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Meyer Burger Technology earnings of subsidiary Roth & Rau hit by additional special item | Europe

Meyer Burger Technology earnings of subsidiary Roth & Rau hit by additional special item

Roth & Rau achieved earnings for the third quarter of 2011 that were again heavily affected by special items and the current difficult market environment in the solar industry. Roth & Rau published a profit warning and, according to preliminary results for the third quarter 2011, incurred a loss at EBIT level of EUR 52 million. Included within this loss are non-recurring value adjustments on trade receivables and inventories and depreciation on intangible assets as well as provisions for contractual risks and structural measures in the total amount of EUR 45 million.

The difficult market environment for cell and module manufacturers during the third quarter 2011 lead to a large proportion of Roth & Rau?s current projects not being concluded according to plans, as some customers delayed their final acceptances. This impacted sales and earnings. Roth & Rau achieved total sales of EUR 54 million for the third quarter 2011 and EUR 146 million for the first nine-months 2011 (previous year period EUR 189 million), respectively.

Roth & Rau has already reacted to the substantial decline in demand and has implemented reduced working hours at its production facilities. This reduced working hours? measure is limited to a half-year period for the time being. This will enable the company to react flexibly and at short notice to a potential rebound in customers' readiness to invest. The existing cost and structure optimisation program is being reviewed by the new management board of Roth & Rau AG and will for the most part be continued and accelerated. The program targets the creation of more flexible cost and organisational structures in the long-term so that fluctuations in demand by customers can be absorbed in a much better way.

Roth & Rau AG will publish its detailed interim report on 15 November 2011 for the nine-month period ended 30 September 2011. However, the company already pointed out today that potential additional special item effects of approximately EUR 15 million cannot be ruled out for the fourth quarter 2011.

Meyer Burger Group fully consolidates Roth & Rau AG into its consolidated financial statements 2011 and in the opening balance sheet as of the date of the completion of the takeover at the beginning of August 2011. The participation held by Meyer Burger prior to this date had been recognised in the balance sheet as investment in associated companies.

All assets of Roth & Rau AG are recognised at fair value in the opening balance sheet of Meyer Burger Group as per the balance sheet date 9 August 2011. The value adjustments on trade receivables and inventories and the depreciation on intangible assets mentioned in the profit warning by Roth & Rau have been considerably impacted by the changed market environment. First signs for the value adjustments and depreciation of the respective assets already existed at the time of the change of control and the depreciations and provisions are therefore included in the opening balance sheet.

The proportion of the total loss incurred by Roth & Rau as per 30 September 2011, which is included in the consolidated financial statements of Meyer Burger Group, will only have a limited effect on the Group?s earnings at EBITDA level. However, Meyer Burger will have to carry a proportional loss of approximately EUR 14 million for the period July to 8 August 2011 at the level of results from investments in associated companies. Potentially negative earnings effects by Roth & Rau AG during the fourth quarter 2011 will also have to be fully consolidated.

Due to the changes in the market environment for solar cell and module manufacturers during the past few months since the launch of the public tender offer, Meyer Burger will also have to re-evaluate the intrinsic value of its participation in Roth & Rau AG. In particular, Meyer Burger Group will carry out an impairment test on the goodwill of Roth & Rau AG within the scope of the annual financial statements 2011. It appears, from today?s point of view, that impairment on goodwill in an amount of approximately EUR 40 to 60 million might become necessary, which would be charged to the income statement 2011 as a one-off item.

Meyer Burger has equity of CHF 760.5 million and an equity ratio of 58.4% as of 30 June 2011. Cash and cash equivalents of the Group are currently at more than CHF 250 million, even after the purchase of the participation in Roth & Rau AG which had been settled by cash. The Group has no interest-bearing liabilities and is able to draw on a confirmed credit line of CHF 180 million at any time. Therefore, the Company continues to have a very sound financial basis. Additionally, the combined Group possesses a unique technology portfolio within its industry and will be able to use the existing large market opportunities as soon as the industry recovers from the current market situation.

In the current very difficult and highly volatile market environment, the new management board of Roth & Rau AG ? who has been in charge since 3 October 2011 - will focus entirely on a fast and sustainable improvement of the operating and financial performance of Roth & Rau.

Profitability of Roth & Rau is substantially below the previous expectations of Meyer Burger Technology Ltd. The Board of Directors and the Executive Board of Meyer Burger Technology Ltd have therefore decided to no longer pursue a control and/or profit transfer agreement with Roth & Rau AG in the current environment of the solar industry and stock markets. The management board of Roth & Rau AG was informed accordingly by Meyer Burger Technology Ltd (through its subsidiary MBT Systems GmbH). All preparatory work is discontinued.

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Posted by Gloria Llopis | 2011-11-09