Interim Report, Q2 2011

| Source: Cemat A/S Cemat A/S

Summary for Q2 and H1 2011

Revenue and earnings

  • Topsil's revenue decreased from DKK 113.1 million in Q2 2010 to DKK 103.7 million in Q2 2011, corresponding to a drop of 8.3%. Accumulated revenue for H1 2011 amounted to DKK 195.6 million, equal to negative organic growth of 9.4%. The main reasons for this development is a decline in the NTD area and a delay in the product restructuring from CZ to CZ-EPI.
  • At the beginning of Q3, Topsil received substantial downwards adjustments and changes in the product mix of NTD orders for the remaining part of 2011. Management believes that the decline is specific to selected applications, industries and contract customers.
     
  • Despite a level of activity which in 2011 will be below the expected level, Topsil believes that the company will maintain its market position and that the underlying market for both FZ and CZ products in the longer term will continue to match the favourable market growth forecasts.
     
  • The product restructuring from CZ to CZ-EPI is delayed due to technical challenges with approval and ramp up of CZ-EPI products to new customers. Sales of CZ-EPI have therefore not been able in the short-term to compensate for the expected reduced sales of CZ.
  • Topsil received confirmation from a number of new and existing customers for the approval of the new PFZ product. However, the approval process is still more time-consuming than expected.
     
  • Topsil had some production related challenges in Q2, most notably were quality issues with one of the two suppliers of FZ polysilicon for NTD production. This generated a lower degree of utilisation and a longer production process, and thus increased production costs at about DKK 5 million. Topsil is working hard to solve the problem in collaboration with the supplier.
  • To adjust the cost level, Topsil reduced staff numbers and strengthened efforts to achieve synergies between the Danish and Polish locations in Q2 2011.
     
  • In H1 2011, the group accelerated the development of 8” crystal, and expects that a fully developed crystal will be in place as planned before the end of the financial year, aiming for qualification and market introduction in 2012. 
  • Construction of a new plant continues according to plan. In 2011, Topsil expects to spend about DKK 200 million on the investment programme, in accordance we previously decided investment plans.
  • The lower level of activity and impaired quality of FZ polysilicon means that the group's EBITDA in Q2 2011 fell from DKK 23.4 million last year to DKK 6.7 million this year, equal to an EBITDA margin of 6.4% compared to 20.7% in the year-earlier period. EBITDA for H1 2011 totalled DKK 19.0 million against DKK 43.5 million for the year-earlier period. 
  • Topsil reported an unsatisfactory profit before tax of DKK 6.7 million in H1 2011 against DKK 36.0 million for the year-earlier period.
     
  • The company reported a net cash outflow from operating activities of DKK 1.6 million in H1 2011 against DKK 40.4 million in the year-earlier period, following the negative development of operating profit.

 

Outlook for 2011

  • Due to a low level of activity in H1 2011, large changes in the product mix in the order book for H2 2011 and delay of approval of 6” PFZ and CZ-EPI products, the profit forecast for 2011 is downgraded. Previously, Management expected an organic growth rate of 0-5%, but now revenue is expected to decline approximately 20% to about DKK 370 million. Consequently, the operating profit (EBTIDA) forecast is downgraded from about DKK 100 million to about DKK 40 million.

  

Further information

Questions regarding stock exchange announcement may be addressed to:

Jens Borelli-Kjær, Chairman, tel. +45 40 16 14 82
Keld Lindegaard Andersen, CEO, tel. +45 21 70 87 72

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