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Singulus Reports Q3 2014 Results, Blu-ray Falters

Singulus Technologies announced financial results for the third quarter of 2014.

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Unedited press release follows:

SINGULUS TECHNOLOGIES Reports Preliminary Financial Key Figures for the First Nine Months

• Key figures below prior-year levels

• One-off measures weigh on financial results

• Sustained difficult business situation, course of business in 2015 dependent on success with Solar and Blu-ray

• Success in wet-chemical area encouraging

• Sufficient liquidity for ongoing business operations

Kahl am Main, November 05, 2014 – In an ad-hoc release pursuant to § 15 WpHG on September 18, 2014 SINGULUS TECHNOLOGIES AG (SINGULUS TECHNOLOGIES) already adjusted the annual forecast for the full-year 2014 due to the subdued order environment for Blu-ray Disc production machines and announced that the company’s Executive Board expects the losses of the 1st half-year 2014 to still expand and therefore result in a significantly negative results for the full-year 2014. The financial key figures of the first nine months of 2014 of SINGULUS TECHNOLOGIES as well as the projections for the full-year are negatively impacted by the weak course of business in the Optical Disc segment as well as further delays in agreement conclusions in the Solar division.

For the Optical Disc division, in the course of the annual budgeting for 2014, the Executive Board had already projected lower sales and earnings contributions than in the business year 2013. Following talks with major Optical Disc customers in the third quarter SINGULUS TECHNOLOGIES had to realize that the current year will fall short of expectations since no major investments for Blu-ray Disc production equipment will materialize. This decline in volume sales of Blu-ray Disc production machines was not foreseeable in the planning stage and strongly weighs on the company in the second half of 2014.

In the solar segment some positive developments were already noticeable. Dr.-Ing. Stefan Rinck, Chief Executive Officer of the SINGULUS TECHNOLOGIES AG, comments: “Several orders for the wet-chemical division were successfully concluded in the current year. However, we had to concede that several projects in the Solar segment could not be realized in 2014 as planned.” Dr. Rinck adds: “The project and realization stages of major investment plans in the Solar division take considerably more time than we had originally anticipated in this year’s budgets”.

During the first nine months of the current business year SINGULUS TECHNOLOGIES recorded sales of € 52.8 million only and is thus significantly below the level of the prior-year period in the amount of € 93.1 million. Sales in the 3rd quarter amounted to € 22.7 million (previous year: € 43.9 million). During the first nine months of the business year 2014 the order intake of € 48.4 million (previous year: € 82.6 million) was substantially below the comparable figures one year ago. In the quarter under review the order intake came to € 23.2 million (previous year: € 33.8 million). The order backlog as per September 30, 2014 amounted to € 15.9 million and was thus below the comparable level as of September 30, 2013 (€ 29.6 million).

Due to the changes in the Optical Disc segment and the still challenging situation in all of the other segments, SINGULUS TECHNOLOGIES had to implement a series of measures, which will have an additional adverse impact on the financial key figures. SINGULUS TECHNOLOGIES will continue to adjust to the changed business and market conditions. The Executive Board has resolved comprehensive measures owing to the business situation. In the context, the review of all balance sheet items in terms of impairments resulted in write-offs on the goodwill in the Solar division by € 15.0 million. For the Optical Disc segment the customer base resulting from the acquisition of the Blu-ray activities of the Oerlikon Balzers AG in the business year 2008 was reevaluated and completely written off by € 4.9 million. These balance sheet adjustments do not affect the liquidity of the company and do not result in cash outflows, either.

The sustained difficult business situation leads to the resolution of extensive restructuring programs for the company. Cost savings for cost of materials and personnel expenditures are planned. The one-off restructuring charges are in a range of € 3.5 million and will be incurred in the quarter under review as well as mainly in the fourth quarter.

Due to the considerable decline in business volume in the Optical Disc segment, the loss on an operating level (EBIT) before extraordinary charges increased materially and amounted to € -18.3 million in the first nine months of the current business year compared with € 1.4 million incurred in the first nine months of 2013. In addition, extraordinary charges amounting to € 20.4 million were incurred. In the period under review the EBITDA totaled € -14.8 million (previous year: € 5.8 million).

SINGULUS TECHNOLOGIES does not have liabilities owed to banks and already completely repaid all of these bankliabilities in 2011. In 2012, SINGULUS TECHNOLOGIES put the company’s financing on a long-term foundation with the issuance of a corporate bond in the amount of € 60 million. The corporate bond is due in March 2017.

Dr. Rinck remarks: “SINGULUS TECHNOLOGIES has sufficient liquidity to finance the current business operations at the moment as well as potential new orders. We might only require additional financial commitments in case of large orders in the Solar division”.

As of the reporting date the liquid funds amounted to € 22.9 million. Accordingly, the net debt came to € 35.8 million as of September 30, 2014. The company is working on forfaiting accounts receivable in the Optical Disc segments up to € 20.0 million from prior years in order to significantly increase the liquid funds in the next months.

Outlook, risks and opportunities of SINGULUS TECHNOLOGIES
The lack of orders for Blu-ray Disc production machines and the delays in the Solar division result in a shortfall of the forecast for 2014. With an expected weak 4th quarter the one-off restructuring charges in the amount of € 3.0 million will additionally weigh on the results. For the full business year the company thus projects on operating loss (EBIT) before extraordinary charges in a range of € -26.0 to -29.0 million. Including extraordinary charges the operating result (EBIT) for the full-year is expected to be in a range of € -49.0 to -52.0 million. The net results for the full-year including taxes and the financial result will be in a range of € -53.0 to -56.0 million.

The challenge for SINGULUS TECHNOLOGIES will now be to achieve stable order intakes and sales in core segments. At the same time new work areas should be built up and successfully implemented. In the upcoming year, the favorable conclusion of Solar projects as well as stable business in the Optical Disc division will be of particular importance for the company.

In the past couple of years, SINGULUS TECHNOLOGIES has continuously expanded the technologic know-how on the basis of the core competencies nano- and vacuum-coating as well as thermal and wet-chemical process technology. Dr. Rinck comments: “In the future we intend to open new markets with new, innovative products. Several required new products for this evolution are being developed or already in a test stage. We are gradually starting their market launches”.