Meyer Burger Technology Ltd – Publication of fiscal year 2015 results
Meyer Burger Technology Ltd recorded, as expected, a substantial increase in incoming orders in fiscal year 2015. Incoming orders increased by 40.4% at constant exchange rates and came to CHF 418.9 million. Net sales were at CHF 323.6 million, representing an increase of 8.3% at constant exchange rates. As already published, project delays in certain larger existing customer projects led to a delay in final acceptance for a number of machines and systems into 2016, and therefore also to a delay of net sales into 2016.
In 2015, operating expenses were significantly lower compared to the previous year as planned. EBITDA stood at CHF -55.9 million (2014: CHF -95.6 million). EBITDA was impacted by the delayed sales and by non-recurring special effects from the sale of the Roth & Rau Ortner subsidiaries. Cash flow from operating activities was CHF -51.9 million and improved compared to the previous year by about CHF 101 million. With cost structure optimisation projects already implemented in 2014 and 2015, the basis is laid to reach break-even at the EBITDA level with sales of around CHF 400 million.
The company’s top priority in fiscal year 2016 is a solid growth in net sales and to achieve break-even at the EBITDA level.
DETAILS ON THE FINANCIAL RESULTS 2015
Incoming orders and oder backlog
Meyer Burger’s market expectations that solar cell and module manufacturers will renew/upgrade existing production lines or increase their production capacities due to the rising demand in renewable energies have been confirmed during fiscal year 2015. Several of the tier 1 and 2 manufacturers have signalled that their production capacities were fully utilised in 2015 – after almost four years of massive overcapacity. The changed situation was reflected in a strong increase of incoming orders achieved by Meyer Burger Group.
The volume in new orders rose by 40.4% at constant exchange rates (in CHF +28.5%) compared to the previous year and came to CHF 418.9 million (2014: CHF 326.0 million). In the Photovoltaics segment, Meyer Burger won a number of larger orders with a total value of about CHF 142 million (2014: CHF 42 million). This included in particular incoming orders for MB PERC technology MAiA 2.1, Heterojunction cell coating equipment as well as for wafer and module measurement technologies. The Specialised Technologies segment also achieved the expected amount of incoming orders.
The order backlog increased by 35.5% to CHF 257.5 million as at 31 December 2015 (31.12.2014: CHF 190.1 million), which provides a solid starting position for fiscal year 2016. The book-to-bill ratio reached 1.29 (2014: 1.03).
In the first half of 2015, Meyer Burger reached a settlement agreement with GT Advanced Technologies Inc. (“GTAT”), which has been operating under Chapter 11. The unsecured claim against GTAT arising from this settlement agreement was assigned at a discount to Citigroup Financial Products Inc. Meyer Burger decided to execute this transaction in order to reduce further legal expenses and collection risks from the GTAT claim. In total, Meyer Burger received a cash settlement of USD 13.9 million for the unsecured claim. From the settlement and due to past valuation adjustments already taken in 2014, net sales in the amount of CHF 10.4 million and a book profit of CHF 5.7 million resulted in 2015.
Net sales
Net sales at constant exchange rates increased by 8.3% (in CHF +2.4%) to CHF 323.6 million (2014: CHF 315.8 million). Due to project delays in certain larger existing customer projects, the final acceptance for a number of machines and systems was delayed into 2016. This affected a total sales volume of around CHF 40 million which had been budgeted for 2015. The net sales and profit contributions from these orders where delayed acceptances occurred, will be realized during 2016.
Profitability
Operating income after costs of products and services amounted to CHF 154.2 million (2014: CHF 133.5 million). The margin increased by 5.4 percentage points to 47.7% in 2015 (2014: 42.3%) and was again at a level that meets the company’s expectation. The normalised margin stood at about 49% for fiscal year 2015 (2014: about 50%).
The various measures implemented during fiscal year 2014 to reduce the operating expenses have shown the expected results. Personnel expenses declined by CHF 25.4 million, or 14% compared to the previous year and amounted to CHF 154.8 million (2014: CHF 180.2 million). The restructuring measures at Diamond Materials Tech Inc. (“DMT”) in Colorado Springs, announced at the end of July 2015, led to another workforce reduction at this site. Compared to the level at the beginning of 2015, the operating cost base at this site will decrease by more than USD 6 million through this and earlier steps taken in Colorado Springs.
Other operating expenses were also reduced. The other operating expenses in fiscal year 2015 totalling CHF 55.4 million include non-recurring losses from the sale of the Roth & Rau Ortner subsidiaries (“R&R Ortner”) in the amount of CHF 6.3 million (2014: total of CHF 48.9 million including the release of two provisions in a total amount of CHF 9.0 million). Adjusted by these special effects in the other operating expenses, the comparable operating costs amounted to CHF 49.1 million in fiscal year 2015 and to CHF 57.9 million in 2014. Therefore, the real other operating costs were also reduced by about 15% through cost reductions.
EBITDA was impacted by the delayed sales and the negative special effects by the sale of R&R Ortner mentioned above and came to CHF -55.9 million (2014: CHF -95.6 million). With cost structure optimisation projects implemented in 2014 and 2015, the basis is laid to reach break-even at the EBITDA level with sales of around CHF 400 million.
EBIT was additionaly affected by a one-time impairment on technology and production equipment at DMT and in intangible assets of the sold R&R Ortner companies (in total special effects of CHF 15.1 million), and amounted to CHF -128.7 million (2014: CHF -161.8 million). The financial result, net, amounted to CHF -28.2 million (2014: CHF +3.2 million). The change is mainly a result of the valuation of intercompany loans to foreign subsidiaries, which led to financial loss from unrealised negative foreign currency translation effects of CHF 11.0 million in 2015, while the 2014 results included a financial profit from unrealised positive foreign currency translation effects in the amount of CHF 15.1 million.
The taxes for 2015 amounted to tax expenses of CHF 12.2 million (2014: tax income of CHF 23.9 million). The taxes in 2015 are mainly due to recognition and utilisation of loss carry-forwards in the amount of CHF 4.0 million net, a new assessment of recognised loss carry-forwards (CHF -7.3 million) and an impairment of existing deferred tax assets at DMT of CHF 16.2 million. The net result for fiscal year 2015 came to CHF -169.0 million (2014: CHF -134.7 million) and was impacted by the above mentioned tax effects compared to the previous year.
Balance sheet
Total assets were CHF 572.3 million (31.12.2014: CHF 755.9 million). The decline in total assets is mainly due to a lower cash position and reduced values for property, plant and equipment, intangible assets and deferred tax assets due to the depreciation and amortisations as well as to one-time impairments. Current assets include cash and cash equivalents of CHF 101.5 million, inventories of CHF 117.8 million. Non-current assets mainly include property, plant and equipment of CHF 120.3 million, intangible assets of CHF 77.9 million and deffered tax assets of CHF 92.6 million. Total liabilities amounted to CHF 397.3 million, of which trade payables were CHF 36.1 million, customer prepayments CHF 46.2 million, provisions CHF 15.1 million and financial liabilities CHF 250.8 million. Equity as at 31 December 2015 stood at CHF 175.0 million, reflecting an equity ratio of 30.6%. The decision by the Swiss National Bank in January 2015 to discontinue the minimum exchange rate CHF/EUR affected the balance sheet of Meyer Burger Group. In fiscal year 2015, foreign currency effects through the income statement or balance sheet positions have led to a negative effect on equity in a total amount of CHF 25.5 million as at 31 December 2015.
Cash flow from operating activities
In 2015, cash flow from operating activities improved compared to the previous year by about CHF 101 million and amounted to CHF -51.9 million (2014: CHF -152.8 million). The reduction of the cash drain in operating activities is mainly due to the facts that the cost reduction programmes have shown their expected effects and that the cash-related losses were substantially reduced. In addition, preparatory investments in inventories as a result of the higher order backlog were mainly financed through customer prepayments.
OUTLOOK
Solar energy will occupy an important global position in the entire future energy supply in the coming years and decades. Estimates by the IEA (International Energy Agency), which anticipate an installed PV base of 4,500 GW in 2050, highlight the substantial growth potential compared to the current 225 GW at the end of 2015 and around 550 to 600 GW in 2020.
For Meyer Burger’s customers, the strong growth in the end-installed PV base means they will have to make additional investments to keep up with technology advances in cell and module efficiency and with the rapid market growth. In 2015, the shift in demand in the upgrade business from standard cell technologies to high-efficiency cell technologies such as PERC and from slurry-based to diamond wire-based cutting technologies has been confirmed. Meyer Burger is convinced that in the replacement business, there will also be a clear trend from slurry- to diamond wire-based cutting in the coming two to three years. With its broad product and solutions portfolio, Meyer Burger is addressing a total market of about CHF 18-20 billion over the next five years (2016 to 2020).
The top priority in 2016 is a solid growth in net sales and to achieve break-even at the EBITDA level. The long-term goal in the roadmap 2020/21, with sales in the order of CHF 1.3 billion and an EBITDA margin between 13% and 15%, seems quite ambitious from the present point of view. However, it gives a broad indication of the long-term growth path that Meyer Burger aims to follow in the coming years – and it illustrates the opportunities that the technology company is addressing.
