Q2 2013 Earnings Call Transcript

Transcript Call Date 07/18/2013

For REC Solar there is a strong improvement in EBITDA, again, driven by increasing revenues from increased shipments and increased prices. Costs also came down as Mr. Enger was saying earlier.

Solar panel inventories are now at the lowest level we have had in a very long time. As we have commented on earlier further development in the panel inventory levels from this level where we are at now, will depend on which markets and customers we serve. Shipment times from Singapore to the different markets differ and also payment terms differs broadly from Northern Europe, Southern Europe, Asia et cetera. So there will be some fluctuations in working capital going forward depending on markets served rather than on continued operational improvements. We do not believe that there is room to take significant new steps and bringing panel inventories down from the operational side.

The capital structure shown here is the capital structure at the end of the quarter, which has then been split up in the slide shown earlier. The equity ratio remains strong at 53% and we have earlier commented on how the proposed transaction will influence this. There are now special items on this area other than the partial refinancing of the convertible bond done during the quarter.

The nominal net debt was reduced by NOK0.3 billion in the quarter, combination of the equity brought in in connection with the partial refinancing and cash flow from operations. The cash to deposit line here is a deposit which is backing the back facilities we have put in place. We therefore cannot count it as part of our cash and therefore it doesn't reduce the net debt factor. So, it leads to an increase in net debt, but that is held as a security or as a restricted cash.

We will then sum up on guidance and in line of the proposed transaction we have separated the guidance into more specific guidance on the two divisions seen separately. For REC's silicon – the production is expected in terms of volumes to remain on the same level again in the third quarter at about 4,900 tons. Costs will be negatively influenced by this planned maintenance shutdown. And again, we see the quarter four cost target which we uphold as ambitious with execution risk.

We believe in terms of our earlier guidance that way where we've guided that CapEx for the whole Group would be below NOK300 million for the year. We believe that we can now guide you that we can split this maximum 50-50 between the two divisions. So, CapEx will be below $150 million for Silicon and below $150 million for Solar.

In terms of the outlook on the market, there is remaining uncertainty concerning the trade dispute which may influence us positively or negatively depending on how that comes out. We do expect a further price increase on solar grade polysilicon over time but it is yet unclear how fast that will materialize and the market where float zone and the electronic grade polysilicon remains weak. And as we point to in the report, we do have some contracts expiring at the end of this year, which increases the risk in terms of the future revenues and results from that part of our product portfolio.

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