TSX: ATA
CAMBRIDGE, ON, Nov. 12 /CNW/ - ATS Automation Tooling Systems Inc. today
reported its financial results for the three and six months ended September
30, 2008 as well as the Company's next steps in restructuring the Automation
Systems Group ("ASG").
Highlights
- Consolidated second quarter revenue increased 49% to $219.5 million
from $146.9 million a year ago;
- Consolidated second quarter earnings from operations increased to
$13.6 million compared to a loss from operations of $16.9 million a
year ago;
- Second quarter earnings were $0.12 per share (basic and diluted)
compared to a loss of $0.28 per share a year ago;
- Initiated the consolidation and restructuring of a number of smaller
ASG manufacturing operations in the United States, Europe and Asia;
- Finalized a definitive agreement to sell the key operating assets and
liabilities of the Precision Components Group ("PCG");
- Improved consolidated cash net of debt by $22.8 million from the
beginning of the year to $50.8 million at September 30, 2008.
"Photowatt and ASG have made good progress on the execution of their
respective strategies," said Anthony Caputo, Chief Executive Officer. "The
sale of PCG and the consolidation and restructuring of the remaining
underperforming ASG operations will substantially complete the "fix" phase of
our strategic plan. Going forward, our focus on approach to market and supply
chain management will increase. We are cognizant of changing global economic
conditions and have been adjusting our plans accordingly".
Financial Results
3 months 3 months 6 months 6 months
In millions of ended ended ended ended
dollars, except Sept 30, Sept 30, Sept 30, Sept 30,
per share data 2008 2007 2008 2007
-------------------------------------------------------------------------
Revenue ASG $ 147.4 $ 109.1 $ 290.2 $ 216.9
from ------------------------------------------------------------
continuing Photowatt 72.5 37.9 141.9 85.6
operations ------------------------------------------------------------
Inter-segment (0.4) (0.1) (0.5) (0.2)
------------------------------------------------------------
Consolidated $ 219.5 $ 146.9 $ 431.6 $ 302.3
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EBITDA ASG $ 16.0 $ 4.4 $ 28.3 $ 7.1
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Photowatt
Technologies
- Photowatt
France 9.8 (2.9) 19.1 (0.2)
- Other
solar (0.4) (2.7) (0.8) (4.5)
- Gain on
sale of
building - - 3.2 -
- Gain on
silicon
sale - - 2.0 -
------------------------------------------------------------
Corporate and
inter-segment
elimination (5.8) (10.4) (10.1) (15.3)
------------------------------------------------------------
Consolidated $ 19.6 $ (11.6) $ 41.7 $ (12.9)
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Net income Consolidated $ 12.7 $ (15.5) $ 27.7 $ (22.6)
(loss)
from
continuing
operations
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Earnings From continuing
(loss) per operations
share (basic &
diluted) $ 0.16 $ (0.23) $ 0.36 $ (0.35)
------------------------------------------------------------
After
discontinued
operations
(basic &
diluted) $ 0.12 $ (0.28) $ 0.29 $ (0.44)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Automation Systems Group Second Quarter Results
- Revenue increased 35% to $147.4 million from $109.1 million a year
ago on higher Order Backlog entering the second quarter of fiscal
2009 compared to the prior year;
- EBITDA was $16.0 million compared to $4.4 million a year ago;
- Earnings from operations were $13.9 million, up from $2.4 million a
year ago;
- Period end Order Backlog increased 12% to $247 million from
$220 million a year ago;
- Order Bookings were consistent with last year at $133 million, and
included two bookings with repeat solar and healthcare customers of
$25 million and $13 million respectively;
- Order Bookings were $35 million during the first six weeks of the
third quarter;
The improvement in operating results reflected higher revenue, cost
reductions implemented during the fourth quarter of fiscal 2008 and improved
program management. Revenue increased 4% in healthcare, 12% in computer-
electronics, 222% in energy and 24% in other markets to more than offset a 14%
decline in automotive revenue compared to the second quarter of 2008. The
consolidation and restructuring of smaller, underperforming manufacturing
operations is expected to result in an approximately 5% reduction in ASG's
workforce and cost between $4 and $6 million during the third and fourth
quarters of fiscal 2009.
Photowatt Technologies Second Quarter Results
- Photowatt France revenue increased 93% to $72.5 million from
$37.5 million a year ago;
- Photowatt France EBITDA was $9.8 million compared to negative EBITDA
of $2.9 million a year ago;
- Photowatt France operating earnings were $6.0 million compared to an
operating loss of $6.1 million a year ago;
- Total megawatts (MWs) sold at Photowatt France increased 82% to
14.9 MWs from 8.2 MWs in the second quarter of fiscal 2008 - with
UMG-Si products accounting for 71% of revenue;
- Average cell efficiency for UMG-Si cells improved to approximately
13.9% from 12.7% a year ago, while average cell efficiency for
polysilicon products was 15.4% compared to 15.2% a year ago.
To balance production, offset the negative impact of the traditional
summer plant shutdown and productively utilize its supply sources, Photowatt
France continued to supplement its internal ingot and wafer production with
increased externally-purchased polysilicon wafers in the second quarter and
outsourced production of some cells and modules. This added incremental
earnings to operations, but at lower operating margins than for modules
manufactured in-house using internally produced wafers and cells. Average
selling prices per watt were consistent year over year.
Quarterly Conference Call
ATS's quarterly conference call begins at 10 am eastern today and can be
accessed over the Internet at www.atsautomation.com or on the phone at 416 644
3423.
About ATS
ATS Automation Tooling Systems Inc. provides innovative, custom designed,
built and installed manufacturing solutions to many of the world's most
successful companies. Founded in 1978, ATS uses its industry-leading knowledge
and global capabilities to serve the sophisticated automation systems' needs
of multinational customers in industries such as healthcare,
computer/electronics, energy, automotive and consumer products. It also
leverages its many years of experience and skills to fulfill the specialized
automation product manufacturing requirements of customers. Through Photowatt
Technologies, ATS participates in the growing solar energy industry as an
integrated manufacturer of ingots, wafers, cells and modules. Photowatt-
branded products and systems serve businesses, institutions and homeowners in
established and emerging markets. ATS employs approximately 3,400 people at 21
manufacturing facilities in Canada, the United States, Europe, Southeast Asia
and China. The Company's shares are traded on the Toronto Stock Exchange under
the symbol ATA. Visit the Company's website at www.atsautomation.com.
Management's Discussion and Analysis
This Management's Discussion and Analysis ("MD&A") for the three and six
months ended September 30, 2008 (second quarter of fiscal 2009) provides
detailed information on the operating activities, performance and financial
position of ATS Automation Tooling Systems Inc. ("ATS" or the "Company") and
should be read in conjunction with the unaudited interim consolidated
financial statements of the Company for the second quarter of fiscal 2009. The
Company assumes that the reader of this MD&A has access to and has read the
audited consolidated financial statements and MD&A of the Company for fiscal
2008 and the unaudited interim consolidated financial statements and MD&A for
the three months ended June 30, 2008 and, accordingly, the purpose of this
document is to provide a second quarter update to the information contained in
the fiscal 2008 MD&A. These documents and other information relating to the
Company, including the Company's fiscal 2008 audited consolidated financial
statements, MD&A and annual information form may be found on SEDAR at
www.sedar.com.
Notice to Reader
The Company has two reportable segments: Automation Systems Group ("ASG")
and Photowatt Technologies ("Photowatt") which includes Photowatt France (the
ongoing Photowatt Technologies operations), Photowatt USA, a small module
assembly facility and sales operation closed during fiscal 2008 and Spheral
Solar, a halted development project that has been wound down. Any reference to
solar production capacity assumes the use of polysilicon at 15% cell
efficiency. Actual solar capacity may vary materially for a number of reasons
including the use of Upgraded Metallurgical Silicon ("UMG-Si"), changes in
cell efficiency and/or changes in production processes. References to
Photowatt's cell ''efficiency'' means the percentage of incident energy that
is converted into electrical energy in a solar cell. Solar cells and modules
are sold based on wattage output. "Silicon" refers to a variety of silicon
feedstock, including polysilicon, UMG-Si and polysilicon powders and fines. As
described in Note 5 to the interim consolidated financial statements, the
Precision Components Group ("PCG") was classified as held for sale as of March
31, 2008, and its results are reported in discontinued operations.
Non-GAAP Measures
Throughout this document the term "operating earnings" is used to denote
earnings (loss) from operations. The term EBITDA is used and is defined as
earnings (loss) from operations excluding depreciation and amortization (which
includes amortization of intangible assets and impairment of goodwill). The
term "margin" refers to an amount as a percentage of revenue. The terms
"earnings (loss) from operations", "operating earnings", "margin", "operating
loss", "operating results", "operating margin", "EBITDA", "Order Bookings" and
"Order Backlog" do not have any standardized meaning prescribed within
Canadian generally accepted accounting principles ("GAAP") and therefore may
not be comparable to similar measures presented by other companies. Operating
earnings and EBITDA are some of the measures the Company uses to evaluate the
performance of its segments. Management believes that ATS shareholders and
potential investors in ATS use non-GAAP financial measures such as operating
earnings and EBITDA in making investment decisions about the Company and
measuring its operational results. A reconciliation of EBITDA to total Company
revenue and earnings from operations for the three and six months ended
September 30, 2008 and the three and six months ended September 30, 2007 is
contained in the MD&A. EBITDA should not be construed as a substitute for net
income determined in accordance with GAAP. Order Bookings represent new orders
for the supply of automation systems and products that management believes are
firm. Order Backlog is the estimated unearned portion of ASG revenue on
customer contracts that are in process and have not been completed at the
specified date.
AUTOMATION SYSTEMS GROUP SEGMENT
ASG Revenue (in millions of dollars)
Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
Sept 30, Sept 30, Sept 30, Sept 30,
2008 2007 2008 2007
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Revenue by industry
Healthcare $ 30.8 $ 29.5 $ 72.2 $ 58.6
Computer-electronics 29.9 26.8 64.1 51.0
Energy 50.8 15.8 82.9 33.6
Automotive 22.8 26.4 46.7 53.7
Other 13.1 10.6 24.3 20.0
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Total ASG revenue $ 147.4 $ 109.1 $ 290.2 $ 216.9
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Second Quarter
ASG second quarter revenue was 35% higher than a year ago, primarily
reflecting a 19% increase in Order Backlog entering the second quarter
compared to a year ago.
By industrial market, healthcare and computer-electronics revenue
increased 4% and 12% respectively year over year as programs moved into later
stages of completion when higher levels of revenue are typically recognized.
Healthcare continues to be a strong market for ASG, particularly within North
America. Revenue generated in the energy market increased by 222% primarily
reflecting growth in solar industry Order Bookings during the fourth quarter
of fiscal 2008 and the first quarter of fiscal 2009. The 14% decline in
automotive revenue compared to a year ago primarily reflects the ongoing
challenges in the North American automotive parts market. "Other" revenues
increased 24% year over year due primarily to assignments in the consumer
products industry.
Automation Products Group ("APG") contributed revenue of $47.0 million in
the second quarter of fiscal 2009, compared to $11.9 million in the second
quarter last year. The growth in revenue reflects two significant programs
that are new to APG in fiscal 2009.
Foreign exchange negatively impacted ASG revenues by an estimated $0.6
million compared to the second quarter of fiscal 2008, primarily reflecting a
stronger Canadian dollar relative to the US dollar, which more than offset a
stronger Euro relative to the Canadian dollar.
Year to date
ASG revenue for the six months ended September 30, 2008 increased 34%
over the same period of fiscal 2008. This increase primarily reflects higher
Order Backlog entering fiscal 2009 compared to fiscal 2008 and higher Order
Bookings through the first quarter of fiscal 2009 compared to fiscal 2008. By
industrial market, year-to-date revenues from healthcare, computer-
electronics, energy and "Other" markets have increased 23%, 26%, 147% and 22%
respectively compared to the same period a year ago. These increases were
partially offset by automotive revenue, which decreased by 13% compared to the
same period a year ago.
Foreign exchange negatively impacted ASG revenues by an estimated $8.1
million compared to the first and second quarter of fiscal 2008, primarily
reflecting a stronger Canadian dollar relative to the US dollar.
ASG Operating Results (in millions of dollars)
Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
Sept 30, Sept 30, Sept 30, Sept 30,
2008 2007 2008 2007
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Earnings from operations $ 13.9 $ 2.4 $ 24.2 $ 3.0
Depreciation and amortization 2.1 2.0 4.1 4.1
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EBITDA $ 16.0 $ 4.4 $ 28.3 $ 7.1
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Second Quarter
Fiscal 2009 second quarter earnings from operations were $13.9 million
(operating margin of 9%) compared to earnings from operations of $2.4 million
(operating margin of 2%) in the second quarter of fiscal 2008. Earnings from
operations improved in Canada, Europe and Asia, and were partially offset by
lower earnings from operations in the US. Improved operating earnings
primarily reflected the 35% year-over-year increase in revenue, cost
reductions implemented during the fourth quarter of fiscal 2008 and improved
program management.
Foreign exchange negatively impacted ASG second quarter earnings from
operations by an estimated $1.9 million compared to the second quarter of
fiscal 2008, primarily reflecting a stronger Canadian dollar relative to the
US dollar.
Year to date
For the six months ended September 30, 2008, earnings from operations
were $24.2 million (operating margin of 8%) compared to earnings from
operations of $3.0 million (operating margin of 1%) in the same period a year
ago. The improvement in operating earnings primarily reflected the 34% year-
over-year growth in revenue, cost reductions implemented during the fourth
quarter of fiscal 2008, and improved program management.
Foreign exchange negatively impacted ASG year to date earnings from
operations by an estimated $4.5 million compared to the same period in fiscal
2008, primarily reflecting a stronger Canadian dollar relative to the US
dollar.
ASG Order Bookings
Second quarter ASG Order Bookings were $133 million, on par with the
second quarter of fiscal 2008, and included Order Bookings of $25 million and
$13 million with repeat customers in the solar and healthcare industries
respectively. Order Bookings in the first six weeks of the third quarter of
fiscal 2009 were $35 million.
ASG Order Backlog Continuity (in millions of dollars)
Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
Sept 30, Sept 30, Sept 30, Sept 30,
2008 2007 2008 2007
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Opening Order Backlog $ 258 $ 217 $ 232 $ 185
Revenue (147) (109) (290) (217)
Order Bookings 133 133 302 279
Order Backlog adjustments(1) 3 (21) 3 (27)
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Total $ 247 $ 220 $ 247 $ 220
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(1) Order Backlog adjustments include foreign exchange and cancellations.
Order Backlog by Industry (in millions of dollars)
Sept 30, Sept 30,
2008 2007
-------------------------------------------------------------------------
Healthcare $ 57 $ 77
Computer-electronics 29 48
Energy 92 24
Automotive 49 47
Other 20 24
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Total $ 247 $ 220
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At September 30, 2008, ASG Order Backlog was $247 million, 12% higher
than at September 30, 2007. Year over year, Order Backlog increased 283% in
energy, primarily reflecting high Order Bookings from the solar industry
during fiscal 2009 and the fourth quarter of fiscal 2008. This growth was
partially offset by decreases of 26% in healthcare, 40% in computer-
electronics and 17% in "Other" markets. The decline in healthcare Order
Backlog reflects lower Order Bookings in North America during the first and
second quarters compared to the prior year. Decreases in Order Backlog from
computer-electronics and "Other" markets reflect lower Order Bookings in North
America and Asia during the first and second quarters compared to the prior
year. Automotive Order Backlog increased 4% compared to the prior year as
increased Order Bookings in Europe and Asia offset declines in North America.
Automation Systems Group Outlook
Continued strong Order Bookings during the first quarter, particularly in
the energy sector, have led to historically high levels of Order Backlog.
Initiatives taken during the fourth quarter to improve program management and
reduce costs have started to positively impact operating performance; however,
other initiatives to improve core operations and change the ASG approach to
market are not anticipated to significantly further improve operating
performance until the second half of fiscal 2009 and into fiscal 2010.
During the second quarter management completed the previously announced
strategic review of ASG divisions. As a result of this review, management
initiated the consolidation and restructuring of a number of smaller,
underperforming manufacturing operations in the United States, Europe and
Asia. The Company plans to maintain a sales, service and support presence in
these geographic regions. The consolidation and restructuring of these
smaller, underperforming manufacturing operations is expected to result in an
approximately 5% reduction in ASG workforce globally and to cost between $4
and $6 million during the third and fourth quarters of fiscal 2009. Management
expects the restructuring to be complete by March 31, 2009, and to reduce ASG
costs in fiscal 2010. As these improvements in ASG divisions are completed,
operational focus will increasingly shift towards improving supply chain
management and leveraging our global footprint and capabilities.
Management continues to believe that the long-term fundamental market
demand for automation remains strong. However, volatility in the relative
value of the Canadian dollar, ongoing restructuring within the North American
manufacturing sector, recent tightening of liquidity in the credit markets and
the broader deterioration in the global economy is expected to present the
Company's operations with challenges during fiscal 2009. Management believes
that in the short term some ASG customers may reduce their capital spending or
delay certain programs to varying degrees depending on the market segment.
Because of recent developments in the credit markets and the broader
deterioration of the global economy, management is reviewing, and where
appropriate, adjusting ASG strategies. ASG is accelerating the consolidation
of non-strategic manufacturing operations, has a strong balance sheet and has
a well diversified customer-base and operational footprint. In addition, ASG
now has a revised offering and approach to market and is in a position to
consider strategic or opportunistic acquisitions.
PHOTOWATT TECHNOLOGIES SEGMENT
Photowatt Technologies Revenue (in millions of dollars)
Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
Sept 30, Sept 30, Sept 30, Sept 30,
2008 2007 2008 2007
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Revenue by operating facility
Photowatt France $ 72.5 $ 37.5 $ 141.9 $ 83.7
Other Solar - 0.4 - 1.9
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Total revenue $ 72.5 $ 37.9 $ 141.9 $ 85.6
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Revenue by product
Polysilicon products $ 21.0 $ 23.7 $ 52.7 $ 54.2
UMG-Si products 51.5 14.2 89.2 31.4
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Total Revenue $ 72.5 $ 37.9 $ 141.9 $ 85.6
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Second Quarter
Photowatt Technologies fiscal 2009 second quarter revenue was $72.5
million, 91% higher than in the second quarter of fiscal 2008. Higher revenue
reflected an increase in total megawatts ("MWs") sold at Photowatt France to
14.9 MWs from 8.2 MWs in the same period a year ago. During the quarter,
Photowatt France outsourced 1.0 MW of polysilicon wafer, cell and module
production to partially offset the negative impact of the annual three-week
summer shutdown at Photowatt France's production facility. Additional growth
in MWs sold resulted from increased cell efficiency and increased ingot, wafer
and cell production compared to the same period a year ago, particularly with
UMG-Si products. Revenue from the sale of module systems ("Systems") increased
to $21.6 million from $5.5 million in the second quarter of fiscal 2008.
Systems include modules, combined with installation kits, solar power system
design and/or other value added services. Average selling prices per watt in
the second quarter of fiscal 2009 were relatively consistent with the prior
year.
Foreign exchange positively impacted Photowatt France second quarter
revenues by an estimated $5.9 million on the translation of Photowatt France
revenues from Euros to Canadian dollars, reflecting the strengthening of the
Euro against the Canadian dollar on higher Euro revenues.
Year to date
Photowatt Technologies revenue for the first six months of fiscal 2009
increased 66% compared to the same period a year ago. The increase in revenue
reflects an increase in MWs sold at Photowatt France from 18.9 MWs to 28.7
MWs. Revenues from System sales increased to $34.9 million from $9.4 million
in the same period a year ago. Average selling prices per watt remained stable
year over year.
Foreign exchange positively impacted Photowatt France year to date
revenues by an estimated $10.1 million on the translation of Photowatt France
revenues from Euros to Canadian dollars, reflecting the strengthening of the
Euro against the Canadian dollar on higher Euro revenues.
Photowatt Technologies Operating Results (in millions of dollars)
Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
Sept 30, Sept 30, Sept 30, Sept 30,
2008 2007 2008 2007
-------------------------------------------------------------------------
Earnings (loss) from
operations:
Photowatt France $ 6.0 $ (6.1) $ 11.6 $ (6.5)
Other Solar (0.4) (2.8) 4.5 (4.8)
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Photowatt Technologies
earnings (loss) from
operations $ 5.6 $ (8.9) $ 16.1 $ (11.3)
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Photowatt France EBITDA
Photowatt France earnings
(loss) from operations $ 6.0 $ (6.1) $ 11.6 $ (6.5)
Depreciation and amortization 3.8 3.2 7.5 6.3
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Photowatt France EBITDA $ 9.8 $ (2.9) $ 19.1 $ (0.2)
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Second Quarter
Photowatt Technologies fiscal 2009 second quarter earnings from
operations were $5.6 million compared to a loss from operations of $8.9
million a year ago.
Fiscal 2009 second quarter earnings from operations for Photowatt France
were $6.0 million (operating margin of 8%), compared to a loss from operations
of $6.1 million (negative operating margin of 16%) in the second quarter of
fiscal 2008. Photowatt France's second quarter results are typically lower
than other quarters due to the traditional summer shutdown of Photowatt
France's production facility. The year-over-year improvement in operating
results reflected higher MWs sold and the recovery of a $1.4 million
receivable that had been previously written off. The second quarter of fiscal
2008 operating results were negatively impacted by a $1.4 million write off of
a deposit paid to a UMG-Si supplier in China of UMG-Si and by costs associated
with the transition to UMG-Si products.
Average cell efficiency for UMG-Si products increased to 13.9% compared
to 12.7% in the second quarter of fiscal 2008. Average cell efficiency for
polysilicon products improved to 15.4% compared to 15.2% in the second quarter
of fiscal 2008. Photowatt France supplemented its internal ingot and wafer
production with increased externally purchased wafers to balance production,
and outsourced some cell and module production to partially offset the
negative impact of the summer shutdown and utilize additional wafer supply.
This added incremental earnings to operations, but at lower operating margins
than for products manufactured using internally produced wafers and cells.
Photowatt France's earnings from operations included approximately $0.2
million of costs related to the investment in the PV Alliance ("PVA"), a joint
venture involving Photowatt France, EDF ENR Reparties ("EDF"), a partially
owned subsidiary of Electricite de France, and CEA Valorisation ("CEA"). PVA
includes Lab-Fab, a research initiative to improve cell efficiencies, and may
eventually include manufacturing operations in France - see "Photowatt France
Outlook".
Photowatt France's amortization expense was $3.8 million compared to $3.2
million in the second quarter of fiscal 2008 reflecting additional
depreciation and amortization from expansion and improvement initiatives.
Foreign exchange positively impacted Photowatt France's second quarter
earnings from operations by an estimated $0.6 million compared to the second
quarter of fiscal 2008, primarily reflecting a stronger Euro relative to the
Canadian dollar.
"Other solar" includes Spheral Solar, Photowatt USA and inter-solar
eliminations. During the second quarter of fiscal 2009, costs were incurred
related to equipment decommissioning. A year ago, loss from operations
included the loss from operations on the now closed Photowatt USA division,
the now halted Spheral Solar research initiative and solar corporate costs and
inter-solar eliminations.
Year to Date
Photowatt Technologies earnings from operations for the six months ended
September 30, 2008 were $16.1 million compared to a loss from operations of
$11.3 million a year ago.
Photowatt France earnings from operations for the six months ended
September 30, 2008 were $11.6 million compared to a loss from operations of
$6.5 million a year ago. Operating profitability has increased during fiscal
2009 compared to a year ago on revenue growth and operational improvements to
increase cell efficiency and manufacturing yields.
Foreign exchange positively impacted Photowatt France year-to-date
earnings from operations by an estimated $0.7 million compared to the same
period a year ago, primarily reflecting a stronger Euro relative to the
Canadian dollar.
Fiscal 2009 "Other solar" earnings from operations included a gain of
$2.0 million on the sale of silicon (not usable by Photowatt France or Spheral
Solar) that had a nominal carrying value. This completed the sales transaction
initiated in the fourth quarter of fiscal 2008. Also included in year to date
fiscal 2009 earnings from operations was a gain of $3.2 million on the sale of
the redundant Spheral Solar building in Cambridge, Ontario. The remaining
expenses primarily related to the wind-down and closure of the Spheral Solar
facility and other clean-up and equipment decommissioning costs. Included in
fiscal 2008 loss from operations was the loss from operations from the now
closed Photowatt USA division, the loss from operations from the now halted
Spheral Solar research initiative and solar corporate costs and inter-solar
eliminations.
Photowatt France Outlook
With respect to fundamental demand, global electricity usage is expected
to increase, which management believes provides a positive long-term outlook
for solar energy businesses. Countries in which Photowatt France sells
products such as Germany, Spain, France and Portugal have significant
government subsidy programs for solar power. Certain jurisdictions, such as
Spain and Germany, have subsidy programs that are designed to decline over
time. Management believes Photowatt France will be impacted by these trends.
In the short term, Photowatt France is expected to continue to face the
industry-wide issues associated with supply of polysilicon and lower average
selling prices per watt than in fiscal 2008, particularly in the latter half
of this fiscal year and into fiscal 2010. UMG-Si products were developed by
Photowatt France as an alternative to polysilicon with the objective of
creating a competitive advantage, and now account for the majority of products
being manufactured by Photowatt France. The operational focus is to increase
the cell efficiency and reduce the cost per watt of manufacturing UMG-Si
modules.
In the second quarter of fiscal 2009, management initiated equipment
installation for the previously announced (euro)20 million investment to
expand capacity in the existing facility and reduce manufacturing costs.
Installation of cell manufacturing equipment was completed subsequent to
quarter end. The remaining equipment, which will balance production and
increase capacity in ingot and wafer stages of production, is expected to be
installed and operational by the end of the third quarter of fiscal 2009. In
addition, Photowatt France intends to invest a further (euro)4 million in
automation systems, which are being designed and built by the Company's ASG
segment, to improve production processes and increase manufacturing yields.
The benefits of these investments are expected to begin positively impacting
operating performance during the fourth quarter of fiscal 2009.
Photowatt France continues to advance the PVA with its partners.
Facilities are now ready for equipment installation for a 25 MW cell line to
research cell efficiency improvements. The cell line is expected to be
completed during the second half of fiscal 2010.
