Letter to the Shareholders October 26, 2012
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L etter to the sharehol d ers O c tobe r 2 6 , 2 0 12
Dear shareholders of the SINGULUS TECHNOLOGIES AG, Dear Ladies and Gentlemen!
The development of the three segments Semiconductor, Solar and Optical Disc were mixed in the current business year. In particular, the Semiconductor segment has developed very favorably. In the Solar division business activities were difficult due to the lack of market recovery in 2012, which is now expected for 2013. Following talks with Optical Disc customers SINGULUS TECHNOLOGIES (SINGULUS) has to concede that despite a high utilization rate in disc manufacturing, larger investments in Blu-ray production equipment will not be realized this year anymore. This has a negative impact on the development of SINGULUS’ business results for the year 2012. However, we would like to point out that in terms of volume growth of produced Blu-ray Discs growth rates of 30 % compared with the previous
year are to be expected. Market research institutes continue to forecast an unabated growth trend for Blu-ray Discs, which will trigger a corresponding demand for our production machines in the next years. The Executive Board has resolved drastic measures owing to the business situation. In the Optical Disc segment this mainly affects the foreign subsidiaries and the product segment “Mastering”. Furthermore, the work area of machines for wet-chemical production steps at the subsidiary SINGULUS STANGL SOLAR GmbH (“Wet-Chemical”) is affected by the decline in the market for silicon-based solar cells. Overall, in the Solar segment structures and capacities in the wet-chemical division as well as capitalized development expenses for traditional coating technology are therefore further adjusted. Accordingly, at the end of the business year 2012 the headcount at the Fürstenfeldbruck site will be reduced by about 40 %.
Against this background pursuant to preliminary results SINGULUS expects sales of about € 83.5 million (previous year: € 121.8 million) for the first nine months and a negative result of about € 10.9 million (previous year: € 6.3 million) excluding the aforementioned extraordinary charges. The order intake in the first nine months stood at € 110.6 million (previous year: € 137.0 million). The order backlog amounted to € 53.9 million as of September 30, 2012 (previous year: € 50.8 million). Due to the trends in the Optical Disc segment sales for the full-year 2012 will also fall short of expectations and will be in a range from € 100 to 115 million (previous year: € 160.0 million). This will lead to an overall negative result including extraordinary charges in a range from - € 54 to 56 million for 2012. On a favorable note, the course of business in the third quarter only (excluding extraordinary charges) resulted in positive earnings, however.
Detailing the measures SINGULUS thus continues to gradually implement a structural change from a pure supplier of machines in Optical Disc to a leading provider for vacuum technology in different segments such as Optical Disc, Solar and Semiconductor. New application areas will be developed in the future. On the one hand, capacities have to be adjusted accordingly. On the other hand, investments in industries of the future and expansions into new work areas are made. The impairment review of all balance sheet items resulted in provisions, write-offs on inventories and on accounts receivable as well as writedowns in the amount of â‚Ź 43.3 million for the current quarter 2012. The majority of the necessary balance sheet adjustments do not result in additional cash outflows. SINGULUS has sufficient liquid funds. The balance sheet continues to remain stable and is still very solid with an equity ratio of approximately 40 %.
SINGULUS TECHNOLOGIES actively consolidating and strong positioning Optical Disc - focus and further streamlining of organization In the OD segment SINGULUS will increasingly focus activities at the headquarters in Kahl. This mainly means cost savings and restructurings at several international subsidiaries and operating sites. In particular, this affects production capacities for Optical Disc in China as well as in European countries. The joint venture in China with a focus on Optical Disc will be restructured into a 100% subsidiary of SINGULUS. The goal is to expand the sales and marketing activities for all segments, but especially for Solar in this important market. With the streamlining of the organization further saving potential can be realized in the future.
L etter to the sharehol d ers O c tobe r 2 6 , 2 0 12
Optical Disc - Blu-ray Disc continues to grow at doubledigit rates - SINGULUS unrivaled in Blu-ray Despite the weak sales of production equipment in 2012 we view the principle development for 2013 and the following years as favorably. The market for Blu-ray Discs continues to grow. For the current year a growth rate of 35 % is forecast for the sale of Blu-ray Discs. Additional positive stimuli will be provided by the launch of the Nintendo gaming console with Blu-ray drive as well as a new gaming console by Microsoft, which will also be equipped with a Blu-ray drive. The growth and the entire life cycle of the Blu-ray Discs will be prolonged significantly with these new applications.
Minimum Blu-ray Production Capacity Needed million discs 2,670 (e)
1,675 1,065
1,274
781
2008
2009
2010
2011
2012
2013
2014
Source: Calculation from Futuresource consulting 01-2012 for SINGULUS, based on an assumption of a capacity utilization of 55 % by 2015
2015
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L etter to the sharehol d ers O c tobe r 2 6 , 2 0 12
The “Full-HD Revolution” is followed by the “4K Era”: With a resolution that is four times higher than the Full-HD resolution, 4K images are set to eclipse the previously known picture quality. Sony and Philips announced the market launch of the first Blu-ray players able to scale the 1,080 pixel material to a resolution of 3,840 x 2,160 pixels. For the even higher resolution of movies international media companies already presented the new 4K television technology at the past IFA. The 4K resolution 3,840 x 2,160 pixel per inch (52 ppi) has recently been standardized by the International Telecommunications Union (ITU). Many years will pass until the transmission of TV signals in UHD (Ultra
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High Definition) format will be realized. Only the Blu-ray Disc will enable this visual experience in the future. Our market position as a provider for Blu-ray production machines is excellent. There is no other supplier worldwide offering production equipment for 50 gigabyte Blu-ray Discs. In the future the global growth of the Blu-ray Disc will once again result in the demand for additional production machines. Together with the sales share from the service activities we expect this segment to again deliver good earnings contributions here in the next couple of years.
Solar - increasing flexibility It is well known that the solar market is still suffering from excess production capacities and that a generation change of the cell technology in imminent. In the area of silicon-based solar cells this is particularly noticeable. Our work area of machines for wet-chemical production steps at out subsidiary SINGULUS STANGL SOLAR GmbH (“Wet-Chemical”) is heavily impacted by this decline. Accordingly, in the Solar segment structures and capacities in the wet-chemical division as well as capitalized development expenses for traditional coating technology are adjusted.
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Global distibution of sunshine
Source: European Centre for Medium-Range Weather Forecasts; http://www.ecmwf.int/.
As a response to the sustained market weakness and to enhance the efficiency and flexibility SINGULUS gradually reduced the production depth in the wet-chemical area and focuses on the key steps of the product development. In the course of the business year 2012 about 40 % of the headcount was cut at the site in Fürstenfeldbruck. Parts of administrative tasks are further relocated to Kahl. These changes require adjustments in the infrastructure such as the use of buildings and the corresponding charges. The balance sheet values for the previously acquired customer base and the acquired brand “Stangl” have to be written down. Furthermore, payment defaults of key customers have occurred.
L etter to the sharehol d ers O c tobe r 2 6 , 2 0 12
On the basis of the already implemented and still ongoing restructuring measures we expect the work area “wetchemical” to stabilize once again. Here, in addition the market introduction of the next cell generation with passivated selective emitter and rear cell contacts (PERC) with efficiencies exceeding 20 % is imminent. For this, SINGULUS is excellently positioned with product innovations and can expect first-class results. Solar - expansion into the next growth stage The solar market is still characterized by global excess capacity in 2012 and is currently in a stage of complete transition. The ongoing political and media discussions make the situation
in Germany particularly difficult. Although a global energy turnaround cannot be achieved free of charge, it will pay off for mankind. While solar energy was one of the most expensive forms of energy only a couple of years ago, compared with the increasing costs of fossil energy sources photovoltaics will become one of the least expensive energy source in the medium-term. A further expansion will only have a small impact on electricity prices. Actually, renewable energies already reduce the price at the electricity exchange today, since they replace more expensive electricity from fossil-fueled power plant at peak power times.
Annualized PV Growth by Area 2000 - 2030 GW
5%
14 %
81 %
21 %
30 %
3%
5%
41 %
38 %
5%
6%
26 %
25 %
n Europe n Asia n North America n Latin America n Africa
Future Growth of PV will come from an ever increasing number of countries.
2010: 40 GW Sources: EPIA, Enerdata, WEO 2011, EER, NREAP, REN 21, EGP
2012: 350 GW
2030 1,200 GW
The geographic diversification of PV will finally correlated to population.
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It is often overlooked that even without the transition to renewable energies a modernization and replacement of the power plants and electricity networks is inevitable. The German Federal Ministry of Economics calculated that the prices for hard coal power plants increased by more than 40 % from 2005 until 2010. In contrast, prices for photovoltaic equipment dropped by 66 % from 2006 until 2012. It is thus essential to invest into these new technologies.
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Even though the market for production machines for solar cells has not recovered in 2012 and uncertainties still remain for the business year 2013, we are firmly convinced of the potential of solar energy.
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PSG
DIFFUSION
SDE/TEXTURE
EMITTER
PSG
PECVD
FIRING
PRINTING
PERCEUS – PERC Upgrade for existing cell production lines
Upgrade
Upgrade
SDE/TEXTURE 03
FIRING
SINGULAR XP – vacuum coating machine to apply a di-electrical passivation layer to the rear of the cell, e.g. PERC solar cells
02 LINEA II Single Side Polish Etch – for wet chemical polishing of the SELECTIVE SDE/TEXTURE rear of the cell DIFFUSION 03
PRINTING
PECVD
Up to now Germany still has a leading position with an installed photovoltaics capacity of more than 30 GW.
Upgrade
SINGLE SIDE POLISH
DIFFUSION
PSG EE
REAR PECVD
FRONT PECVD
LCO
PRINTING
FIRING
As can be seen in the picture on page 4, the sun belt and thus higher solar radiation is in other parts of the world. Countries such as Brazil, Australia, India, as well as countries of the Arabic Peninsular are the real target markets in the next couple of years. The market forecast very clearly reflects this trend. While 82 % of the installed capacity was still located in Europe in 2010, this proportion is set to decline to 26 % with a simultaneous rise in global photovoltaics capacity. SINGULUS is following a clear strategy to position itself as a development partner and supplier of production machines at the top for the coming growth in photovoltaics worldwide. With the new process and production technologies cell manufacturers are enabled to profitably manufacture solar cells at required market prices.
Especially during a stage of industry consolidation we succeed in taking relevant positions with new developments. Accordingly, we presented many new process and machine developments to the professional audience at the 27th European Photovoltaic Solar Energy Conference and Exhibition in Frankfurt in September 2012. The goals of the new machine concepts and process technologies are the increase in efficiency and the reduction of production costs for thin-film and silicon solar cells.
L etter to the sharehol d ers O c tobe r 2 6 , 2 0 12
Efficiency levels of up to 20 % possible for silicon solar cells For the manufacturing of PERC solar cells SINGULUS has developed a new line for the wet-chemical polishing of the cell rear side with an industrial partner. The first machine was delivered a couple of days ago. In order to achieve 20 % efficiency for PERC cells, a dielectric passivation layer on the rear side of the cells is still required. The coating machine SINGULAR was further developed for this task. To integrate the existing cell production lines SINGULUS offers an upgrade package consisting of a LINEA, a SINGULAR XP as well as a laser with the product name PERCEUS.
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Numerous product innovations for the production of CIGS solar cells: With its numerous new machines SINGULUS increasingly positions itself as a leading provider of production solutions for efficient CIGS thin-film solar cells. In the future SINGULUS will offer all important manufacturing steps for the CIGS production: 01
> Cleaning machines of the VITRUM type > Vacuum cathode sputtering equipment > Vacuum deposition machines > Selenization machines of the CISARIS type > Machines for buffer layer coating of the TENUIS type
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CISARIS – selenisation furnace for thin-film solar cells
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Vapor deposition system for thin-film solar cells
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Sputtering system for thin-film solar cells
The market consolidation will continue to reduce the number of machine suppliers. With important key orders in the segment of CIGS solar technology from Germany, Korea, India, South Africa and the USA SINGULUS today has taken relevant starting points for projects in the coming years. SINGULUS is therefore at an excellent starting point for further growth in the next couple of years.
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Semiconductor - growth in 2012 - expansion in the coming years SINGULUS sees its strategy in the Semiconductor segment confirmed and intends to further expand its position as a provider for vacuum coating equipment for the semiconductor sector. In the reporting period for 2012 SINGULUS already booked several TIMARIS coating systems with different configurations as orders, which exceeded an overall volume of â‚Ź 22.5 million. In total, seven machines are in the order backlog.
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The machine of the TIMARIS family have a modular built and can be utilized for numerous applications with high growth potential. For tablet PCs, mobile phones and other mobile data devices the new MRAM chip is a technologic revolution and regarded as the memory technology of the future. An additional application is the modern sensory technology: For example with the TIMARIS key parts of chip laboratories can be manufactured, which
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Examples for applications of MRAM technology
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include the entire functionality of a macroscopic laboratory on a plastic substrate only the size of a plastic card. Chemical syntheses and analyses, such as the diagnosis of cancer, can be produced at high speed shortly. Furthermore, the highly specialized sensors produced with the TIMARIS are already used in today’s automobile technology and enhance the vehicles’ safety. Based on the TIMARIS platform a new universal vacuum coating machine is introduced to the market under the product name ROTARIS. The ROTARIS machine has been designed especially for the application research in the semiconductor industry and will be presented at the Semicon Japan trade fair in December 2012.
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SINGULUS - solid finances for the future. In the business year 2011 SINGULUS completely repaid its liability owed to banks. Except for a loan from the KfW in the amount of € 4.8 million there are currently no more bank liabilities. With the issue of a corporate bond on March 12, 2012 with a volume of € 60 million and a term to maturity of five years SINGULUS ensured that the financing of current projects, the growth in the existing divisions as well as the expansion into new work areas rests on a secure and stable foundation.
of the system partnership with producers of thin-film solar cells, the development of new products in the Solar division and the development of manufacturing equipment for the next generation of Blu-ray Discs.
With the proceeds from the issue SINGULUS TECHNOLOGIES is able to finance larger projects in the Solar segment, the expansion
To strengthen SINGULUS’ existing business segments the Executive Board has elaborated a detailed portfolio strategy and is currently reviewing several concrete acquisition opportunities. It goes without saying that the Executive Board is analyzing the potential targets with the required diligence.
Establishment of new business areas - external growth As already depicted, with the proceeds from the bonds SINGULUS intends to set-up new business areas in the vacuum coating technology through research and development as well as through acquisitions of companies and company divisions.
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ROTARIS – sputtering system for application research in the semiconductor segment
SINGULUS TECHNOLOGIES 2013 - good prospects for breaking-even in Optical Disc, Solar and Semiconductor growth through new business areas SINGULUS’ Executive Board sees a good chance for the existing segments Optical Disc, Solar and Semiconductor to generate positive earnings in the next year again. The trends in the individual segments are projected as follows: > Optical Disc Since the market for Blu-ray Disc continues to grow at double-digit rates in 2012, we expect stable sales and earnings contributions again. > Solar In the thin-film technology CIS/CIGS SINGULUS is excellently positioned. Larger investment projects have already been announced for 2013. If they are realized according to plan, SINGULUS will surely succeed in delivering a significant number of machines.
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In a difficult market we see us very well positioned technologically due to the good development efforts in the past years. The upgrade business in the area of crystalline solar cells to the PERC standard promises new demand for relevant production equipment in 2013.
> Semiconductor The Semiconductor division will make positive earnings contributions this year. The potential of the various application areas for the machines suggests a further uptrend in the coming business years. The Executive Board works on the structural changes of the company together with the entire workforce and is convinced that SINGULUS will generate sufficient internal and external growth to initiate a sustainable growth stage from 2013 onwards.
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Please put you trust in us for this path.
The Executive Board SINGULUS TECHNOLOGIES AG
02 Dr.-Ing. Stefan Rinck, Chief Executive Officer, CEO
03 Dipl.-Oec. Markus Ehret, Board Member Responsible for Finance, Controlling, Human Resources and IT, CFO
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This report contains future-oriented statements based on the current expectations, assessments and forecasts of the Executive Board as well as on the currently available information to them. Known as well as unknown risks, uncertainties and impacts could cause the actual results, the financial situation or the development to differ from the statements made in this report. We assume no obligation to update the futureorientedstatements made in this report.
SINGULUS TECHNOLOGIES AG Hanauer Landstrasse 103 D-63796 Kahl am Main Phone +49 6188 440-0 Fax +49 6188 440-110 Internet: www.singulus.de
Investor Relations Maren Schuster Tel. +49 6188 440-612 Fax +49 6188 440-110 investor.relations@singulus.de
MetaCom 10/2012
Future-oriented statements and forecasts