cost of capital changes the impairment by EUR6 million
Other exceptional items
The exceptional items in the year are set out in note 35 to the
accounts. In addition to the above mentioned impairment of EUR27.9
million, the Group wrote down its inventories by EUR22.9 million
and made onerous contract charge and provisions of EUR20.9 million.
The inventory write down was made to adjust inventory carrying
values to realisable value. The onerous contract provision was made
in respect of contracts with external suppliers of raw materials.
These contracts run for the unexpired period of between two and
four years. The provision relates to future losses that are likely
to be made if the Group processes or sells the material committed
to under the contracts, although adjustments have been made to
purchase prices according to the Directors' estimates of how
contract prices are likely to be renegotiated.
Dr Peter Finnegan
Chief Financial Officer
27 March 2012
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2011
2011 2011 2011 2010
Before Exceptional Total Total
Exceptional Items
Items
(Note35)
Notes EUR'000 EUR'000 EUR'000 EUR'000
----------------------------------- ------- ------------- ------------ ---------- ----------
Revenues 8 210,400 - 210,400 252,559
Other income 2 5,605 - 5,605 3,459
----------------------------------- ------- ------------- ------------ ---------- ----------
Cost of material and
services
Cost of material 3 (149,415) (43,735) (193,150) (162,272)
Cost of services 3 (18,699) - (18,699) (20,479)
----------------------------------- ------- ------------- ------------ ---------- ----------
Personnel expenses
Wages and salaries 4 (14,805) - (14,805) (13,660)
Social security costs 4 (2,295) - (2,295) (2,090)
Pension costs 4 (527) - (527) (476)
Employee share schemes 4 (238) - (238) (1,047)
----------------------------------- ------- ------------- ------------ ---------- ----------
Depreciation and impairment
of property, plant and
equipment and intangible
assets (16,107) (27,874) (43,981) (13,096)
Other expenses 5 (11,284) - (11,284) (8,373)
----------------------------------- ------- ------------- ------------ ---------- ----------
Currency gains and losses 30 1,438 - 1,438 (1,176)
----------------------------------- ------- ------------- ------------ ---------- ----------
Earnings before interest
and taxes (EBIT) 4,073 (71,609) (67,536) 33,349
Interest income 6 855 - 855 1,061
Interest expense 6 (404) - (404) (684)
----------------------------------- ------- ------------- ------------ ---------- ----------
Earnings before taxes
(EBT) 4,524 (71,609) (67,085) 33,726
----------------------------------- ------- ------------- ------------ ---------- ----------
Income taxes 7 (13,598) 19,790 6,192 (10,462)
----------------------------------- ------- ------------- ------------ ---------- ----------
Loss attributable to
equity holders of the
parent (9,074) (51,819) (60,893) 23,264
----------------------------------- ------- ------------- ------------ ---------- ----------
Other comprehensive income
Exchange differences
on translating foreign
operations 30 5,206 - 5,206 12,551
----------------------------------- ------- ------------- ------------ ---------- ----------
Total comprehensive income
Attributable to equity
holders of the parent (3,868) (51,819) (55,687) 35,815
----------------------------------- ------- ------------- ------------ ---------- ----------
Basic and diluted (loss)/earnings
in Euro cents 9 (15.0) 5.7
All of the activities of the Group are classed as
continuing.
The accompanying notes form an integral part of these financial
statements.
Consolidated Balance Sheet
As at 31 December 2011
2011 2010
Notes EUR'000 EUR'000
-------------------------------- ----------------- --------- ---------
Intangible assets 15 508 668
Property, plant and equipment 16 107,914 129,509
Pension surplus 27 157 -
Other long--term assets 17 32,797 36,757
Deferred tax asset 18 19,320 12,080
-------------------------------- ----------------- --------- ---------
Total non--current assets 160,696 179,014
-------------------------------- ----------------- --------- ---------
Cash and cash equivalents 10 71,664 101,300
Trade accounts receivable 11 32,319 55,807
Inventories 12 48,497 50,813
Prepaid expenses and
other assets 13 29,620 24,929
Current tax assets 14 9,815 -
-------------------------------- ----------------- --------- ---------
Total current assets 191,915 232,849
-------------------------------- ----------------- --------- ---------
Total assets 352,611 411,863
Loans payable 19 49,046 46,462
Trade accounts payable 20 8,803 23,129
Deferred revenue 26 10,082 10,084
Accrued expenses 21 6,589 4,837
Provisions 22 7,973 315
Deferred grants and subsidies 23 2,831 2,867
Income tax payable 24 399 6,764
Other current liabilities 25 753 900
-------------------------------- ----------------- --------- ---------
Total current liabilities 86,476 95,358
-------------------------------- ----------------- --------- ---------
Deferred revenue 26 8,039 10,562
Accrued expenses 21 131 98
Pension benefit obligation 27 - 62
Deferred grants and subsidies 23 22,426 24,156
Deferred tax liability 18 8,183 825
Provisions 22 10,122 -
Other long--term liabilities 43 42
-------------------------------- ----------------- --------- ---------
Total non--current liabilities 48,944 35,745
-------------------------------- ----------------- --------- ---------
Share capital 28 12,332 12,332
Share premium 75,607 75,607
Shares held by the EBT (8,640) (8,640)
Share--based payment
reserve 500 262
Reverse acquisition reserve (3,601) (3,601)
Retained earnings 158,094 227,107
Currency translation
adjustment (17,101) (22,307)
-------------------------------- ----------------- --------- ---------
Total shareholders' equity 217,191 280,760
----------------------------------------------- --------- ---------
Total liabilities and shareholders'
equity 352,611 411,863
----------------------------------------------- --------- ---------
The accompanying notes form an integral part of these
statements.
Approved and authorised for issue by the Board of Directors and
signed on its behalf by:
Dr Peter Finnegan
Chief Financial Officer
Company number
06019466
27(th) March 2012
Consolidated statement of changes in Equity
for the year ended 31 December 2011
Shares
held Share--based Reverse Currency
Share Share by the payment acquisition Retained translation Total
capital premium EBT reserve reserve profit adjustment equity
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
----------------------- -------- -------- -------- ------------- ------------ --------- ------------ ---------
As at 1 January 2010 12,332 75,607 (5,642) 2,021 (3,601) 214,301 (34,858) 260,160
Dividends paid in the
year - - - - - (12,139) - (12,139)
Share--based payment
charge - - - (1,759) - - - (1,759)
Gain on sale of shares
by the EBT - - (2,998) - - 1,681 - (1,317)
----------------------- -------- -------- -------- ------------- ------------ --------- ------------ ---------
Transactions with
owners - - (2,998) (1,759) - (10,458) - (15,215)
----------------------- -------- -------- -------- ------------- ------------ --------- ------------ ---------
Profit for the the
year - - - - - 23,264 - 23,264
Currency translation
adjustment - - - - - - 12,551 12,551
Total comprehensive
income - - - - - 23,264 12,551 35,815
----------------------- -------- -------- -------- ------------- ------------ --------- ------------ ---------
As at 31 December 2010 12,332 75,607 (8,640) 262 (3,601) 227,107 (22,307) 280,760
----------------------- -------- -------- -------- ------------- ------------ --------- ------------ ---------
As at 1 January 2011 12,332 75,607 (8,640) 262 (3,601) 227,107 (22,307) 280,760
Dividends paid in the
year - - - - - (8,120) - (8,120)
Share--based payment
charge - - - 238 - - - 238
Transactions with
owners - - - 238 - (8,120) - (7,882)
----------------------- -------- -------- -------- ------------- ------------ --------- ------------ ---------
Profit for the the
year - -- - - - (60,893) - (60,893)
Currency translation
adjustment - - - - - - 5,206 5,206
Total comprehensive
income (60,893) 5,206 (55,687)
----------------------- -------- -------- -------- ------------- ------------ --------- ------------ ---------
As at 31 December 2011 12,332 75,607 (8,640) 500 (3,601) 158,094 (17,101) 217,191
----------------------- -------- -------- -------- ------------- ------------ --------- ------------ ---------
Consolidated Cashflow Statement
for the year ended 31 December 2011
2011 2010
EUR'000 EUR'000
----------------------------------------------------- --------- ---------
Earnings before taxes (67,085) 33,726
Adjustments for:
Net Interest Income (451) (377)
Depreciation and amortisation 16,107 13,096
Impairment charge 27,874 -
Inventory writedown 22,866 -
Charge for retirement benefit obligation and
share based payments 19 (129)
Charge for provisions 17,019 849
Loss from the disposal of property, plant and
equipment and intangibles 249 60
Unrealised losses / (gains) in foreign currency
exchange 2,784 (2,938)
Change in deferred income (2,862) (2,755)
----------------------------------------------------- --------- ---------
16,520 41,532
----------------------------------------------------- --------- ---------
Changes in working capital
Increase in inventories (19,117) (12,633)
Decrease in accounts receivables 26,734 6,349
(Decrease)/increase in accounts payables and
advance payments (15,197) 4,863
Decrease/(increase) in other assets 976 (21,846)
Decrease in other liabilities (151) (260)
----------------------------------------------------- --------- ---------
9,765 18,005
----------------------------------------------------- --------- ---------
Income taxes paid (9,063) (7,762)
Interest received 855 1,061
----------------------------------------------------- --------- ---------
Net cash from operating activities 1,557 11,304
----------------------------------------------------- --------- ---------
Cash flow from investing activities
Proceeds from sale of property, plant and equipment 60 24
Proceeds from investment grants and subsidies 1,097 3,304
Payments to acquire property, plant and equipment (21,867) (19,871)
----------------------------------------------------- --------- ---------
Net cash used in investing activities (20,710) (16,543)
----------------------------------------------------- --------- ---------
Cash flow from financing activities
(Repayment)/receipt of bank and other borrowings (317) 11,141
Dividends paid (8,120) (12,139)
Interest paid (404) (684)
Losses in foreign currency exchange (2,784) -
Shares acquired by EBT - (4,266)
----------------------------------------------------- --------- ---------
Net cash used in financing activities (11,625) (5,948)
----------------------------------------------------- --------- ---------
Net change in cash and cash equivalents available (30,778) (11,184)
Effects of foreign exchange rate changes on
cash and cash equivalents 1,142 12,083
----------------------------------------------------- --------- ---------
Cash and cash equivalents at beginning of the
year 101,300 100,404
----------------------------------------------------- --------- ---------
Cash and cash equivalents at end of the year 71,664 101,300
----------------------------------------------------- --------- ---------
Notes to the Company Financial Statements
for the year ended 31 December 2011
The accompanying notes form an integral part of these financial
statements.
1. Group accounting policies
Basis of preparation
The Consolidated Financial Statements of the Group have been
prepared in accordance with International Financial Reporting
Standards (IFRS) as adopted by the European Union, IFRIC
interpretations and the Companies Act 2006 applicable to companies
reporting under IFRS. The financial information has also been
prepared under the historical cost convention except that it has
been modified to include certain financial assets and liabilities
(including derivatives) at their fair value through the
Consolidated Statement of Comprehensive Income.
PV Crystalox Solar PLC is incorporated and domiciled in the
United Kingdom.
The company is listed on the London Stock Exchange.
The financial statements for the year ended 31 December 2011
were approved by the Board of Directors on 27 March 2012.
Functional and presentational currency
Items included in the financial statements of each of the
group's entities are measured using the currency of the primary
economic environment in which the entity operates (the "functional
currency").The functional currency of the parent company is
Sterling. The financial information has been presented in Euros,
which is the Group's presentational currency. The Euro has been
selected as the Group's presentational currency as this is the
currency used in its significant contracts. The financial
statements are presented in round thousands.
Foreign currency translation
Transactions in foreign currencies are translated into the
functional currency of the respective entity at the foreign
exchange rate ruling at the date of the transactions. Monetary
assets and liabilities denominated in foreign currencies at the
balance sheet date are translated to the functional currency at the
foreign exchange rate ruling at that date. Non-monetary assets and
liabilities that are measured in terms of historical cost in a
foreign currency are translated using the exchange rate at the date
of the transaction. Non-monetary assets and liabilities that are
stated at fair value are translated to the functional currency at
foreign exchange rates ruling at the date the fair value was
determined. Exchange gains and losses on monetary items are taken
to EBIT.
The assets and liabilities of foreign operations are translated
to Euros at foreign exchange rates ruling at the balance sheet
date. The income and expenses of foreign operations are translated
into Euros at the average foreign exchange rates of the year that
the transactions occurred in. In the Consolidated Financial
Statements exchange rate differences arising on consolidation of
the net investments in subsidiaries are recognised in other
comprehensive income under "Currency translation adjustment".
Use of estimates and judgements - overview
The preparation of financial statements in conformity with
adopted IFRS requires management to make judgements and estimates
that affect the application of policies and reported amounts of
assets, liabilities, income, expenses and contingent liabilities.
Estimates and assumptions mainly relate to the useful life of
non--current assets, the discounted cash flows used in impairment
testing, the establishing of provisions for onerous contracts,
litigation, pensions and other benefits, taxes and inventory
valuations. Estimates are based on historical experience and other
assumptions that are considered reasonable under the circumstances.
Actual values may vary from the estimates. The estimates and the
assumptions are under continuous review with particular attention
paid to the life of material plant.
Critical accounting and valuation policies and methods are those
that are both most important to the depiction of the Group's
financial position, results of operations and cash flows and that
require the application of subjective and complex judgements, often
as a result of the need to make estimates about the effects of
matters that are inherently uncertain and may change in subsequent
years. The critical accounting policies that we disclose will not
necessarily result in material changes to our financial statements
in any given year but rather contain a potential for material
change. The main accounting and valuation policies used by the
Group are outlined in the following notes. While not all of the
significant accounting policies require subjective or complex
judgements, the Group considers that the following accounting
policies should be considered critical accounting policies.
Use of estimates - property, plant and equipment impairment
Property, plant and equipment are depreciated over their
estimated useful lives. The estimated useful lives are based on
estimates of the period during which the assets will generate
revenue. The carrying amount of the Group's assets, other than
inventories and deferred tax assets, are subject to regular
impairment testing and are reviewed annually and upon indication of
impairment. Having considered the impairment indicators relating to
the assets of PV Crystalox Solar Silicon GmbH, a detailed review
has been performed.
Managements expectations of the future cash flows of the
currently closed plant showed that carrying value was in excess of
net realisable amount. Consequently, included in the statement of
comprehensive income for this year is an impairment charge of
EUR27.9 million (2010: EURnil).The most important variable is the
assumed future market price of polysilicon. Other variables are:
production/sales volumes, variable direct production cost per kg,
personnel costs, other overhead cost, cash taxes, incremental
working capital investment and replacement fixed capital
investment
Although we believe that our estimates of the relevant expected
useful lives, our assumptions concerning the business environment
and developments in our industry and our estimations of the
discounted future cash flows, are appropriate, changes in
assumptions or circumstances could require changes in the analysis.
This could lead to additional impairment charges or allowances in
the future or to valuation write backs should the expected trends
reverse.
Use of estimates - deferred taxes
To compute provisions for taxes, estimates have to be applied.
These estimates involve assessing the probability that deferred tax
assets resulting from deductible temporary differences and tax
losses can be utilised to offset taxable income in the future.
Deferred tax assets at 31 December 2011 totalled EUR19.32
million (2010: EUR12.08 million) (see note 18).
Use of estimates - provisions - onerous contract provisions
In keeping with normal practice in the industry at the time, the
Group entered into long term supply contracts for its raw material,
polysilicon, with two major suppliers. Given the recent significant
unexpected decline in market prices for polysilicon and silicon
wafers, the resultant cost of polysilicon under these contracts
means the Group is expecting losses on these contracts.
Consequently the financial statements include a provision of
EUR17.9m (2010 EURNIL) for the discounted total of currently
anticipated losses under these contracts.
Any further renegotiation of these contracts or improvement in
market pricing would reduce this provided for loss.
Use of estimates - share--based payments
Share options granted to employees and share-based arrangements
are valued at the date of grant or award using an appropriate
option pricing model and are charged to operating profit over the
performance or vesting period of the scheme. The annual charge is
modified to take account of shares forfeited by employees who leave
during the performance or vesting period and, in the case of
non-market related performance conditions, where it becomes
unlikely the options will vest.
The fair value of shares and share options granted are
calculated using an appropriate option pricing model, eg. the
Black--Scholes model. Such models require the input of highly
subjective assumptions, including volatility of share price.
Details of the inputs and how they were derived are included in
note 29.
Use of estimates - inventory valuation
Given the recent significant unexpected decline in market prices
for polysilicon and silicon wafers, the carrying amount of
inventory has been reduced to net realisable value.
Net realisable value has been determined as estimated selling
price less all estimated costs of completion and costs to be
incurred in marketing, selling and distribution.
Any improvement in anticipated selling prices would reduce the
level of writedown necessary and would be taken as profit in
2012.
Basis of consolidation
The Group financial statements consolidate those of the Group
and its subsidiary undertakings drawn up to 31 December 2011.
Subsidiaries are entities over which the Group has the power to
control the financial and operating policies so as to obtain
benefits from its activities. The Group obtains and exercises
control through voting rights.
The results of any subsidiary sold or acquired are included in
the Consolidated Statement of Comprehensive Income up to, or from,
the date control passes. Unrealised gains and losses on intra-group
transactions are eliminated fully on consolidation.
Consolidation is conducted by eliminating the investment in the
subsidiary with the parent's share of the net equity of the
subsidiary.
The Group owns 100% of the voting rights in PV Crystalox Solar
Kabushiki Kaisha. Non-controlling interests in equity of EUR43,400
are related to non--redeemable preferred stock, subject to a
guaranteed annual dividend payment of EUR2,000. As the fair value
of the resulting dividend liabilities reduces the equity portion to
marginal amounts, all minority interest has been reclassified as
liabilities.
On acquisition of a subsidiary, all of the subsidiary's
separately identifiable assets and liabilities existing at the date
of acquisition are recorded at their fair value reflecting their
condition at that date. Goodwill arises where the fair value of the
consideration given for a business exceeds the fair value of such
net assets. So far no acquisitions have taken place since inception
of the Group.
Amounts reported in the financial statements of subsidiaries
have been adjusted where necessary to ensure consistency with the
accounting policies adopted by the Group. All intra-group
transactions, balances, income and expenses are eliminated upon
consolidation.
Going concern
A description of the market conditions, the reduction in spot
prices of wafers during 2011 and the Group's actions to conserve
cash are included in the Operational Review.
As part of its normal business practice, the Group regularly
prepares both annual and longer-term plans which are based on the
directors' expectations concerning key assumptions. The assumptions
around contracted sales volumes and prices and contracted purchase
volumes and prices are based on management's expectations and are
consistent with the Group's experience in the first part of
2012.
There are several long-term wafer supply contracts for unexpired
periods of up to three years and accordingly the Group is able to
sell wafers at prices that are above current market spot prices
despite the difficult market environment. Wafer sales to customers
without long term contracts are assumed in the longer term plans at
values close to spot prices. In addition the Group is negotiating
compensation for the termination of certain wafer supply contracts
and these are expected to generate a significant cash inflow within
the next twelve months.
Likewise, the Group has long-term contracts with suppliers of
our main raw material polysilicon for unexpired periods of between
two and four years. Polysilicon used in the Group's wafer
production comes from two external suppliers and from the Group's
plant at Bitterfeld. The Group's management has been successful in
working with these suppliers to secure periodic contract amendments
through a combination of adjusted prices and adjusted volumes. As a
result, these amendments have brought the terms more in-line with
current market pricing. To manage inventory levels the Group will
sell excess polysilicon and has been successful in this respect
during the first quarter of 2012.
The nature of the Group's operation means that it can vary
production levels to match market requirements. As part of the cash
conservation measures and the associated planning assumptions,
production output has been reduced to match expected demand. At the
same time production capacity has been retained. In line with the
Group's strategy of retaining flexibility in production levels,
production can be brought back on stream when market conditions
allow. Employment costs have been reduced following the reduction
in contract labour, redundancies in the UK and government supported
short-time working in Germany. The Group expects to reduce other
costs through negotiation with suppliers and by achieving greater
efficiencies within the Group's operations.
As a result of these modeling assumptions the base plans
indicate that the Group will be able to operate within its net cash
reserves for the foreseeable future.
On 31 December 2011 there was a net cash balance of EUR22.6
million, comprising cash or cash equivalents of EUR71.6 million and
short-term loans of EUR49.0 million. The borrowings are in Japanese
Yen and are subject to certain covenants on the Japanese subsidiary
company (including interest cover, profitability, restrictions on
Group dividends and debtor cover). The Group's plans are based upon
remaining within its net cash balance and are not dependent upon
these short-term borrowings.
Therefore, whilst any consideration of future matters involves
making a judgement at a particular point in time about future
events that are inherently uncertain, the Directors, after careful
consideration and after making appropriate enquiries, are of the
opinion that the Group has adequate resources to continue in
operational existence for at least 12 months from the date of
approval of the financial statements. Thus the Group continues to
adopt the going concern basis of accounting in preparing the annual
financial statements.
Effects of new accounting pronouncements
Accounting standards in effect or applied for the first time in
2011
-- IAS24 (revised) Related party disclosures (effective for
accounting periods starting on or after 1 January 2011). This
revised standard clarifies the definition of a related party.
-- Amendments to IAS32 (Financial instruments: Presentation)
deals with accounting for rights issues.
-- Amendments to IFRS1 ' First time adoption' on financial
instruments disclosures (effective for accounting periods starting
on or after 1 January 2010). This amendment provides first time
adopters with the same transition provisions regarding comparative
information for the new three-level classification disclosures.
-- Annual improvements to IFRSs 2010 (effective for accounting
periods starting on or after 1 January 2011) . This set of
amendments includes changes to six standards and one IFRIC.
-- IFRS1 - First time adoption
-- IFRS3 - Business combinations
-- IFRS7 - Financial Instruments, Disclosure
-- IAS1 - Presentation of financial statements
-- IAS27 - Separate financial statements
-- IAS34 - Interim financial reporting
-- IFRIC13 - Customer loyalty programmes
-- IFRIC19 'Extinguishing financial liabilities with equity
investments' (effective for accounting periods starting on or after
1 July 2010) clarifies the accounting when an entity renegotiates
the terms of its debt.
-- Amendment to IFRIC14 'Prepayment of minimum funding
requirement' (effective for accounting periods starting on or after
1 January 2011). Applies only to entities required to make minimum
funding to defined benefit pension plans.
All of the above are expected to make no material difference to
the financial statements.
Effects of new accounting pronouncements continued
In issue, but not yet effective
The following interpretations are in issue, but not yet
effective. The Group does not believe that any will have a material
impact on the Group's financial positions, results of operations or
cash flows.
-- Amendments to IFRS7 'Financial instruments: Disclosures
(effective for accounting periods starting on or after 1 July
2011).
-- Amendments to IFRS1 'First time adoption' (effective for
accounting periods starting on or after 1 July 2011)
-- Amendment to IAS12 'Income taxes on deferred tax' (effective
for accounting periods starting on or after 1 January 2012)
-- Amendment to IAS19 'Employee Benefit' (effective for
accounting periods starting on or after 1 July 2012)
-- Amendment to IAS1 'Financial statement Presentation'
(effective for accounting periods starting on or after 1 July
2012)
-- IFRS9 'Financial Instruments' classification and measurement
(effective for accounting periods starting on or after 1 January
2015)
-- IFRS10 'Consolidated financial statements' (effective for
accounting periods starting on or after 1 January 2013)
-- IFRS11 'Joint Arrangements' (effective for accounting periods
starting on or after 1 January 2013)
-- IFRS12 'Disclosure of interest in other entities' (effective
for accounting periods starting on or after 1 January 2013)
-- IFRS13 'Fair Value Measurement' (effective for accounting
periods starting on or after 1 January 2013)
-- IAS27 (revised 2011) 'Separate financial statements'
(effective for accounting periods starting on or after 1 January
2013)
-- IAS28 (revised 2011) 'Associates and joint ventures'
(effective for accounting periods starting on or after 1 January
2013)
Intangible assets
Intangible assets are capitalised at cost and amortised over
their useful life. Amortisation of intangible assets is recorded
under 'Depreciation and impairment of property plant and equipment
& intangible assets' in the Consolidated Statement of
Comprehensive Income.
Acquired computer software licences and patents are capitalised
on the basis of the costs incurred to purchase and bring into use
the software.
The capitalised costs are written down using the straight--line
method over the expected economic life of the patents and licenses
(five years) or the software under development (three to five
years).
Internally generated intangible assets - research and
development expenditure
Expenditure on research activities undertaken with the prospect
of gaining new scientific or technical knowledge and understanding
is recognised in the Consolidated Statement of Comprehensive
Income.
Internal development expenditure is charged to the Consolidated
Statement of Comprehensive Income in the year in which it is
incurred unless it meets the recognition criteria of IAS 38
(Intangible Assets). Technical and other uncertainties generally
have the effect that such criteria are not met. However,
expenditure on development activities, whereby research findings
are applied to a plan or design for the production of new or
substantially improved products or processes, is capitalised if the
product or process is technically and commercially feasible and the
Group has sufficient resources to complete development. The
expenditure capitalised includes the cost of services and
materials, direct labour and an appropriate proportion of
overheads. Otherwise, development expenditure is recognised in the
Consolidated Statement of Comprehensive Income as an expense as
incurred. Capitalised development expenditure is stated at cost
less accumulated amortisation and impairment losses.
Subsequent expenditure on capitalised intangible assets is
capitalised only when it increases the future economic benefit of
the specific asset to which it relates. All other expenditure is
expensed as it occurs.
Only patents have been capitalised as development costs to date,
as the future utilisation of other developments is not sufficiently
determinable or certain.
Property, plant and equipment
Property, plant and equipment is stated at acquisition or
construction cost, net of depreciation and provision for
impairment. No depreciation is charged during the period of
construction. The cost of own work capitalised is comprised of
direct costs of material and manufacturing and directly
attributable costs of manufacturing overheads. All allowable costs
up until the point at which the asset is physically able to operate
as intended by management are capitalised. The capitalised costs
are written down using the straight--line method.
The Group's policy is to write off the difference between the
cost of property, plant and equipment and its residual value
systematically over its estimated useful life. Reviews of the
estimated remaining lives and residual values of individual
productive assets are made annually, taking commercial and
technological obsolescence as well as normal wear and tear into
account.
The total useful lives range from approximately 25 to 33 years
for buildings, 5 to10 years for plant and machinery, up to 15 years
for other furniture and equipment. No depreciation is provided on
freehold land. Property, plant and equipment are reviewed for
impairment at each balance sheet date or upon indication that the
carrying value may not be recoverable.
The gain or loss arising on disposal of an asset is determined
as the difference between the disposal proceeds and the carrying
amount of the asset and is recognised in the Consolidated Statement
of Comprehensive Income.
Impairment
The carrying amount of the Group's assets, other than
inventories and deferred tax assets, is subject to impairment
testing upon indication of impairment.
If any such indication exists, the asset's recoverable amount is
estimated. An impairment loss is recognised for the amount by which
the asset's carrying amount exceeds its recoverable amount. The
recoverable amount is the higher of fair value, reflecting market
conditions less costs of disposal and value in use based on an
internal discounted cash flow evaluation.
Leased assets
Leases are categorised as per the requirements of IAS17. Where
risks and rewards are transferred to the lessee, the lease is
classified as a finance lease. All other leases are classed as
operating leases.
Rentals under operating leases are charged to the Consolidated
Statement of Comprehensive Income
on a straight-line basis over the lease term. Lease incentives
are spread over the total period of the lease.
The obligations from operating lease contracts are disclosed
among financial obligations.
For the reporting year, no assets were recorded under finance
leases.
Financial instruments
Financial assets and financial liabilities are recognised on the
Group's Balance Sheet when the Group becomes a party to the
contractual provisions of the instrument.
Financial instruments are recorded initially at fair value net
of transaction costs if changes in value are not charged directly
to the Consolidated Statement of Comprehensive Income. Subsequent
measurement depends on the designation of the instrument, as
follows:
Amortised cost
-- fixed deposits, generally funds held with banks and
short--term borrowings and overdrafts are classified as receivables
and loans and held at amortised cost;
-- long--term loans are held at amortised cost; and
-- accounts payable which are not interest bearing are
recognised initially at fair value and thereafter at amortised cost
under the effective interest method.
Held for trading
-- derivatives, if any, comprising interest rate swaps and
foreign exchange contracts, are classified as held for trading.
They are included at fair value, upon the valuation of the local
bank.
Loans and receivables
-- non--interest bearing accounts receivable are initially
recorded at fair value and subsequently valued at amortised cost,
less provisions for impairment. Any change in their value through
impairment or reversal of impairment is recognised in profit or
loss; and
-- cash and cash equivalents comprise cash balances and call
deposits with maturities of less than three months together with
other short--term highly liquid investments that are readily
convertible into known amounts of cash and which are subject to an
insignificant risk of changes in value.
Interest and other income resulting from financial assets are
recognised in profit or loss when receivable, regardless of how the
related carrying amount of the financial assets is measured.
Inventories
Inventories are stated at the lower of cost or net realisable
value.
Acquisition costs for raw materials are usually determined by
the weighted average method.
For finished goods and work in progress, cost of production
includes directly attributable costs for material and manufacturing
and an attributable proportion of manufacturing overhead expenses
(including depreciation) based on normal levels of activity.
Selling expenses and other overhead expenses are excluded. Interest
is expensed as incurred and therefore not included. Net realisable
value is determined as estimated selling price for silicon wafers
or polysilicon less all estimated costs of completion and costs to
be incurred in marketing, selling and distribution.
Contingent liabilities
Provisions are made for legal disputes where there is an
obligation at the balance sheet date, an adverse outcome is
probable and associated costs can be estimated reliably. Where no
obligation is present at the balance sheet date no provision is
made, although, where material, the contingent liability will be
disclosed in a note.
Current and deferred taxes
Current tax is the tax currently payable based on taxable profit
for the year, including any under or over provisions from prior
years.
Deferred income taxes are calculated using the liability method
on temporary differences. Deferred tax is generally provided on the
difference between the carrying amounts of assets and liabilities
and their tax bases. However, deferred tax is not provided on the
initial recognition of goodwill, nor on the initial recognition of
an asset or liability unless the related transaction is a business
combination or affects tax or accounting profit.
Deferred tax on temporary differences associated with shares in
subsidiaries is not provided if reversal of these temporary
differences can be controlled by the Group and it is probable that
reversal will not occur in the foreseeable future. In addition, tax
losses available to be carried forward as well as other income tax
credits to the Group are assessed for recognition as deferred tax
assets.
Deferred tax liabilities are provided in full. Deferred tax
assets are recognised to the extent that it is probable that the
underlying deductible temporary differences will be able to be
offset against future taxable income. Current and deferred tax
assets and liabilities are calculated at tax rates that are
expected to apply to their respective period of realisation,
provided they are enacted or substantively enacted at the balance
sheet date.
Changes in deferred tax assets or liabilities are recognised as
a component of tax expense in the Consolidated Statement of
Comprehensive Income, except where they relate to items that are
charged or credited directly to equity in which case the related
deferred tax is also charged or credited directly to equity.
Public grants and subsidies
As the German operations are located in a region designated for
economic development, the Group receives both investment subsidies
and investment grants. Government grants and subsidies relating to
capital expenditure are credited to the "Deferred income" account
and are released to the Consolidated Statement of Comprehensive
Income by equal annual instalments over the expected useful lives
of the relevant assets under 'Other income'.
Government grants of a revenue nature, mainly for research and
development purposes, are credited to the Consolidated Statement of
Comprehensive Income in the same year as the related
expenditure.
All required conditions of these grants have been met and it is
the Group's intention they will continue to be met.
Provisions
Provisions are formed where a third party obligation exists,
which will lead to a probable future outflow of resources and where
this outflow can be reliably estimated. Provisions are measured at
the best estimate of the expenditure required to settle the
obligation.
Accruals
Accruals are recognised when an obligation to meet an outflow of
economic benefit in the future arises at the balance sheet
date.
Accruals are initially recognised at fair value and subsequently
at amortised cost using the effective interest method.
Revenue recognition
Revenue is recognised when the significant risks and rewards of
ownership have been transferred to the customer. Ownership is
considered to have transferred once products have been received by
the customer unless shipping terms dictate any different. Revenues
exclude intragroup sales and value added taxes and represent net
invoice value less estimated rebates, returns and settlement
discounts. The net invoice value is measured by reference to the
fair value of consideration received or receivable by the Group for
goods supplied.
The Group has outsourced some elements of production to external
companies. In cases in which the Group retains power of disposal
over the product or product element, a sale is only recognised
under IFRS when the final product is sold. The final product is
deemed to have been sold when the risks and rewards of ownership
have been transferred to a third party.
Interest income and expenses
Net financing costs comprise interest payable on borrowings
calculated using the effective interest rate method, interest
receivable on funds invested and dividend income and gains.
Interest income is recognised in the Consolidated statement of
Comprehensive Income as it accrues, using the effective interest
method.
Employee benefits
The Group operates a number of pension schemes. The schemes are
funded through payments to insurance companies. The Group has both
defined benefit and defined contribution plans.
Exceptional items
Excpetional items are those items that in the Directors' view
are required to be separately disclosed by virtue of their size or
incidence to enable a full understanding of the Group's financial
performance.
Defined benefit pension plan
A defined benefit plan is a pension plan that defines an amount
of pension benefit that an employee will receive on retirement,
usually dependent on one or more factors such as age, years of
service and compensation.
The liability recognised in the Balance Sheet in respect of
defined benefit pension plans is the present value of the defined
benefit obligation at the balance sheet date less the fair value of
plan assets. The defined benefit obligation is calculated annually
by independent actuaries using the projected unit credit method.
The present value of the defined benefit obligation is determined
by discounting the estimated future cash outflows using interest
rates of Government bonds at the balance sheet date with a ten year
maturity, adjusted for additional term to maturity of the related
pension liability.
Actuarial gains and losses arising from experience adjustments
and changes in actuarial assumptions are charged or credited
directly to the Consolidated Statement of Comprehensive Income in
the period in which they arise.
Past service costs are recognised immediately in profit or loss,
unless the changes to the pension plan are conditional to the
employees remaining in service for a specified period of time (the
vesting period). In this case, the past service costs are amortised
on a straight--line basis over the vesting period.
Defined contribution plan
For defined contribution plans, the Group pays contributions to
pension insurance plans on a contractual basis. The Group has no
further payment obligations once the contributions have been paid.
The contributions are recognised as employee benefit expenses when
they are due. Prepaid contributions are recognised as an asset to
the extent that a cash refund or a reduction in the future payments
is available.
Employee benefit trust
All assets and liabilities of the Employee Benefit Trust (EBT)
have been consolidated in these financial statements as the Group
has de facto control over the trust's net assets as the parent of
its sponsoring company.
Deferred revenue and other long--term assets
As is common practice within the sector, the Group, where
appropriate, both seeks to receive deposits from customers in
advance of shipment and makes deposits in advance of supplies of
silicon tetrachloride and polysilicon feedstock.
These deposits are held on the Balance Sheet and matched against
revenue/cost as appropriate.
Deposits received from customers are not discounted, as the
effect is not considered to be material.
Share--based payments
The Group has applied the requirements of IFRS 2 (Share--based
Payments). The Group issues equity--settled share--based payments
to certain employees. These are measured at their fair value at the
date of the grant using an appropriate option pricing model and are
expensed over the vesting the year, based on the Group's estimate
of the number of shares that will eventually vest. Grants of shares
made during 2008 and 2007 are not subject to performance criteria
and were valued at the date of the grant at market value. During
2009 the Group granted share options to employees. During 2011
awards were granted under the Performance Share Plan to employees.
The share options granted are subject to performance criteria
required for the option to vest and are considered in the method of
measuring fair value.
Charges made to the Consolidated Statement of Comprehensive
Income in respect of share--based payments are credited to the
share--based payment reserve.
Shareholders' equity
Shareholders' equity is comprised of the following balances:
-- share capital is comprised of 416,725,335 ordinary shares of 2 pence each, see note 28;
-- share premium represents the excess over nominal value of the
fair value of consideration received for equity shares, net of
expenses of share issue;
-- investment in own shares is the Group's shares held by the
EBT that are held in Trust for the benefit of employees;
-- share--based payment reserve is the amount charged to the
Consolidated Statement of Comprehensive Income in respect of shares
already granted or options outstanding relative to the vesting date
or option exercise date;
-- reverse acquisition reserve is the difference between the
value of the assets acquired and the consideration paid by way of a
share for share exchange on 5 January 2007;
-- retained earnings is the cumulative profit retained by the Group; and
-- currency translation adjustment represents the differences
arising from the currency translation of the net assets in
subsidiaries.
2. Other income
2011 2010
EUR'000 EUR'000
----------------------------------------------------- -------- --------
Recognition of accrued grants and subsidies
for investments 2,862 2,755
Customer deposit realised as income on cancellation
of contract 951 -
Research and development grants 666 211
Sale of non silicon product 457 -
Refunds 200 9
Insurance claims 94 8
Miscellaneous 375 476
----------------------------------------------------- -------- --------
5,605 3,459
----------------------------------------------------- -------- --------
3. Cost of material and services
The cost of materials is attributable to the consumption of
silicon, ingots, wafers, chemicals and other consumables as well as
the purchase of merchandise.
2011 2010
EUR'000 EUR'000
-------------------------------------------------- --------- --------
Cost of raw materials, supplies and purchased
merchandise 202,879 167,081
Change in finished goods and work in progress 1,770 (2,807)
Own work capitalized (11,499) (2,002)
-------------------------------------------------- --------- --------
Cost of materials after exceptional items 193,150 162,272
-------------------------------------------------- --------- --------
Exceptional items, included in Cost of material
and services
Inventory write down 22,866 -
Onerous contract charge and provision 20,869 -
-------------------------------------------------- --------- --------
Cost of materials 43,735 -
-------------------------------------------------- --------- --------
2011 2010
EUR'000 EUR'000
---------------------------- -------- --------
Cost of purchased services 18,699 20,479
---------------------------- -------- --------
Cost of services 18,699 20,479
---------------------------- -------- --------
Own work capitalised relates to the construction of production
equipment including in particular crystallisation systems.
4. Personnel expenses
2011 2010
EUR'000 EUR'000
--------------------------- -------- --------
Wages and salaries 14,805 13,660
Social security 2,295 2,090
Pension costs (see below) 527 476
Employee share schemes 238 1,047
--------------------------- -------- --------
17,865 17,273
--------------------------- -------- --------
Pension costs
2011 2010
EUR'000 EUR'000
----------------------------------------------- -------- --------
Appropriation to pension accruals for defined
benefit schemes 68 120
Early retirement settlements and pay 3 (8)
Contributions to defined contribution pension
plans 456 364
----------------------------------------------- -------- --------
527 476
----------------------------------------------- -------- --------
Employees
The Group employed a monthly average of 385 employees during the
year ended 31 December 2011 (2010: 355).
2011 2010
Number Number
---------------- ------- -------
Germany 247 232
United Kingdom 130 115
Japan 8 8
---------------- ------- -------
385 355
---------------- ------- -------
2011 2010
Number Number
---------------- ------- -------
Production 255 238
Administration 130 117
---------------- ------- -------
385 355
---------------- ------- -------
2010 numbers have been reallocated using the same rationale as
2011 numbers.
The Group employed 361 employees at 31 December 2011.
The remuneration of the Board of Directors, including
appropriations to pension accruals, is shown in the Directors'
Remuneration Report.
5. Other expenses
2011 2010
EUR'000 EUR'000
------------------------------------------------ -------- --------
Land and building operating lease charges 1,394 1,271
Other property related costs 1,419 1,260
Repairs and maintenance 1,079 249
Selling expenses 68 54
Technical consulting, research and development 710 576
External professional services 2,795 1,793
Insurance premiums 775 780
Travel and advertising expenses 546 581
Staff related costs 1,007 840
Other 1,491 969
------------------------------------------------ -------- --------
11,284 8,373
------------------------------------------------ -------- --------
Selling expenses mainly include delivery costs and warranty
provisions.
Technical consulting and research and development costs relate
to expenditure in connection with silicon wafers and ingots.
In addition to those disclosed above, the Group undertakes
considerable research and development in the field of continuous
production process optimisation and improvement and adaptation of
products to market requirements. These costs are an integral part
of a highly technical production process.
The directors have estimated, on the basis of directly
attributable costs and a general proportion of production and
personnel costs, that the cost of research and development is
approximately EUR6.4m for the year ended 31 December 2011 (2010:
EUR11.1m).
Included within External professional services, within other
expenses, are the following amounts which were paid to the Group's
auditors:
2011 2010
EUR'000 EUR'000
-------------------------------------------------- -------- --------
Fees payable to the Company's auditor for
the audit of the Group's financial statements 67 74
Audit of parent company financial statements 14 15
Other services pursuant to legislation - 16
The audit of the Company's subsidiaries pursuant
to legislation 140 212
Tax services - 47
-------------------------------------------------- -------- --------
221 364
-------------------------------------------------- -------- --------
6. Interest income and expenses
Interest income and expense is derived/incurred on financial
assets/liabilities and recognised under the effective interest
method.
7. Income taxes
2011 2011 2011 2010
Before
Exceptional Exceptional
Items Items Total Total
EUR'000 EUR'000 EUR'000 EUR'000
----------------------------------- ------------ ------------ -------- --------
Current tax:
Current tax on profit / (loss)
for the year 766 (7,357) (6,591) 13,217
Adjustments in respect of
prior years (81) - (81) (22)
Total current tax 685 (7,357) (6,672) 13,195
----------------------------------- ------------ ------------ -------- --------
Deferred tax (note 18):
Origin and reversal of termporary
differences 3,271 (12,433) (9,162) (2,581)
Adjustments in respect of
prior years - - - (152)
Impact of change in tax rate 552 - 552 -
Derecognition of previously
recognised tax losses 9,090 - 9,090 -
Total deferred tax 12,913 (12,433) 480 (2,733)
----------------------------------- ------------ ------------ -------- --------
Total tax charge 13,598 (19,790) (6,192) 10,462
----------------------------------- ------------ ------------ -------- --------
The total tax rate for the German companies is 30.5% (2010:
30.5%) in Erfurt and 28.4% in Bitterfeld (2010: 28.4%). The
effective total tax rate in the United Kingdom was 26.5% (2010:
28%), and the total tax rate in Japan was 42.1% (2010: 42.1%).
These rates are based on the legal regulations applicable or
adopted at the balance sheet date.
The standard rate of corporation tax in the UK changed from 28%
to 26% with effect from 1 April 2011. Accordingly, profits in the
UK were taxed at an effective rate of 26.5%. Legislation to reduce
the main rate of corporation tax from 26% to 25% from 1 April 2012
was included in the Finance Act 2011 and consequently deferred tax
balances have been remeasured. Further legislation to reduce the
main rate of corporation tax to 24% from 1 April 2012 was included
in the Provisional Collection of Taxes Act 1968 (PCTA) and further
reductions to the main rate are proposed to reduce the rate by 1%
per annum to 22% by 1 April 2014. These further rate reductions had
not been substantively enacted at the balance sheet date and,
therefore, are not included in these financial statements. The
impact of these further changes is not expected to be material.
The German rates are increasing, to 31.6% in Erfurt in 2012 and
29.1% in Bitterfeld in 2012.
7. Income taxes continued.
The tax on the Group's profit before tax differs from the
theoretical amount that would arise using the weighted average tax
rate applicable to the profits of the consolidated entities as
follows:
2011 2010
EUR'000 EUR'000
----------------------------------------------- --------- --------
(Loss)/profit before tax (67,085) 33,726
----------------------------------------------- --------- --------
Expected income tax expense at effective
tax rate 30.0% (2010: 33.2%) (20,100) 11,188
Taxation on dividend income 178 -
Income not subject to tax (126) (602)
Tax for profit in stock eliminations 2,610 (451)
Derecognition of previously recognised tax
losses 9,090 -
Unrelieved tax losses 1,972 -
Over provision of current tax in prior year (337) -
Movement in deferred tax rate 552 -
Over provision of deferred tax in prior years (170) (176)
Expenses not deductible for tax 145 236
Accelerated capital allowances - 276
Other tax effects (6) (9)
----------------------------------------------- --------- --------
Total tax expense (6,192) 10,462
----------------------------------------------- --------- --------
8. Segment reporting
The chief operating decision-maker, who is responsible for
allocating resources and assessing performance, has been identified
as the executive board. The group is organised around one product,
with all revenues derived from the production and supply of
multicrystalline silicon wafers. Accordingly, the board reviews the
performance of the group as a whole, and there is only one
operating segment. Disclosure of reportable segments under IFRS 8
is therefore not made.
Geographical information 2011
Rest Rest
of United of
Japan China Asia Germany Kingdom Europe USA Group
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
--------------------- -------- -------- -------- -------- -------- -------- -------- --------
Revenues
By entity's country
of domicile 61,405 - - 52,843 96,152 - - 210,400
By country from
which derived 61,368 67,195 40,806 33,601 102 255 7,073 210,400
--------------------- -------- -------- -------- -------- -------- -------- -------- --------
Non--current
assets*
By entity's country
of domicile 633 - - 86,006 54,580 - - 141,219
--------------------- -------- -------- -------- -------- -------- -------- -------- --------
* Excludes: financial instruments, deferred tax assets and
post--employment benefit assets.
Two customers accounted for more than 10% of Group revenue each
and sales to these customers are as follows (figures in
EUR'000):
1. 64,962 (China);
2. 43,305 (Japan).
Geographical information 2010
Rest Rest
of United of
Japan China Asia Germany Kingdom Europe USA Group
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
-------------- -------- -------- -------- -------- -------- -------- -------- --------
Revenues
By entity's
country of
domicile 85,463 - - 67,694 99,402 - - 252,559
By country
from which
derived 78,502 77,605 32,573 24,834 29 481 38,535 252,559
-------------- -------- -------- -------- -------- -------- -------- -------- --------
Non--current
assets*
By entity's
country of
domicile 705 - - 117,736 48,493 - - 166,934
-------------- -------- -------- -------- -------- -------- -------- -------- --------
* Excludes: financial instruments, deferred tax assets and
post--employment benefit assets.
Four customers accounted for more than 10% of Group revenue each
and sales to these customers are as follows (figures in
EUR'000):
1. 74,888 (China);
2. 39,397 (Japan);
3. 38,633 (Japan); and
4. 33,040 (USA).
9. Net loss / earnings per share
Net loss / earnings per share is computed by dividing the net
loss for the year attributable to ordinary shareholders by the
weighted-average number of Ordinary shares outstanding during the
year.
Diluted net loss per share is computed by dividing the net loss
for the period, by the weighted-average number of Ordinary shares
outstanding and, when dilutive, adjusted for the effect of all
potentially dilutive shares, including share options.
2011 2010
----------------------------------------- ------------ ------------
Basic shares (average) 405,891,335 404,939,862
Basic earnings per share (Euro cents) (15.0) 5.7
Diluted shares (average) 405,891,335 405,029,507
Diluted earnings per share (Euro cents) (15.0) 5.7
----------------------------------------- ------------ ------------
Basic shares and diluted shares for this calculation can be
reconciled to the number of issued shares, see note 28, as
follows:
2011 2010
--------------------------------------- ------------- -------------
Shares in issue (see note 28) 416,725,335 416,725,335
Weighted average number of EBT shares
held (10,834,000) (11,785,473)
--------------------------------------- ------------- -------------
Weighted average number of shares for
basic EPS calculation 405,891,335 404,939,862
EBT shares, granted but not vested in
2010 - 89,645
Weighted average number of shares for
fully diluted EPS calculation 405,891,335 405,029,507
--------------------------------------- ------------- -------------
For the year ended 31 December 2011, there were no differences
in the weighted-average number of Ordinary shares used for basic
and diluted net loss per Ordinary Share as the effect of all
potentially dilutive Ordinary Shares outstanding was anti-dilutive.
As at 31 December 2011, there were 3,458,022 share options
outstanding that could potentially have a dilutive impact in the
future but were anti-dilutive in 2011.
10. Cash and cash equivalents
All short--term deposits are interest bearing at the various
rates applicable in the business locations of the Group.
11. Trade Accounts receivable
As at 31 December
--------------------
2011 2010
EUR'000 EUR'000
---------------- --------- ---------
Japan 25,043 31,567
Germany 2,920 8,546
United Kingdom 4,356 15,694
---------------- --------- ---------
32,319 55,807
---------------- --------- ---------
All receivables have short--term maturity. No significant
doubtful debt allowances were necessary during the year.
Some of the unimpaired trade receivables are past due at the
reporting date. The age of financial assets past due but not
impaired is as follows:
As at 31 December
--------------------
2011 2010
EUR'000 EUR'000
---------------------------- --------- ---------
Not more than three months 2,667 4,058
---------------------------- --------- ---------
These amounts represent the Group's maximum credit risk at the
year end. No doubtful debt allowance is deemed necessary.
12. Inventories
Inventories include finished goods and work in progress (ingots
and blocks), as well as production supplies. The change in
inventories is included in the Consolidated statement of
Comprehensive Income in the line 'Cost of materials and
services'.
As at 31 December
--------------------
2011 2010
EUR'000 EUR'000
------------------- --------- ---------
Finished products 18,139 2,550
Work in progress 8,902 25,409
Raw materials 21,456 22,854
------------------- --------- ---------
48,497 50,813
------------------- --------- ---------
Exceptional inventory writedowns of EUR22.9m in 2011 are
included in cost of materials (2010 NIL)
13. Prepaid expenses and other assets
As at 31 December
--------------------
2011 2010
EUR'000 EUR'000
-------------------------------------- --------- ---------
Subsidies and grants due relating to
Bitterfeld 542 3,259
Other subsidies due 387 1,065
VAT 10,144 9,187
Prepaid expenses 15,599 10,165
Energy tax claims 2,342 1,120
Other current assets 606 132
-------------------------------------- --------- ---------
29,620 24,929
-------------------------------------- --------- ---------
Prepaid expenses primarily comprise polysilicon feedstock
deposits
14. Current tax assets
As at 31 December
--------------------
2011 2010
EUR'000 EUR'000
------------------------ --------- ---------
Income tax recoverable 9,815 -
------------------------ --------- ---------
9,815 -
------------------------ --------- ---------
Income tax recoverable relates to tax paid on prior year profits
that is expected to be recovered against current year losses.
15. Intangible assets
Patents Software
and under
licences development Total
EUR'000 EUR'000 EUR'000
------------------------------------------ --------- ------------ --------
Cost
At 1 January 2011 1,521 4 1,525
Additions 71 8 79
Reclassification - (2) (2)
Disposals (25) - (25)
Net effect of foreign currency movements 20 - 20
------------------------------------------ --------- ------------ --------
At 31 December 2011 1,587 10 1,597
------------------------------------------ --------- ------------ --------
Depreciation
At 1 January 2011 857 - 857
Charge for the year 237 - 237
Disposals (20) - (20)
Net effect of foreign currency movements 15 - 15
------------------------------------------ --------- ------------ --------
At 31 December 2011 1,089 - 1,089
------------------------------------------ --------- ------------ --------
Net book amount
At 31 December 2011 498 10 508
------------------------------------------ --------- ------------ --------
At 31 December 2010 664 4 668
------------------------------------------ --------- ------------ --------
Patents Software
and under
licences development Total
EUR'000 EUR'000 EUR'000
------------------------------------------ --------- ------------ --------
Cost
At 1 January 2010 1,375 4 1,379
Additions 100 4 104
Reclassification 4 (4) -
Disposals (5) - (5)
Net effect of foreign currency movements 47 - 47
------------------------------------------ --------- ------------ --------
At 31 December 2010 1,521 4 1,525
------------------------------------------ --------- ------------ --------
Depreciation
At 1 January 2010 591 - 591
Charge for the year 271 - 271
Disposals (5) (5)
------------------------------------------ --------- ------------ --------
At 31 December 2010 857 - 857
------------------------------------------ --------- ------------ --------
Net book amount
At 31 December 2010 664 4 668
------------------------------------------ --------- ------------ --------
At 31 December 2009 784 4 788
------------------------------------------ --------- ------------ --------
16. Property, plant and equipment
Freehold Other
furniture Assets
land and Plant and and under
buildings Machinery equipment construction Total
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
------------------- ---------- ---------- ---------- ------------- --------
Cost
At 1 January
2011 12,895 149,935 6,380 12,014 181,224
Additions 15 13,391 743 8,112 22,261
Reclassification 27 11,862 8 (11,895) 2
Disposals - (679) (86) (197) (962)
Net effect of
foreign currency
movements 7 666 60 108 841
------------------- ---------- ---------- ---------- ------------- --------
At 31 December
2011 12,944 175,175 7,105 8,142 203,366
------------------- ---------- ---------- ---------- ------------- --------
Depreciation
At 1 January
2011 952 48,209 2,554 - 51,715
Charge for the
year 408 14,716 746 - 15,870
Impairment - 27,874 - - 27,874
On disposals - (590) (69) - (659)
Net effect of
foreign currency
movements 3 618 31 - 652
------------------- ---------- ---------- ---------- ------------- --------
At 31 December
2011 1,363 90,827 3,262 - 95,452
------------------- ---------- ---------- ---------- ------------- --------
Net book amount
At 31 December
2011 11,581 84,348 3,843 8,142 107,914
------------------- ---------- ---------- ---------- ------------- --------
At 31 December
2010 11,943 101,726 3,826 12,014 129,509
------------------- ---------- ---------- ---------- ------------- --------
Assets under construction relate to future plant and machinery.
Capital commitments at 31 December 2011 relating to this amounted
to EUR1.5 million.
Freehold Other
furniture
land and Plant and and Assets under
buildings machinery equipment construction Total
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
------------------- ---------- ---------- ---------- ------------- --------
Cost
At 1 January 2010 12,490 142,308 4,752 823 160,373
Additions 369 5,814 1,595 11,989 19,767
Reclassification 21 734 38 (793) -
Disposals - (194) (86) (40) (320)
Net effect of
foreign currency
movements 15 1,273 81 35 1,404
------------------- ---------- ---------- ---------- ------------- --------
At 31 December
2010 12,895 149,935 6,380 12,014 181,224
------------------- ---------- ---------- ---------- ------------- --------
Depreciation
At 1 January 2010 540 35,659 1,942 - 38,141
Charge for the
year 406 11,779 650 - 12,835
On disposals - (159) (78) - (237)
Net effect of
foreign currency
movements 6 930 40 - 976
------------------- ---------- ---------- ---------- ------------- --------
At 31 December
2010 952 48,209 2,554 - 51,715
------------------- ---------- ---------- ---------- ------------- --------
Net book amount
At 31 December
2010 11,943 101,726 3,826 12,014 129,509
------------------- ---------- ---------- ---------- ------------- --------
At 31 December
2009 11,950 106,649 2,810 823 122,232
------------------- ---------- ---------- ---------- ------------- --------
Assets under construction related to future plant and machinery.
Capital commitments at 31 December 2010 relating to this amounted
to EUR17.5 million.
16. Property, plant and equipment continued
Impairment
The Board has assessed the carrying values of the Group's
property, plant and equipment for impairment as at 31 December
2011. As a result of this assessment, an impairment charge has been
recognised to reduce the carrying values of plant by EUR27.9
million. The impairment charge has been recognised in the income
statement. As an impairment of fixed assets it had no impact on the
Group's cash flow.
On 31 December 2011 the Group had invested EUR100 million in its
polysilicon plant at Bitterfeld and had received grants of EUR23
million. The current difficulties in the photovoltaic industry
dictated that an impairment test should be carried out to
determined whether the plant should be impaired. The recoverable
value of Bitterfeld plant is estimated to amount of EUR47.9
million, based on an estimate of its value in use. This has been
derived from a forecast of potential cash flows from the plant.
These cash flows were discounted at a post tax cost of capital of
9.67%, which was determined by calculating the Group's cost of
capital using the CAPM (capital asset pricing model). The resultant
(discounted cash flow) analysis determined the net present value of
the plant. The potential future cash flows have been estimated on
the assumption that the plant is brought into production in the
second half of 2012 and produces at full capacity thereafter. This
analysis assumes that sales of polysilicon are at prices based on
managements' expectations backed up by the forecast from an
external consultant that has a high level of experience of the
photovoltaic industry. Plant running costs were obtained from the
Group's internal planning system.
The level of impairment of the assets of our plant is
predominantly dependent upon judgements used in arriving at future
market prices, plant maintenance costs, future growth rates, the
discount rate applied to cash flow projections and successfully
operating the plant at Bitterfeld. The estimates and judgement used
in the aforementioned assessment represents management's best
estimate based on current experience and information available,
which may be different from the actual results in the future due to
changes in the Group's business and other external environment. Any
significant changes in the market price of polysilicon, $/EUR
exchange rate, or plant maintenance costs might lead to further
impairment of some or all of the capitalised assets.
The sensitivity of the valuation to these parameters is as
follows:
-- 5% increase/decrease in the sales price forecast
decreases/increases the impairment by EUR14 million
-- 5% reduction/increase in the direct cost of production
forecast decreases/increases the impairment by EUR9 million
-- 1% change in the cost of capital changes the impairment by EUR6 million
17. Other long--term assets
As at 31 December
--------------------
2011 2010
EUR'000 EUR'000
---------------------------------------- --------- ---------
Polysilcon feedstock deposits 30,148 33,790
Silicon tetrachloride (for Bitterfeld) 2,291 2,583
Prepaid expenses 66 40
Other assets 292 344
32,797 36,757
---------------------------------------- --------- ---------
18. Deferred taxes
Deferred taxes are calculated at the local rates in accordance
with IAS 12 (Income Taxes).
Analysis of deferred tax assets and liabilities:
2011 2010
EUR'000 EUR'000
----------------------------------------- -------- --------
Elimination of intra--company gains - 2,610
Tax loss carried forward 10,950 9,090
Deferred tax asset on consolidation 8,118 -
Other 252 380
----------------------------------------- -------- --------
Deferred tax asset 19,320 12,080
----------------------------------------- -------- --------
Deferred tax liability on consolidation (7,986) -
Other (197) (825)
----------------------------------------- -------- --------
Deferred tax liability (8,183) (825)
----------------------------------------- -------- --------
Total deferred taxes 11,137 11,255
----------------------------------------- -------- --------
Deferred tax assets arising as a result of losses are recognised
where, based on the Group's budget, they are expected to be
realised in the foreseeable future.
As at 31 December 2011 there were unrecognised potential
deferred tax assets in respect of losses of EUR11.4m (2010:
NIL).
19. Loans payable
As at 31 December
-----------------------------
2011 2010
Interest
Underwriter EUR'000 EUR'000 Maturity rate
------------------------------------- -------- -------- --------- ---------
Sumitomo Mitsui Banking Corporation
(SMBC) 21,945 18,505 01/12 0.78%
Mizuho Bank 9,975 9,253 02-03/12 0.78%
Barclays Bank 14,133 18,704 02/12 1.34%
Bank of TokyoMitsubishi UFJ 2,993 - 01/12 0.67%
------------------------------------- -------- -------- --------- ---------
49,046 46,462
------------------------------------- -------- -------- --------- ---------
All current loans are in Japanese Yen.
Security for the loan with Barclays Bank was provided by
sterling cash cover. This facility was not renewed.
Security/comfort for all other loans, is provided by the
Japanese accounts receivable, details of which can be found in note
11. These facilities have been reduced upon renewal in line with
the lower receivables.
20. Trade accounts payable
As at 31 December
--------------------
2011 2010
EUR'000 EUR'000
---------------- --------- ---------
Japan 3,850 10,045
United Kingdom 2,887 8,295
Germany 2,066 4,789
---------------- --------- ---------
8,803 23,129
---------------- --------- ---------
The book value of these payables is materially the same as the
fair value.
21. Accrued expenses
2011 2010
EUR'000 EUR'000
-------------------------------- -------- --------
Rents and ancillary rent costs 280 638
Onerous contract charge 3,850 -
Other 2,459 4,199
-------------------------------- -------- --------
Current accruals 6,589 4,837
-------------------------------- -------- --------
Non--current accruals 131 98
-------------------------------- -------- --------
Total accruals 6,720 4,935
-------------------------------- -------- --------
22. Provisions
Movement in provisions is shown below:
As at 31 December
--------------------
2011 2010
EUR'000 EUR'000
--------------------------------- --------- ---------
Provisions brought forward 315 414
Charged to the Income Statement 17,019 -
Exchange differences 840 -
Utilised (79) (99)
--------------------------------- --------- ---------
Provisions carried forward 18,095 315
--------------------------------- --------- ---------
Provisions included above are detailed below:
As at 31 December
--------------------
2011 2010
EUR'000 EUR'000
---------------------------- --------- ---------
Warranty provisions 236 315
Onerous contract provision 17,859 -
---------------------------- --------- ---------
18,095 315
---------------------------- --------- ---------
Warranty provisions unwind over a year from the date of sale,
per the terms of the warranty agreement with customers.
The onerous contract provision is an allowance for the loss
arising on the difference between raw material costs under these
contracts and the anticipated selling price of the Group's end
product. This is discussed further in note 1. This provision will
unwind over the length of the contracts, between 2 and 4 years.
23. Deferred grants and subsidies
The grants from governmental institutions are bound to specific
terms and conditions. The Group is obliged to observe retention
periods of five years for the respective assets in the case of
investment subsidies as well as of five years for assets under
investment grants, and to retain a certain number of jobs created
in conjunction with the underlying assets. In cases of breach of
the terms, the grants received must be repaid. In the past, the
grants received were subject to periodic audits, which were
concluded without significant findings or adjustments.
The deferred grants and subsidies in the year under review
consist of the following:
As at 31 December
--------------------
2011 2010
EUR'000 EUR'000
---------------------- --------- ---------
Investment subsidies 12,746 13,500
Investment grants 12,511 13,523
25,257 27,023
---------------------- --------- ---------
Current portion 2,831 2,867
Non--current portion 22,426 24,156
---------------------- --------- ---------
25,257 27,023
---------------------- --------- ---------
24. Income tax payable
As at 31 December
--------------------
2011 2010
EUR'000 EUR'000
---------------- --------- ---------
United Kingdom - 3,708
Germany 325 355
Japan 74 2,701
---------------- --------- ---------
399 6,764
---------------- --------- ---------
Income tax liabilities comprise both corporation and other
non--VAT tax liabilities, calculated or estimated by the Group
companies as well as corresponding taxes payable abroad due to
local tax laws, including probable amounts arising on completed or
current tax audits.
25. Other current liabilities
As at 31 December
--------------------
2011 2010
EUR'000 EUR'000
--------------------- --------- ---------
VAT liability 598 -
Payroll liabilities 70 499
Other liabilities 85 401
--------------------- --------- ---------
753 900
--------------------- --------- ---------
26. Deferred revenue
Where appropriate the Group enters into long--term contracts
with its customers and may request payment deposits from them ahead
of the supply of goods. At 31 December 2011, such deposits amounted
to EUR18.121 million from three customers (2010: EUR20.646 million
from four customers.)
As at 31 December
2011 2010
EUR'000 EUR'000
------------- --------- ---------
Current 10,082 10,084
Non-current 8,039 10,562
------------- --------- ---------
18,121 20,646
------------- --------- ---------
27. Pension surplus / benefit
The obligation relates to fixed post retirement payments for two
employees and includes benefits for surviving spouses granted in
2005. The plan will be fully funded upon retirement of the
employees by insurance contracts held and paid in by the Group. In
case of insolvency the benefits have been ceded to the employees
directly. Therefore the fair value of the insurance contracts has
been treated as a plan asset. The scheme is not significant to the
Group.
28. Share capital
2011 2010
EUR'000 EUR'000
--------------------------------------------- -------- --------
Authorised share capital
600,000,000 ordinary shares of 2 pence each 17,756 17,756
--------------------------------------------- -------- --------
Allotted, called up and fully paid
416,725,335 ordinary shares of 2 pence each 12,332 12,332
--------------------------------------------- -------- --------
The market value of the shares held by the EBT at year-end was
EUR566k
Summary of rights of share capital
The ordinary shares are entitled to receipt of dividends. On
winding up, their rights are restricted to a repayment of the
amount paid up to their share in any surplus assets arising. The
ordinary shares have full voting rights.
29. Share--based payment plans
The Group established the PV Crystalox Solar PLC EBT on 18
January 2007, which has acquired, and may in the future acquire,
the Company's ordinary shares for the benefit of the Group's
employees.
The Group currently has three share incentive plans in operation
which are satisfied by grants from the EBT.
PV Crystalox Solar PLC Performance Share Plan (PSP)
This plan was approved by shareholders at the 2011 AGM under
which awards are made to employees, including executive directors,
consisting of a conditional right to receive shares in the Company.
The awards will normally vest after the end of a three year
performance period, to the extent that performance conditions are
met.
On 26(th) May 2011 awards over up to 3,038,454 ordinary shares
were granted to the three executive directors and other key
employees. These awards are subject to achieving growth in both
total shareholder return and earnings per share in the performance
period ending on 31 December 2013.
PV Crystalox Solar PLC Long-Term Incentive Plan
This is a long-term incentive scheme under which awards are made
to employees consisting of the right to acquire ordinary shares for
a nominal price subject to the achievement of specified performance
conditions at the end of the vesting period which is not less than
three years from the date of grant. Under the LTIP it is possible
for awards to be granted which are designated as a Performance
Share Award, a Market Value Option or a Nil Cost Option. To date
Performance Share Awards and Market Value Options have been
granted.
29.Share--based payment plans
Performance Share Award (PSA)
A PSA is a conditional award of a specified number of ordinary
shares which may be acquired for nil consideration. The PSAs
granted to date have all been initial awards where there is no
specified performance condition. The vesting period of each award
is three years from the date of grant.
On 17 December 2007 awards over 2,175,000 ordinary shares of 2
pence were granted to key employees. In 2008 two employees that had
been granted an aggregate amount of 150,000 shares each left the
Group and in December 2010 one employee who had been granted an
award of 50,000 shares left the Group and in accordance with the
rules of the LTIP these grants were cancelled and the shares remain
available within the EBT. On 17 December 2010 the options over the
remaining 1,926,500 shares were exercised.
On 26 February 2008 awards were granted to employees of 500
shares each over a total of 33,000 ordinary shares of 2 pence each.
During 2010 awards over 3,000 shares were forfeited by employees
leaving the Group and awards over 1,500 shares were exercised by
Group employees retiring. During 2011 awards over 1,000 shares were
forfeited by employees leaving the Group and on 26 February 2011
the options over the remaining 27,500 shares were exercised.
Market Value Option (MVO)
An MVO is an option with an exercise price per share equal to
the market value of a share on the date of grant. The vesting
period of each award is three years from the date of grant and the
award must be exercised no later than ten years following the date
of grant.
On 24 November 2008 an MVO over 200,000 ordinary shares of 2
pence each was granted to a senior employee and this option is
exercisable from 24 November 2011 at GBP1.00 per share subject to
an agreed performance criteria. This option is now exercisable at
any time until 23 November 2018.
On 26 March 2009 an MVO over 200,000 ordinary shares of 2 pence
each was granted to a senior employee and this option is
exercisable from 26 March 2012 at 76 pence per share subject to an
agreed performance criteria; and on 25 September 2009 MVO awards
over 1,200,000 ordinary shares of 2 pence each were granted to key
senior employees and these options are exercisable from 25
September 2012 at 76.9 pence per share subject to agreed
performance criteria.
29. Share-based payment plans
PV Crystalox Solar PLC Share Incentive Plan (SIP)
The SIP is an employee share scheme approved by HM Revenue and
Customs in accordance with the provisions of Schedule 8 to the
Finance Act 2000. On 26 February 2008 awards were granted to UK
employees of 500 shares each over a total of 37,000 ordinary shares
of 2 pence. These 37,000 ordinary shares of 2 pence each were
transferred from the EBT into the SIP. During 2011 awards over
3,500 shares were forfeited by employees leaving the Group and
awards over 8,500 shares vested due to employees leaving the Group
as good leavers due to redundancy or retirement.
The Group recognised total expenses before tax of EUR237,729
(2010: EUR1,047,000) related to equity-settled share-based payment
transactions during the year.
The number of share options and weighted average exercise price
(WAEP) for each of the schemes is set out as follows:
MVO WAEP
PSP[*] PSA[*] MVO price SIP[*]
Number Number Number Pence Number
---------------------------- ----------- ------------ ----------- --------- --------
Share grants and options
outstanding at 1 January
2011 - 28,500 1,600,000 79.7 37,000
Share grants and options
granted during the year 3,038,454 - - - -
Share grants and options
forfeited during the year - (1,000) - - (3,500)
Options exercised during
the year - (27,500) - - (8,500)
---------------------------- ----------- ------------ ----------- --------- --------
Share grants and options
outstanding
at 31 December 2011 3,038,454 - 1,600,000 79.7 25,000
---------------------------- ----------- ------------ ----------- --------- --------
Exercisable at 31 December
2011 - 200,000 100.0 -
---------------------------- ----------- ------------ ----------- --------- --------
Share grants and options
outstanding at 1 January
2010 2,008,000 1,600,000 79.7 37,000
Share grants and options
granted during the year - - - -
Share grants and options
forfeited during the year (53,000) - - -
Options exercised during
the year (1,926,500) - - -
---------------------------- ----------- ------------ ----------- --------- --------
Share grants and options
outstanding
at 31 December 2010 28,500 1,600,000 79.7 37,000
---------------------------- ----------- ------------ ----------- --------- --------
Exercisable at 31 December
2010 - - - -
---------------------------- ----------- ------------ ----------- --------- --------
[* The weighted average exercise price for the PSP, PSA and SIP
options is GBPnil.]
29. Share-based payment plans
At 31 December 2011 PSP awards will vest in 2014 following the
determination by the Remuneration Committee of the extent to which
the Performance conditions have been met. MVO options are
exercisable between three years and ten years after the date of
grant, up to September 2019. SIP options are exercisable between
three and five years after date of grant, up to February 2013.
The remaining weighted average remaining contractual life of
options outstanding at 31 December 2011 is 7.58 years for MVO
(2010: 8.58 years) and 1.16 years for SIP (2010: 2.16 years).
30. Risk management
The main risks arising from the Group's financial instruments
are credit risk, exchange rate fluctuation risks, interest rate
risk and liquidity risk. The Board reviews and determines policies
for managing each of these risks and are, as such, summarised
below. These policies have been consistently applied throughout the
year.
Credit risk
The main credit risk arises from accounts receivable. All trade
receivables are of a short-term nature, with maximum payment terms
of 150 days, although the majority of customers currently have
payment terms of 45 days. In order to manage credit risk, local
management defines limits for customers based on a combination of
payment history and customer reputation. Credit limits are reviewed
by local management on a regular basis. As a supplier to some of
the leading manufacturers of solar cells, the Group has a limited
number of customers. In 2011 30.9% of the sales are related to the
largest customer (2010: 29.7%). The number of customers accounting
for approximately 95% of the annual revenue increased from ten in
2010 to twelve in 2011. Where appropriate, the Group requests
payment or part payment in advance of shipment, which generally
covers the cost of the goods. Different forms of retention of title
are used for security depending on local restrictions prevalent on
the respective markets. The maximum credit risk to the Group is the
total of accounts receivable, details of which can be seen in note
11.
Cash is not considered to be a high credit risk and this is
mitigated by the Group's policy of only selecting counterparties
with a strong investment graded long-term credit rating, at least
BB or equivalent, and assigning financial limits of EUR15 million
to individual counterparties.
Exchange rate fluctuation risks
A large portion of sales revenue is invoiced in foreign
currencies, potentially exposing the Group to exchange rate risks.
In the financial year 2011, about EUR60.8 million (2010: EUR78.0
million) of the Group's sales was generated in Japanese Yen.
Expenses of EUR89.5 million (2010: EUR88.0 million) invoiced in
Japanese Yen were allocated to cost of materials.
Significant cash funds are denominated in currencies other than
the presentational currency of the Group. Excess cash funds not
needed for local sourcing are exposed to exchange rate and
associated interest fluctuation risks, particularly so in the
United Kingdom. The exchange rate risk is based on assets held in
currencies other than Euros.
The Group sells its products in a number of currencies (mainly
Euros and Japanese Yen and to a lesser extent US Dollars) and also
purchases goods and services in a number of currencies (mainly
Euros, Japanese Yen, Sterling and US Dollars).
The following exchange rates were used to translate individual
companies' financial information into the Group's presentational
currency:
Year
Average end
rate rate
-------------------- -------- --------
Euro: Japanese Yen 111.064 100.250
Sterling: Euro 1.15275 1.19360
-------------------- -------- --------
30. Risk management continued
Hedging strategy
The Group is largely naturally hedged at an operating level
because it buys a significant proportion of its raw materials in
Euros and Japanese Yen, operates its wafering factory within the
Euro zone and pays for the sub-contracting of wafer production in
Japan in Japanese Yen. However, the ingot manufacturing operation
is within the United Kingdom and therefore a part of Group costs
are in Sterling. In addition, the Group has a relatively large
debtor book in Japan denominated in Japanese Yen and this is
subjected to exchange rate fluctuation of that currency. The Group
has Japanese Yen borrowings to hedge against downwards movement in
the Japanese Yen/Euro exchange rate. This process continues to be
under review.
After careful consideration and due to the satisfactory natural
operating hedging position coupled with its policy of matching
borrowings in Japanese Yen with Japanese Yen assets, the directors
have adopted a long-term policy of setting off any downside risks
of currency fluctuation against the associated upside risks.
During 2011 the Japanese Yen/Euro exchange rate decreased 7.24%
(2010: increased 18.2%). The impact of this increase on the
Consolidated statement of Comprehensive Income was to increase
sales revenues by approximately 2.1% and increase the cost of
materials and services by approximately 3.9% (2010: 12.1%).
For each 1% increase in the Japanese Yen/Euro exchange rate
profits would decrease by approximately EUR677,000 (2010: decrease
by EUR431,000). The effect of the movement in the Japanese Yen/Euro
exchange rate on assets held in Japanese Yen has been considered.
Group management has arranged borrowings in Japanese Yen so that
these largely offset asset balances held in that currency.
Therefore, based on Japanese Yen asset balances on 31 December
2011, each 1% movement in the Japanese Yen/Euro exchange rate would
have an immaterial effect on the currency translation
adjustment.
During 2011 the net gain on foreign currency adjustments was
EUR1.4 million (2010: loss of EUR1.2 million). This loss was mainly
related to the conversion of currency balances in respect of Group
advances or loans, currency debtor/creditor balances, currency
advance payments to raw material suppliers and currency cash
balances. These can be broken down into the following broad
categories:
As at 31 December
--------------------
2011 2010
EUR'000 EUR'000
-------------------------------------------- --------- ---------
Revaluation of cash balances 265 636
Revaluation of Group loans (2,784) (2,257)
Revaluation of Group raw material deposits (421) (1,729)
(Debtor)/creditor revaluation 634 (375)
Revaluation of customer/suppliers deposits 3,744 2,549
-------------------------------------------- --------- ---------
1,438 (1,176)
-------------------------------------------- --------- ---------
In addition to the above, upon translation of net assets in the
consolidation, there was a positive impact in 2011 of EUR5.2
million (2010: EUR12.6 million) recording as a currency translation
adjustment which is shown in the consolidated statement of
comprehensive income as other comprehensive income.
30. Risk management continued
Interest rate risk
The Group is exposed to interest rate fluctuation risks, since
the Group's loan agreements largely are subject to variable
interest rates. All variable interest rate loans are of a
short-term nature with a maturity of less than twelve months. The
borrowings EUR49.0 million at the end of 2011 are in Japanese Yen
(2010: EUR46.5 million). Accordingly, there is a downside risk that
Japanese Yen interest rates may increase substantially from the
current relatively low levels. However, the Group has a regular
strong Japanese Yen income sufficient to repay the loans (if Group
management wished to do so) within a twelve month time scale.
On 31 December 2011 the Group borrowings in Japanese Yen were
EUR49.0 million (2010: EUR46.5 million) at an average interest rate
of approximately 0.97% (2010: 0.97%). For each 1% rise in the
Japanese Yen interest rates Group interest costs would increase by
approximately EUR490,000 (2010: EUR465,000). Accordingly, Group
profits and equity would fall or rise (after corporation tax in
Japan) by approximately EUR245,000 (2010: EUR233,000).
Further sensitivity analysis of the accruals and loans
outstanding at the year-end has not been disclosed as these are
virtually all current and paid in line with standard payment
terms.
The Group's borrowings in Japanese Yen are also current and have
no set repayment plan being secured on the Japanese receivables
book. The interest on this loan is paid monthly in arrears.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to
meet its financial obligations as they fall due. The Group manages
its exposure to liquidity risk by regularly reviewing net debt and
forecast cash flows to ensure that current cash resources are
available to meet its business objectives. The Group is exposed to
the worldwide photovoltaic market and due to current overcapacity
this market has suffered large decreases in pricing over the
previous twelve months and market pricing of the group's main
product (silicon wafers) remain under pressure. Against this
difficult market background, Group management has put in place a
Cash Conservation Plan, which involves putting in place various
measures so that the Group optimises its cash position whilst these
conditions persist. Various measures have been taken to reduce
production to a level that allows contracted customers to be
supplied, whilst not supplying product at below marginal cost. At
the same time production capacity has been maintained so that this
can be utilised when market conditions allow. The cash conservation
plan covers the period until 31 December 2015. Due to changing
market and economic conditions, the expenses and liabilities
actually arising from this plan in the future may differ materially
from the estimates made on the basis of these actuarial
assumptions.
As at 31(st) December 2011 the Group had a net cash balance of
EUR22.6 million and this together with cash flow projections from
the cash conservation plan indicate that the, assuming the
projections are broadly correct, that Group will have adequate cash
reserves until at least the end of 2015.
The Group also regularly monitors its compliance with its debt
covenants. During the financial year, all covenants have been
complied with. The Group has borrowing facilities in Japanese Yen
which are available to be drawn.
30. Risk management continued
Financial assets and liabilities
Book Loan and Amortised Non--
value receivables cost financial Total
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
---------------------------- ---------- ------------ ---------- ---------- ----------
2011
Assets:
Cash and cash equivalents 71,664 71,664 - - 71,664
Accounts receivable 32,319 32,319 - - 32,319
Prepaid expenses
and other assets 29,620 14,021 - 15,599 29,620
Misc non--financial
assets 219,008 - - 219,008 219,008
---------------------------- ---------- ------------ ---------- ---------- ----------
Total 352,611 118,004 - 234,607 352,611
---------------------------- ---------- ------------ ---------- ---------- ----------
Liabilities:
Loans payable short--term (49,046) - (49,046) - (49,046)
Accounts payable
trade (8,803) - (8,803) - (8,803)
Accrued expenses (6,589) - (6,589) - (6,589)
Provisions (18,095) - - (18,095) (18,095)
Misc current liabilities (753) - (753) - (753)
Misc long--term liabilities (43) - (43) - (43)
Misc non--financial
liabilities (52,091) - - (52,091) (52,091)
---------------------------- ---------- ------------ ---------- ---------- ----------
Total (135,420) - (65,234) (70,186) (135,420)
---------------------------- ---------- ------------ ---------- ---------- ----------
2010
Assets:
Cash and cash equivalents 101,300 101,300 - - 101,300
Accounts receivable 55,807 55,807 - - 55,807
Prepaid expenses
and other assets 24,929 14,764 - 10,165 24,929
Misc non--financial
assets 229,827 - - 229,827 229,827
----------------------------- ---------- -------- --------- --------- ----------
Total 411,863 171,871 - 239,992 411,863
----------------------------- ---------- -------- --------- --------- ----------
Liabilities:
Loans payable short--term (46,462) - (46,462) - (46,462)
Accounts payable
trade (23,129) - (23,129) - (23,129)
Accrued expenses (4,935) - (4,935) - (4,935)
Provisions (315) - - (315) (315)
Misc current liabilities (900) - (900) - (900)
Misc long--term liabilities (42) - (42) - (42)
Misc non--financial
liabilities (55,320) - - (55,320) (55,320)
----------------------------- ---------- -------- --------- --------- ----------
Total (131,103) - (75,468) (55,635) (131,103)
----------------------------- ---------- -------- --------- --------- ----------
31. Calculation of fair value
There are no publicly traded financial instruments (e.g.
publicly traded derivatives and securities held for trading and
available for sale securities) nor any other financial
instruments.
32. Contingent liabilities
The Group did not assume any contingent liabilities for third
parties. No material litigation or risks from violation of third
parties' rights or laws that could materialise in 2012 or beyond
are pending at the time of approval of these financial
statements.
33. Other financial obligations
Lease agreements (operating leases)
The leases primarily relate to rented buildings and have terms
of no more than ten years. Financial obligations resulting from
operating leases become due as follows:
As at 31 December
--------------------
2011 2010
EUR'000 EUR'000
------------------------ --------- ---------
Less than one year 1,947 1,716
Two to five years 4,281 4,939
Longer than five years 2,050 2,504
------------------------ --------- ---------
8,278 9,159
------------------------ --------- ---------
The land and buildings used by the Group, with the exception of
land with an area of approximately 31,000m(2) in the Chemical Park
at Bitterfeld, are rented. The contracts have durations of up to
ten years. In some cases there are options to extend the rental
period.
Equipment purchase commitments
Orders to the amount of EUR1.5 million had been made on 31
December 2011 (2010: EUR17.5 million).
34. Related party disclosures
Related parties as defined by IAS24 comprise the senior
executives of the Group and also companies that these persons could
have a material influence on as related parties as well as other
group companies. During the reporting year, none of the
shareholders had control over or a material influence in the parent
Company.
Transactions between the Company and its subsidiaries have been
eliminated on consolidation.
The remuneration of the directors, who are the key management
personnel of the Group, is set out in the audited part of the
Directors' Remuneration Report.
35. Exceptional items
The following are considered to be exceptional items.
2011
EUR'000
------------------------------------------------------- --------
Onerous contract provision (note 22) 17,019
Onerous contract charge (note 21) 3,850
Inventory writedown (note 3) 22,866
------------------------------------------------------- --------
Total exceptional items included in cost of materials
(note 3) 43,735
Impairment (note 16) 27,874
------------------------------------------------------- --------
Total exceptional items 71,609
------------------------------------------------------- --------
Onerous contract charge and provision
In keeping with normal practice in the industry at the time, the
Group entered into long term supply contracts for its raw material,
polysilicon, with two major suppliers. Given the recent significant
unexpected decline in market prices for polysilicon and silicon
wafers, the resultant cost of polysilicon under these contracts
means the Group is expecting losses on these contracts.
In addition, the charge includes a contractual penalty relating
to minimum quantities which the Group's management are in the
process of negotiating.
Inventory writedown
Inventory has been written down to the lower of cost or net
realisable value. Net realisable value has been calculated as
anticipated sales price less costs to completion.
Impairment
An impairment was recognised for the Group's currently closed
polysilicon production facility following managements impairment
review which showed the carrying value was in excess of the present
value of expected future cash-flows.
36. Dividends
Dividends were paid in 2011 of EUR8,120,249 (EUR0.02 per share)
and in 2010 of EUR12,139,150 (EUR0.03 per share).
37. Post balance sheet events
In the opinion of management, the following are the significant
post balance sheet events.
Two of the Group's customers gave notice in 2012 to cancel their
wafer supply contracts. Claims against both customers have been
submitted to the International Chamber of Commerce. There is no
resultant asset or liability included in the financial
statements.
The Group has negotiated in 2012 deferrals of volume and
reductions in cost from its suppliers of polysilicon. Further
negotiations are ongoing and management expect to continue to come
to mutually beneficial agreements with its suppliers.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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