There was no new capital expenditure authorised during the year
due to the Group's cash conservation strategy although capital
projects started in prior years have been completed. Consequently
capital expenditure in the year was significantly lower at EUR1.3
million (2011: EUR21.9 million). No material investment grants were
received in the year. Investment grants received in prior years
were all in respect of the German operations as capital expenditure
in the United Kingdom does not qualify for such grants.
A large proportion of the loans in the Group's Japanese
subsidiary were repaid in the year. The loans had been taken out in
Japanese Yen and had been utilised as a hedge against movements in
the Japanese Yen and its effect on assets held in that currency
(mainly debtors). As the Japanese debtor book was significantly
lower, the loans as a form of natural hedge were no longer required
to the same degree. In addition the loans had been secured against
the Japanese Yen debtor book. Accordingly, EUR42.9 million of these
Yen loans were repaid in the year (2011: EUR0.3 million).
No dividends were paid in the year (2011: EUR8.1 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 including the continued
decline in spot prices of wafers during 2012 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
2013.
The Group has three remaining long-term wafer supply contracts
and accordingly these should give the Group the ability to sell
wafers at prices that are above current market spot prices during
2013 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.
On the other hand, the Group has long-term contracts with two
external suppliers for the purchase of polysilicon, our main raw
material, for unexpired periods of between two and three years and
for volumes in excess of current reduced production requirements.
The Group's management has been successful in reaching
accommodation with these suppliers to secure periodic contract
amendments and adjust 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 2012 and
the first quarter of 2013.
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. In
line with the Group's strategy of retaining flexibility in
production levels, production can be brought back on stream when
market conditions allow. Following the fall in employment costs in
2012 resulting from the reduction in contract labour in Germany and
redundancies in the United Kingdom, further cost savings will be
obtained in 2013 as a result of the announced Group restructuring.
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 actions and based on the above 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 2012 there was a net cash balance of EUR89.4
million, comprising cash or cash equivalents of EUR94.7 million
less short-term loans of EUR5.3 million. The current borrowings are
in Japanese Yen and are subject to certain covenants on the
Japanese subsidiary company (including interest cover,
profitability, and receivables cover). The Group's current plans
are based on 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 twelve 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
2012. As a result of this assessment, an impairment charge has been
recognised to reduce the carrying values of plant by EUR82.5
million (2011: 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.
The Group has impaired the majority of its production capital
assets. The main impairment relates to the polysilicon plant at
Bitterfeld, which on the grounds that its production has been
discontinued, was impaired to its realisable value, accordingly the
recoverable value of Bitterfeld plant is estimated to amount to
EUR8.0 million. This has been derived from a detailed professional
valuation of the individual assets.
The impairment charges in respect of plant and equipment has
been made to write-down the value of such plant and equipment to
realisable value. These write-downs have been accounted for in
individual group companies. Accordingly, any further potential
write-downs are restricted to the remaining modest values and will
thus be immaterial.
Other financial write-downs in the year
In addition to the above mentioned impairment of EUR82.5 million
(2011: EUR27.9 million), the Group wrote down its inventories by
EUR41.5 million (2011: EUR22.9 million) and made onerous contract
charge and provisions of EUR42.0 million (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
three 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
20 March 2013
Consolidated financial statements:
Consolidated statement of comprehensive income
For the year ended 31 December 2012
2012 2011
Total Total
Notes EUR'000 EUR'000
---------
Revenues 8 46,324 210,400
Other income 2 109,479 5,605
------------------------------------ ------- --------- ---------
Cost of material and services
Cost of material 3 (126,199) (193,150)
Cost of services 3 (4,518) (18,699)
------------------------------------ ------- --------- ---------
Personnel expenses
Wages and salaries 4 (12,501) (14,460)
Social security costs 4 (1,871) (2,247)
Pension costs 4 (597) (527)
Employee share schemes 4 (319) (238)
---------
Restructuring costs 4 (4,877) (393)
------------------------------------ ------- --------- ---------
Depreciation and impairment
of property, plant and equipment
and amortisation of intangible
assets (99,438) (43,981)
Other expenses 5 (18,017) (11,284)
------------------------------------ ------- --------- ---------
Currency gains and losses 30 2,435 1,438
------------------------------------ ------- --------- ---------
Loss before interest and
taxes ("EBIT") (110,099) (67,536)
Finance income 6 820 855
Finance cost 6 (1,515) (404)
------------------------------------ ------- --------- ---------
Loss before taxes ("EBT") (110,794) (67,085)
------------------------------------ ------- --------- ---------
Income taxes 7 (10,607) 6,192
------------------------------------ ------- --------- ---------
Loss attributable to equity
owners of the parent (121,401) (60,893)
------------------------------------ ------- --------- ---------
Other comprehensive income
Exchange differences on translating
foreign operations 30 (1,258) 5,206
------------------------------------ ------- --------- ---------
Total comprehensive income
Attributable to equity owners
of the parent (122,659) (55,687)
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