2 nd Quarter Consolidated Interim Report SolarWorld AG. Strength

Transcription

1 2 nd Quarter 2007 Consolidated Interim Report SolarWorld AG Strength

2 raw material wafer cell module trade Selected corporate indicators Income statement figures (in te) 2 nd Quarter nd Quarter 2006 Variation in % Sales 180, , EBITDA 59,002 43, EBIT 49,698 37, Consolidated net profit 26,844 23, Income statement figures (in te) 1 st half of st half of 2006 Variation in % Sales 313, , EBITDA 103,926 76, EBIT 84,829 64, Consolidated net profit 48,243 40, Balance sheet figures (in te) as per as per Variation in % Total assets 1,533, , Non-current assets 405, , Current assets 1,127, , Shareholder s equity 633, , Liabilities 900, , Selected indicators as per as per Variation Equity ratio 41.3% 64.0% -22.7%-Points Return on equity 7.6% 7.9% -0.3%-Points ROCE Return on capital employed* 6.1% 9.6% -3.5%-Points Return on sales 15.4% 21.7% -6.3%-Points Cash ratio** Employee data as per as per Variation in % Number of employees 1, Sales per capita (in te) EBIT per capita (in te) Personnel cost ratio 12,7% 12.0% 0.7%-Points * EBIT/ total capital current liabilities ** liquid funds + other financial assets/current liabilities

3 INTEGRATED PRODUCTION Raw material Wafer Cell Industrial scale silicon production from monosilane started on schedule. New plant for the production of fine grain raw materials from recycled wafers and cells has been commissioned. Investment project for wafer expansion in Freiberg from so far 500 MW to now 1,000 MW. Increase of our nominal capacity at the highly advanced DS 1000 wafer manufacturing facility in Freiberg to 270 MW. Group-wide production capacity for solar cells increased. Planning and order placement for the technical equipment to build up our cell manufacturing plant in Hillsboro, USA. Conclusion of additional raw material contracts as back-up procurement position. Planning and order placement for the technical equipment to build up our wafer production plant in Hillsboro, USA. SolarWorld Stock indicators SolarWorld stock compared with TecDAX ISIN (International Securities Identification Number) DE // WKN (Wertpapier-Kenn-Nummer) Cutoff date Cutoff date Prime Standard/TecDAX Number of shares million million Market capitalization 3.8 be 2.7 be Trade volume (12 months) 9.5 be 8.7 be Position in TecDAX based on trade volume (free float, 12 months) 1 1 Position in TecDAX based on free float market capitalization 2 1 Earnings per share in 1 st half of the year 0.43 e 0.37 e Opening price at beginning of year e e* Closing price at cutoff date e e* Development in per cent +42 % +75% SolarWorld AG +1,714% TecDax +66% Aug 04 Source: Deutsche Börse AG Jul 07 * adjusted to the issue of bonus shares in 2007 (1:1)

4 Module Trade Group-wide module manufacturing capacities increased step by step. Sales in core markets Germany and Spain significantly increased. Successful entry into new European target markets. Largest off-grid project in corporate history for the electrification of rural regions in China successfully completed. Sales by regions as of cutoff date in million e SolarWorld Group s indicators Germany Rest of Europe Asia USA ROW Quarterly comparison of the Consolidated Income Statements Figures in te Variations 3 nd Quarter 4 nd Quarter 1 st Quarter 2 nd Quarter 2 nd Quarter in % Sales revenues 141, , , , , Changes in inventories of finished products 32,332-4,026 22,131-37,492-5, Own work capitalized Other operating income 68,596 20,580 11,660 12,173 4, Cost of materials -101, ,102-86,297-59,915-34, Staff costs -19,054-16,093-18,280-19,556-11, Depreciation and amortization -21,027-10,057-9,793-9,304-5, Other operating expenditure -23,440-17,104-17,632-16,965-11, Operating result 77,409 38,483 35,131 49,698 37, Net financial income , , Earnings before taxes on income 76,695 39,601 35,075 43,640 38, Taxes on income -13,379-12,437-13,676-16,796-14, Consolidated profit/loss 63,316 27,164 21,399 26,844 23,

5 Profil What distinguishes us is of lasting value! Profile 2nd Quarter Group-wide we were able to continue to grow profitably compared to the previous year. We increased our 2nd quarter sales by around 78 per cent and our EBIT by some 32 per cent. For the 1st half of the year we could boost our sales revenues by about 70 per cent. This reflects our capacities and sales volumes expansion, our answer to the increased and rising international demand. By way of our back-up activities in the raw materials sector we are strengthening our procurement position step by step. The international business is increasingly becoming more important and our international strategy is paying off. Thus, our group-wide share of international business amounted to 53 (previous year: 39) per cent. We again succeeded in entering new markets. Major milestones on the way to our further expansion have been set since the beginning of the year: the acquisition of a new wafer production plant in Hillsboro, USA, the expansion of the highly advanced wafer production in Freiberg, the step by step expansion of all stages of the value chain. For the full year we strive to exceed our growth forecast of 20 per cent INDICATORS PROFILE FOREWORD BY THE BOARD OF MANAGEMENT I.-VIII. CONSOLIDATED INTERIM REPORT 1 ST HALF OF 2007 I. THE SOLARWORLD STOCK II. III. IV. MARKET AND BACKGROUND CONDITIONS BUSINESS DEVELOPMENT 2 ND QUARTER 2007 EARNINGS, FINANCIAL AND NET WORTH POSITION V. SUBSTANTIAL BUSINESS WITH COMPANIES AND PERSONS CLOSE TO THE COMPANY VI. VII. VIII. SUPPLEMENTARY REPORT RISKS/OPPORTUNITIES FORECAST REPORT And we manage all that on the basis of our sustainable and climate-friendly business model. 22 IX. CONSOLIDATED INTERIM FINANCIAL STATEMENTS 32 X. ASSURANCE OF LEGAL REPRESENTATIVES

6 INDICATORS PROFILE LETTER BY THE CHAIRMAN I. THE SOLARWORLD STOCK II. MARKET AND BACKGROUND CONDITIONS III. BUSINESS DEVELOPMENT 2 ND QUARTER 2007 IV. EARNINGS, FINANCIAL AND NET WORTH POSITION LETTER BY THE CHAIRMAN By the middle of the year we can clearly allow ourselves to be measured against our forecast for the year 2007: That we have been able to increase sales and earnings simultaneously is a sign of our growth, our progressing productivity and the sound substance of our business. We have further expanded all the stages of the value chain from raw materials to module production. We have succeeded in entering new international markets. Since the beginning of the year our shareholders have been able to enjoy a value increase of their SolarWorld stockholding of 65 per cent until today in early August and a dividend increase of 44 per cent. Our technical progress in solar power technology is a crucial factor in reaching Grid Parity in the medium term. This means: In the years to come we will manage to push prices for solar power sustainably below the level of conventional household electricity. Economically this is a successs; ecologically it is the step into a new energy age to combat climate change. Yet, my personal demand on a sustainable business model goes even further than that: SolarWorld is to be the synonym for an ecologically clean, economically profitable and socially compatible company. To this end I created the Ethics Council in the 2nd quarter of 2007 as a complement number to the Strategic Council. The objective is for our company value to be measured not only in economic terms but also in ethical and moral terms. As the Chief Executive Officer of a worldwide company I would like us to face the responsibility for a sustainable and fair development also in the poorer regions of the world. Electrification plays a crucial role in this context: It is a fundamental prerequisite for people to attain a higher standard of living in developing countries and can therefore make a contribution to a more equitable distribution of goods. This is why we are getting involved in projects of rural electrification by way of off-grid solar systems. Above and beyond this it is my declared objective that the concept of sustainability be penetrated all the way to the operational level of the company and that our employees completely identify with the strategy and the objectives derived from it in their day-to-day work. We will consistently pursue this approach especially also with a view to the future in the spirit of integrated sustainability management. 2

7 V. BUSINESS WITH PERSONS CLOSE TO THE COMPANY VI. SUPPLEMENTARY REPORT VII. RISKS/OPPORTUNITIES VIII. FORECAST REPORT IX. CONSOLIDATED INTERIM FINANCIAL STATEMENTS X. ASSURANCE OF LEGAL REPRESENTATIVES Frank H. Asbeck Dipl.-Ing. Chief Executive Officer/ CEO At SolarWorld socially compatible also means that we take it for granted that our employees, the performers in the company, share in our economic success. At all our locations the SolarWorld employees directly participate in our corporate results. At the location in Germany we are even among the pioneers in this field with our employee profit sharing scheme GOMAB which has for many years been securing an income above the level in West Germany for our Freiberg employees in Saxony. We have to mend our ways to preserve creation. An important key to this is the expansion and further development of solar energy. And what does a glance into the future promise us? Well, it will remain exciting. That is what I am looking forward to, together with you. With sunny greeting, Dipl.-Ing. Frank H. Asbeck Chairman and CEO of SolarWorld AG 3

8 Consolidated Interim Report 1 st half of 2007

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10 INDICATORS PROFILE LETTER BY THE CHAIRMAN I. THE SOLARWORLD STOCK II. MARKET AND BACKGROUND CONDITIONS III. BUSINESS DEVELOPMENT 2 ND QUARTER 2007 IV. EARNINGS, FINANCIAL AND NET WORTH POSITION I. THE SOLARWORLD STOCK Stock markets at record high. In the 2nd quarter of 2007 the international stock markets made further gains in dynamism. Against the background of a robust economy, stable forecasts for companies and the world economy as well as high liquidity in the financial markets the Dow Jones Industrial reached a new historic high. In spite of high interest rates the US lead index gained more than 8 per cent in the spring quarter closing at 13,400 points on 30 June The German stocks benefited from the very good economic data, most of them showing a disproportionately positive development. The DAX as the index for the 30 largest German standard securities headed for the historic high of more than 8,100 points from the year 2000 in June finally closing at more than 8,000 points, an increase of 21 per cent since the beginning of the year. There was a particularly vigorous demand for technology stocks. In the 1st half of the year the German technology index TecDAX recorded an increase of 24 per cent and in the 2nd quarter of 10 per cent to just over 930 points. The biggest contribution was made by the stocks of the renewable energy industry that continued to gain in value against the background of the increasing public awareness of the need for climate protection. The international NAI (Nature Stock Index) that reflects the industry of renewable energies gained 8.7 per cent in the quarter closing at 5,630 points. As an answer to the increasing demands placed by investors on companies with regard to transparency and responsibility for energy efficiency, greenhouse gas emissions and environmental protection the Frankfurt Stock Exchange launched the EcoDAX as a new sustainability index in June. It represents the ten largest German stocks by market capitalization in the field of renewable energies one of which is the SolarWorld AG stock. All the securities in the index are equally weighted and the composition of the index is reviewed on a quarterly basis. 6

11 V. BUSINESS WITH PERSONS CLOSE TO THE COMPANY VI. SUPPLEMENTARY REPORT VII. RISKS/OPPORTUNITIES VIII. FORECAST REPORT IX. CONSOLIDATED INTERIM FINANCIAL STATEMENTS X. ASSURANCE OF LEGAL REPRESENTATIVES The SolarWorld stock compared with key stock indices 12 months TecDAX % DAX % SolarWorld % NAI % EuroSTOXX % DJ STOXX % DJ Industrial Index % Jul Aug Sep Oct Nov Dec Jan Feb Mar Source: Deutsche Börse AG Apr May Jun Jul SolarWorld stock with pronounced upward movement. The stock gained 17 per cent from April through June and closed after the issue of bonus shares at a ratio of 1:1 the imputed halving of the stock price with double the number of shares at e. Since the beginning of the year the SolarWorld shares have experienced an appreciation of 42 per cent. In addition to the generally positive industry climate the good business figures, the new sales successes as well as the consistent expansion policy are reasons for this growth. In the TecDAX the SolarWorld AG stock occupied the two top positions as per 30 June 2007 in terms of trading volume in the last twelve months and in terms of free float market capitalization. Increased dividend and bonus shares approved. The Annual General Meeting of SolarWorld AG which took place in the Plenary Hall of the former German parliament building (Bundestag) in Bonn on 24 May 2007 with around 1,000 shareholders in attendance approved the distribution of a dividend for fiscal year 2006 in the seventh year in succession. In comparison with the previous year the dividend increased to 0.20 (0.13) e per share thus going up in the third year in succession. Also for the future the Board of Management held out the prospect of continuity in its dividend policy. Furthermore, the AGM approved the issue of bonus shares in a ratio of 1:1 that were allocated to shareholders on the basis of this resolution on 29 June As a result, the capital stock of SolarWorld AG has doubled to million e within the framework of the capital increase from company funds by way of the conversion of part of the revenue reserves million new shares with an imputed share of 1.0 e in the capital stock were issued. 7 Shareholder structure as per 30 June 2007 UBS AG 4.35 % Increased dividend and bonus shares approved DWS Investment GmbH 5.08 % Frank H. Asbeck % Fidelity Investments % Free Float % BlackRock Inc./ BlackRock Holdco 1, LLC 4.98 % The annual shareholders meeting approved all items of the agenda with almost 100 per cent. Shareholder structure and capital stock. After the issue of the bonus shares the capital stock of SolarWorld AG amounts to million e divided into million no-par-value bearer shares with an imputed nominal value of 1 e. 7

12 INDICATORS PROFILE LETTER BY THE CHAIRMAN I. THE SOLARWORLD STOCK II. MARKET AND BACKGROUND CONDITIONS III. BUSINESS DEVELOPMENT 2 ND QUARTER 2007 IV. EARNINGS, FINANCIAL AND NET WORTH POSITION II. MARKET AND BACKGROUND CONDITIONS Economy picking up. The world economy was on a course of expansion again in the 2nd quarter according to the data of the Institute for World Economy (IfW), Kiel. According to the Economic Report of June 2007 the economic development in the USA was able to take off again. Signs of weakness in individual industrialized countries were compensated for by positive effects in the threshold countries. In the 2nd quarter Germany again benefited from high exports and investments as well as increasing incomes. Economic experts are expecting growth to continue in the 2nd quarter of the year albeit at a slightly reduced level. After 0.5 per cent in the 1st quarter GDP can be expected to go up by 0.4 per cent in the 2nd quarter according to the economists at Commerzbank AG. Energy prices on the rise. After a relatively slow start into the year international oil prices have risen again substantially since March. According to the German Petroleum Industry Association (MWV), one barrel of North Sea Brent cost US-dollars in June 2007 which was more than 30 per cent higher than in January. In comparison with June 2006 crude oil prices were about 4 per cent higher. Because of refinery bottlenecks in the USA gasoline prices rose disproportionately so that in Germany the prices for premium grade fuel hit an all-time high of 1.39 e per liter as a monthly average in May. After the decline in the 1st quarter electricity prices at the Leipzig energy exchange EEX grew again in double digits in the further course of the year and were at 55 e per kilowatt hour for base load in 2008 which brought them back to the level of the previous year. In spite of the wholesale prices remaining unchanged over the year many utilities announced price increases, in some cases in double digits, for household customers effective July. Observers see the elimination of the electricity price approval by the government as the reason for the price increases. UN climate report recommends renewable energies. The Intergovernmental Panel on Climate Change (IPCC) created by the United Nations (UN) submitted its latest report on the condition of the world climate in the spring of The previous reported dated from the year The report is based on the comprehensive results of a large number of internationally renowned climate researchers and therefore constitutes the most comprehensive and up-to-date document on climate change of our time. The third part presented in May under the title Mitigation of climate change finds that greenhouse gas emissions increased by 70 per cent from 1970 to With a plus of 145 per cent the energy sector had a disproportionately high responsibility for the increase in emissions. In order to limit the negative consequences of climate change the UN climate report recommends the increased use of renewable energies in addition to practicing energy efficiency. USA is moving on climate protection. At the summit meeting of the heads of state and government of the G8 Group in Germany the US President George W. Bush indicated that he was willing to support a future climate agreement within the framework of the UN. For the first time Bush accepted the findings of the UN Climate Council that wants to limit global warming to a maximum of between 1.5 and 2 degrees Celsius in order to still be able to control the repercussions of climate change. According to the final communiqué the USA want to seriously consider to at least halve emissions by the year The ministers of the environment of the G8 states are to begin negotiations about the worldwide climate agreement on the occasion 8

13 V. BUSINESS WITH PERSONS CLOSE TO THE COMPANY VI. SUPPLEMENTARY REPORT VII. RISKS/OPPORTUNITIES VIII. FORECAST REPORT IX. CONSOLIDATED INTERIM FINANCIAL STATEMENTS X. ASSURANCE OF LEGAL REPRESENTATIVES of the UN environmental conference in Bali in December. These should be completed by 2009 if at all possible in order to replace the Kyoto Protocol of the UN that is going to run out in Developed countries, as main emitters of greenhouse gases, should already agree on a contribution to climate protection by the end of the year Investments in renewable energies going up. Climate change, the growing demand for energy sources and the questions of the safe supply of energy are driving the worldwide development of renewable energies. According to a study by the UN Environmental Program (UNEP) the worldwide investments in renewable energies exceeded the 100 billion US-dollar mark (about 75 billion e) for the first time in 2006 which is equivalent to a growth of 20 per cent over the previous year. The share of environmentally friendly energies in the worldwide investments in the energy sector amounted to some 18 per cent. More and more companies and countries came out in favor of promoting alternative energies. The sector is no longer dominated by the industrialized countries alone. Thus, China accounts for a share of 9 per cent in the worldwide investments in renewable energies. The investments of the threshold countries like China, India and Brazil taken together amount to 21 per cent of the total according to the report. Eco-power boosted by one third. The share of renewable energies in power consumption in Germany, according to the Association of the German Electricity Industry (VDEW) went up in the 1st half of 2007 by 34 per cent versus the previous year to 41.3 billion kwh. Thus, the share of renewable energies in total German power generation went up from 9.7 per cent in the year 2006 to 13.3 per cent. According to a new VDEW study this share will continue to grow. In the future it would be primarily wind power plants in the North Sea and the Baltic Sea as well as photovoltaic and biomass plants that would increasingly be generating power. German solar market rallying. After a low-key 1st quarter the German solar market has rallied noticeably. Especially at the Freiburg solar technology fair Intersolar in June 2007 a clear improvement of the climate was discernible in the industry. The largest European trade show for solar technology reports new records in exhibitor and visitor numbers. According to information provided by the organizers the show was attended by 32,000 (previous year: 23,000) guests from almost 100 countries. As the Federal Association of the Solar Industry (BSW) announced on the occasion of the exhibition some 220,000 new solar plants valued at 5 billion e were installed in Germany in the year 2006 (same period previous year: 3.8 billion e). Sales in international markets amounted to around 1 billion e (previous year: some 420 million e). Solar technology as the economic driving force of the German trades. The Central Association of German Electrical and Information Technology Trades has found that one in three of the 78,000 SME craft businesses in Germany are working in the field of solar technology. The solar technology share in total sales went up from 8 per cent in 2000 to 21 per cent in European solar markets growing vigorously. In the 2nd half of the year the photovoltaic market in Italy was in a phase of vigorous growth. The background to the high demand was provided by legal changes to the feed-in laws enacted in the 1st quarter. These provide for an increase of the expansion targets from 1,000 MW to 3,000 MW by the year Group Report 2006/ Legal and economic factors of influence, p. 17 Group Report 2006/ Development of our solar core markets, p. 31 In Spain the Council of Ministers approved the long-awaited amendment of the feed-in compensation for renewable energies at the end of May. The government has increased the feed-in compensation for all photovoltaic plants from 100 kw to 10 MW by 82 per cent to Cent 9

14 INDICATORS PROFILE LETTER BY THE CHAIRMAN I. THE SOLARWORLD STOCK II. MARKET AND BACKGROUND CONDITIONS III. BUSINESS DEVELOPMENT 2 ND QUARTER 2007 IV. EARNINGS, FINANCIAL AND NET WORTH POSITION per kwh. Up to 100 kw the solar power stations will receive 44.0 Cent per kwh fed into the grid. The important thing is that this ruling now eliminates the previous practice in the market of artificially dividing large solar projects into 100 kw units in order to obtain an attractive level of compensation. The new compensation framework of the Real Decreto 661/2007 will be valid from 2008 until at least After that the Council of Ministers wants to put the tariffs to the test again. Market observers say that the passing of this law has led to a further revival of the market. In France the market has continued to grow but is still in an early phase of development. Roof-integrated solutions are more in demand in France than in many other countries. The compensation for roof-integrated solar systems at 0.55 e per kwh are substantially higher than those for standard solar plants (0.30 e per kwh). Another developing market is the Greek solar market where since the middle of 2006 a new feed-in law to promote renewable energies has been creating attractive market and export conditions. USA passes new energy law. The US Senate has approved the Clean Energy Act of It is designed to reduce dependence on foreign oil through investments in renewable energies, new energy technologies and energy efficiency. At the same time the US Department of Energy wants to invest 60 million US-dollar in the expansion of solar energy. The sum is to be roughly divided 50:50 between university research and the promotion of joint photovoltaic research projects with industry. Solar market in South Korea with powerful growth. Against the background of positive legal framework conditions the demand in South Korea has grown substantially. Behind Japan South Korea is the largest Asian solar market. In China and many South East Asian states the demand for off-grid systems is growing continuously. Potential solar market in Morocco. In June 2007 Morocco passed a law to promote renewable energies along the lines of the German EEG law with the law coming into force on 01 July According to the law the share of renewable energies in total electricity generation is to be increased from 2 per cent to 20 per cent by the year 2012 in order to cut dependence on imports. In addition, the government expects the renewable energies to bring electricity to rural areas, to create jobs and to cut CO 2 emissions in the country. In the long term the enormous wind and solar power potentials in Morocco are to be used to export energy. Framework conditions positive for business development. The fact that large segments of the population have become sensitive to the need for a consistent climate protection has positively influenced the business development of our group. The need to expand renewable energies in general and solar energy in particular is beyond dispute and is documented by the creation of appropriate framework conditions in different international markets. Our group has positioned itself in the core markets accordingly. The stable increase in international demand will secure sales of our solar products. 10

15 V. BUSINESS WITH PERSONS CLOSE TO THE COMPANY VI. SUPPLEMENTARY REPORT VII. RISKS/OPPORTUNITIES VIII. FORECAST REPORT IX. CONSOLIDATED INTERIM FINANCIAL STATEMENTS X. ASSURANCE OF LEGAL REPRESENTATIVES III. BUSINESS DEVELOPMENT 2 nd QUARTER 2007 Strategic raw materials activities Raw materials activities expanded group-wide. In the framework of our Joint Venture with Degussa AG Joint Solar Silicon GmbH & Co. KG at the Rheinfelden site the expansion of our solar silicon plant is proceeding according to schedule. The technology employed here turns the monosilane intermediate product produced by Degussa AG in our compound plant into poly-crystalline solar silicon. We were able to start up the first reactor with monosilane at the end of the 2nd quarter as scheduled which currently allows us to produce a quantity of 10 tons of silicon per month. After the ramp-up phase of industrial scale production in the year 2008 we are planning an annual production capacity of 850 tons. This process is characterized by a clearly better energy balance than competing processes. It only needs 10 per cent of the energy input employed so far. The SolarMaterial division of our subsidiary Deutsche Solar AG was able to commission new plants for the production of fine-grain raw materials from recycled wafers and cells. The availability of suitable raw materials was thus increased. The capacity of the SolarMaterial division is thus increased step by step as scheduled from a nominal 800 tons p.a. in 2006 to 1,200 tons p.a. in Parts of the available capacities are also offered to external customers as a recycling service. By concluding new raw materials contracts in the course of the reporting period we have secured the necessary input products for the planned expansion of capacities to supplement our own silicon production which is just starting up. Integrated production Planned investment for wafer expansion to 1 Gigawatt in Freiberg. Against the background of the booming export trade in the high added value external wafer business we will double the planned wafer production of 500 MW at the Freiberg location to 1,000 MW (1 Gigawatt) in the medium term. For this further expansion of wafer production we have available to us a production area in Freiberg of about 20 hectares. Up to 1,000 new jobs could be created in the context of this expansion. 14 Order book development In parallel to this planned new investment the ongoing expansion of wafer production in Freiberg has been proceeding according to schedule. In the new wafer complex DS 1000 officially opened in April of 2007 we were able to commission additional production plants in the reporting period thus increasing capacity as planned to a nominal 270 MW by the end of the quarter. In DS 1000 the wafer capacities are to be successively lifted to 500 MW by the end of In this highly advanced manufacturing facility we are continuing the trend towards wafers using less raw material and producing higher efficiency. 17 Research and development activities 11

16 INDICATORS PROFILE LETTER BY THE CHAIRMAN I. THE SOLARWORLD STOCK II. MARKET AND BACKGROUND CONDITIONS III. BUSINESS DEVELOPMENT 2 ND QUARTER 2007 IV. EARNINGS, FINANCIAL AND NET WORTH POSITION In addition to the new wafer factory we have 160 MW worth of solar cell capacities available at the Freiberg production location as well as solar module capacities that will grow through additional investments from currently 90 MW to 120 MW by the end of the year In our GPV module production facility at Gällivare, Sweden, the production potential in the fully continuous operating mode could also be increased from 25 to 30 MW since the beginning of the year. For our new Hillsboro production site in Oregon, USA, we are currently in the planning and order placement stage for the technical equipment needed for the build-up of our cell and wafer production facility. Production capacity clearly enhanced. We could expand our group-wide wafer production capacity in the first six months of the year to some 305 MW. Of this 35 MW are accounted for by our US production. In cell production we increased our production capacity group-wide in the first six months of the year to some 205 MW. 45 MW of this are attributable to US production. Our group-wide module production capacity was increased to roughly 155 MW. 35 MW of this total are part of our production in the USA. Wafer production as a service. Deutsche Solar AG has again continuously expanded the high added value wafer production business as a service in the 2nd quarter. Raw materials made available by external customers who procured these for their own business purposes because of the silicon scarcity are processed by us into wafers as a service. Trading Trading business expanded as planned. The foreign business rate in the module and solar kit trading business was at 50 per cent in terms of volume as scheduled at the end of the 1st half of 2007 (previous year as per 30 June: 25 per cent). In our main sales market in Germany we were able to boost domestic sales of modules and solar kits by more than 20 per cent as scheduled in the 1st half of 2007 versus the same period of the previous year. In the second largest solar market Spain we achieved a double digit growth rate in the first half as a result of which we are on schedule for the full year. In this market we were also able to successfully integrate customer structures of the former solar Shell activities. In the business in Italy the 2nd quarter of the year has so far been the strongest one for Solar- World AG. Here, too, we were able to win over the customer structures of the former solar Shell activities for a long-term cooperation. In the 1st half of the year we sold several Megawatts. This means we clearly exceeded the level of the previous year with a double digit market share. In the developing solar target markets Greece, France and Belgium we expanded our businesses in the 2nd quarter positioning ourselves in a promising way in all three markets. Against the background of the attractive level of compensation for roof-integrated solutions in France our sales of the Energyroof developed very positively. In the USA and in Asia sales were increased in the double digit range as planned over the same period last year. In the Asia-Pacific region the comprehensive business deals in South Korea deserve a special mention. 12

17 V. BUSINESS WITH PERSONS CLOSE TO THE COMPANY VI. SUPPLEMENTARY REPORT VII. RISKS/OPPORTUNITIES VIII. FORECAST REPORT IX. CONSOLIDATED INTERIM FINANCIAL STATEMENTS X. ASSURANCE OF LEGAL REPRESENTATIVES With our expanding worldwide trading activities we were additionally able to move into new markets like Slovenia, Tunisia and the Maghrib states gaining new customers. The project business also benefited from this internationalization. In the 2nd quarter we supplied the technology and the engineering for major projects in Spain and South Korea. New off-grid businesses. Our distribution network in the off-grid business has been further expanded with distributors in Asia, South America and Africa. Additionally, we could complete the biggest project to date for the electrification of rural regions in the 2nd quarter of the year. For 44 villages in the Western Chinese province of Qinghai SolarWorld AG supplied 4,800 solar modules with a power output of 80 Watt each and also provided the installation of the solar systems. The villages were thus given access to electrical energy for the first time. IV. EARNINGS, FINANCIAL AND NET WORTH POSITION 1. Earnings situation 1.1 Earnings and sales development Group sales increased in the 2nd quarter versus the same period last year by 78.4 per cent to (previous year: 101.3) million e and from January through June by 69.9 per cent to (previous year: 184.6) million e. Our group-wide share of international business increased in the 1st half of 2007 to 53 per cent in comparison with the previous year (39 per cent). The sales growth in the 2nd quarter over the same quarter in the previous year is especially supported by the doubling of the revenues in the trading segment to 140 million e. The basis for this was the consistent expansion of the production capacities in In the 1st half of 2007 sales went up by 129 million e. In the wafer segment we were able, due to substantial capacity increases, to expand the external business by 26 million e in the 1st half of 2007 compared to the same period the previous year. As a result of the persistently high demand both at home and abroad our trading business could generate a growth in sales in the 1st half of the year of 80 per cent and increased its revenues by 99 million e to 222 million e. The group-wide earnings before interest and tax (EBIT) increased in the 2nd quarter of 2007 by 31.7 per cent to 49.7 (previous year: 37.7) million e and in the 1st half of the year by 31.6 per cent to 84.8 (previous year: 64.5) million e. The result before interest, tax, depreciation and amortization (EBITDA) clearly climbed in the 2nd quarter by 35.2 per cent to 59.0 (previous year: 43.7) million e and in the 1st half of 2007 to (previous year: 76.0) million e. The EBIT margin in the 2nd quarter amounted to 27.5 (previous year: 37.2) per cent and in the 1st half of the year to 27.1 (previous year: 34.9) per cent. Group profit after tax grew in the 2nd quarter by 13.9 per cent over the same period last year to 26.8 (previous year: 23.6) million e and by 20.3 per cent to 48.2 million e in the 1st half of

18 INDICATORS PROFILE LETTER BY THE CHAIRMAN I. THE SOLARWORLD STOCK II. MARKET AND BACKGROUND CONDITIONS III. BUSINESS DEVELOPMENT 2 ND QUARTER 2007 IV. EARNINGS, FINANCIAL AND NET WORTH POSITION 1.2 Order book development External wafer business increased by additional orders. In the 2nd quarter we saw ourselves confronted with an excellent group-wide order development. In the external wafer business we have been able to conclude new orders in excess of 2.2 billion e in the 2nd quarter. Towards the end of the quarter the total order backlog in the wafer business amounted to 5 billion e for the period until per cent of the orders have come from abroad, 43 per cent from Asia and 40 per cent from Europe (excluding Germany). Customers in Germany account for 10 per cent of the orders and in North America for 7 per cent. Trading business expanded as planned 12 In the international trading business we have also been able to generate new orders worth a three digit million e figure in total. 1.3 Development of major P&L items In the 2nd quarter the materials and consumables rate at 41.8 per cent exceeded the previous year s figure (35.8 per cent) due to higher raw materials costs. For the 1st half of the year the ratio of material costs to total operating performance reached 48.9 (previous year: 41.3) per cent. Staff costs increased in the 2nd quarter to 19.6 (previous year: 11.8) million e and accumulated in the 1st half of the year to 37.8 (previous year: 22.6) million e. At the same time the total number of employees increased group-wide by 73 per cent to 1,378 due to acquisitions and new recruitments. The scheduled increase of depreciations in the 2nd quarter to 9.3 (previous year: 5.9) million e and to 19.1 (previous year: 11.5) million e in the 1st half of the year results from the investments into the expansion of production capacities as well as the acquisitions made in Other operating expenses rose in the 2nd quarter to 17.0 (previous year: 11.0) million e and in the 1st half of the year to 34.6 (previous year: 20.8) million e. Other operating income in the 2nd quarter amounted to 12.2 (previous year: 4.7) million e and rose in the 1st half of the year to 23.8 (previous year: 8.5) million e of which a major share amounting to 11.8 million e is accounted for by the expense subsidies agreed upon in conjunction with the acquisitions made in The financial result was significantly influenced by the sizeable influx of outside capital into SolarWorld AG and amounted in the 1st half of the year 2007 to -6.1 (previous year: 0.2) million e. 14

19 V. BUSINESS WITH PERSONS CLOSE TO THE COMPANY VI. SUPPLEMENTARY REPORT VII. RISKS/OPPORTUNITIES VIII. FORECAST REPORT IX. CONSOLIDATED INTERIM FINANCIAL STATEMENTS X. ASSURANCE OF LEGAL REPRESENTATIVES 2. Financial situation 2.1 Financing analysis The equity capital at million e is by 36.1 million e higher than at the end of The equity ratio as per 30 June 2007 amounts to 41.3 (as per 31 December 2006: 59.5) per cent. In the 2nd quarter of 2007 SolarWorld AG placed another note loan for a total of 130 million e with institutional investors in Europe. Thus, in the 1st half of the year 2007 SolarWorld AG has had an influx of around 472 million e worth of liquid funds from completed financing measures. The investment grants and subsidies reported under long-term debts amounted to 53.7 million e as per the balance sheet date (as per 31 December 2006: 57.1 million e). These public funds for the expansion of production capacities which are accrued on the liabilities side will be dissolved affecting net income over the period of utilization of the assets subsidized in this way. The increase in other long-term liabilities by 41.4 million e to (as per 31 December 2006: 75.4) million e is essentially attributable to the receipt of down-payments on the conclusion of long-term wafer supply contracts. 2.2 Investment analysis The investments in intangible and fixed assets in the 2nd quarter amounted to 16.4 (previous year: 23.9) million e and in the 1st half of the year to 61.9 (previous year: 44.8) million e. The major share is accounted for by the acquisition of the production site in Hillsboro, Oregon (30.3 million e) and the further expansion of the wafer production in Freiberg. Investments in at Equity valued companies amounted to 1.6 million e in the 1st half of Liquidity analysis Our group s good liquidity situation was further strengthened by the financing measures executed in late 2006 and early As per the balance sheet date the free liquidity (liquid funds and other financial assets) amounted to (31 December 2006: 303.2) million e. The Cash Flow from ongoing business activities amounted to (previous year: -68.4) million e. Included in this amount are cash inflows amounting to 58.5 million e from the regrouping of securities that were classified as held for trading. The Cash Flow from new investments ( million e) are carried under Cash Flow from investment activities. These new investments are short- and medium-term investments fort he purposes of earnings-optimized liquidity management. The positive Cash Flow from financing activities of (previous year: 246.6) million e results from the concluded outside capital measures. Financing analysis 15 15

20 INDICATORS PROFILE LETTER BY THE CHAIRMAN I. THE SOLARWORLD STOCK II. MARKET AND BACKGROUND CONDITIONS III. BUSINESS DEVELOPMENT 2 ND QUARTER 2007 IV. EARNINGS, FINANCIAL AND NET WORTH POSITION 3. Asset situation 3.1 Asset structure analysis As of the balance sheet date 30 June 2007 our group possesses a sound asset structure. In the course of the group-wide growth and the influx of additional outside capital the balance sheet total increased to a total of 1,533.5 (31 December 2006: 1,004.4) million e. The increase of long-term assets to million e is mainly attributable to the expansion investments that consistently exceed depreciations significantly. The short-term assets of 1,127.8 million e exceed the value as per 31 December 2006 by million e. This increase is due to the influx of liquid funds in the course of the implemented financing measures on the one hand and the high growth of the business volume on the other hand. 3.2 Employees The number of employees rose slightly in the 2nd quarter of As per 30 June 2007 the company employed 1,378 staff worldwide which is 27 more than at the end of the 1st quarter of Including loan workers there were 1,800 people working for the group worldwide. Group employees as per 30 June 2007 Employees Employees +/- as per as per absolute Germany 897* USA Rest of the World Total 1, *incl. 36 trainees Personnel changes on the Board of Management or the Supervisory Board did not occur in the 2nd quarter of V. SUBSTANTIAL BUSINESS WITH COMPANIES AND PERSONS CLOSE TO THE COMPANY For Solarparc AG a solar park with an order value of 6.6 million e was established. For the Engineering Office Asbeck a project started in 2006 was completed. Sales revenues of 1.4 million e were generated from this project in the 1st half of the year. 16

21 V. BUSINESS WITH PERSONS CLOSE TO THE COMPANY VI. SUPPLEMENTARY REPORT VII. RISKS/OPPORTUNITIES VIII. FORECAST REPORT IX. CONSOLIDATED INTERIM FINANCIAL STATEMENTS X. ASSURANCE OF LEGAL REPRESENTATIVES VI. SUPPLEMENTARY REPORT Energy summit confirms climate policy. At the third energy summit with Chancellor Angela Merkel in early July the federal government reconfirmed its climate targets also against the resistance of the established energy industry. The renewable energies industry represented among others by SolarWorld CEO Frank Asbeck made it clear that as a result of the combination of renewable energy technologies it would be available for the future supply of base load capacity. In addition, the industry provided evidence of the potential to reach a share of at least 40 per cent of total power consumption by the year After this all-party support for climate protection and renewable energies the industry can look forward to very positive framework conditions also in the long term. Formation of Sunicon AG with responsibility for group-wide security of supplies. With the objective of securing and bundling raw material supplies group-wide within the context of the further capacity expansion we formed the wholly owned subsidiary Sunicon AG headquartered in Freiberg at the beginning of June Under this umbrella we will bundle activities like Joint Solar Silicon GmbH & Co. KG (JSSI), the Joint Venture Scheuten SolarWorld Solicium GmbH as well as other processes for raw material production still under development. The SolarMaterial division will continue to be part of Deutsche Solar AG in the future. The Board of Management of Sunicon AG will consist of Prof. Dr. Peter Woditsch, CEO of Deutsche Solar AG, and Dr. Armin Müller, so far responsible for group R&D at SolarWorld AG. Research and development activities. The international research and development activities of the group will in future be centrally bundled in another wholly owned subsidiary, namely SolarWorld Innovations GmbH which will be responsible for the technology development and the efficiency improvements in production along the entire value chain. The designated Managing Director of SolarWorld Innovations is Dr. Ralf Lüdemann, Managing Director of the SolarWorld subsidiary Deutsche Cell GmbH. Overall statement by the Board on the economic situation at the time of reporting Shareholder structure as per 31 July 2007 DWS Investment GmbH 5.08 % UBS AG 2.30 % Frank H. Asbeck % Fidelity Investments 9.88 % Free Float % BlackRock Inc./ BlackRock Holdco 1, LLC 4.98 % Taking into consideration the earnings, financial and asset situation of the group as evidenced in the consolidated financial statements for 2006 as well as the 1st and 2nd quarters of the year 2007 as outlined above SolarWorld AG s Board of Management comes to a very positive assessment of the group s economic situation also taking into account the business development since the time the annual financial statements were drawn up. The profitable expansion of the business continued consistently after the end of the reporting period. 17

22 INDICATORS PROFILE LETTER BY THE CHAIRMAN I. THE SOLARWORLD STOCK II. MARKET AND BACKGROUND CONDITIONS III. BUSINESS DEVELOPMENT 2 ND QUARTER 2007 IV. EARNINGS, FINANCIAL AND NET WORTH POSITION VII. RISKS/OPPORTUNITIES In the course of the 2nd quarter of 2007 no further changes occurred to the risks described in detail in the 2006 Annual Report under the heading Risk Report. Group Report 2006/ Risk report, p. 63 and Group Report 2006/ Opportunities, p. 75 With regard to the opportunities resulting from the development of the framework conditions as well as the company s internal opportunities we refer you to the 2006 Annual Report. VIII. FORECAST REPORT 1. Future framework conditions Economic forecasts corrected upwards. An end to the upswing in Germany is not in sight according to the opinions of the leading German economists. The Institute for World Economy (IfW), Kiel, again corrected its forecast for Germany upwards in June. The experts are now expecting a growth in GDP of 3.2 (previously: 2.8) per cent for 2007 and 2.7 (previously: 2.4) per cent for This means that Germany will outperform European space for which a growth of 2.9 and 2.4 per cent respectively has been predicted. The background to this positive economic development in Germany is the rise in exports and investments by industry as well as the increase in real terms of the disposable income that is liable to boost consumption. This makes the German economy so robust that it will not even be jeopardized by the slight weakening of the world economy expected to occur in the course of the year. In the view of the experts the world economy will continue to expand in the years 2007 and 2008 by 4.8 and 4.7 per cent respectively (previous year: 5.2 per cent). In the USA the growth in GDP weakened temporarily still reaching 2.2 per cent in 2007 (previous year: 3.0) per cent. In 2008 it is expected to go up again to 2.8 per cent. Economic development in Asia will be very dynamic. In China the IfW is expecting constant growth rates of at least 10 per cent and in South East Asia and in Latin America just about 5 per cent. Energy prices high. The high economic growth worldwide will cause an accelerated growth in the oil demand in 2007 and subsequent years. The International Energy Agency (IEA) has again raised its demand estimate in the middle of Accordingly, the worldwide consumption of oil will grow at a rate of 2.2 per cent annually (so far 2.0 per cent) until the year As a consequence global demand will go up from 86.1 million barrel a day (bpd) in the year 2007 to 95.8 bpd. After analysts had still expected declining oil prices for 2007 at the beginning of the year they increased their forecasts again in the 2nd quarter. HSH Nordbank AG considers it a probability that the historic high from August 2006 (just about 80 US dollars) will again be reached in the current year. The institute is predicting an annual average price of at least 65 US-dollars in the years 2007 and This corresponds to the level of the previously most expensive year of Along with petroleum the prices of all other conventional energy sources like natural gas and coal will also remain high. In terms of fuel costs no relaxation can be expected in the area of conventional electricity prices. In Germany the stricter supervision of transmission 18

23 V. BUSINESS WITH PERSONS CLOSE TO THE COMPANY VI. SUPPLEMENTARY REPORT VII. RISKS/OPPORTUNITIES VIII. FORECAST REPORT IX. CONSOLIDATED INTERIM FINANCIAL STATEMENTS X. ASSURANCE OF LEGAL REPRESENTATIVES charges might bring about a partial price attenuation even though according to the experience gathered so far the utilities can be expected to use the tougher rules of emission trading as of 2008 for another round of price hikes. Renewable energies continuing to grow. The International Energy Agency (IEA) has increased its 2006 forecast for the future share of renewable energies in total worldwide energy supplies. In 2030 they will have a 16 per cent share in total power consumption thus supplying double the amount of energy that they do today. The power generation volume of 430 Terawatt hours (TWh) from renewable energies once forecast by the IEA for the year 2020 was already reached in However, the European Renewable Energy Council (EREC) is more optimistic than that. It expects the future share of power from renewable energies to go up to 35 per cent. Renewable energies Made in Germany in demand worldwide. The German renewable energy industry is expecting the export volume in 2007 to increase to 8.5 (previous year: 6.0) billion e. Until the year 2010 exports are expected to grow to 15.7 billion e and until 2020 to 80 billion e. Solar exports rise by 50 per cent. The German solar industry association BSW expects that this year the solar technology market growth abroad, especially in Southern Europe, will be higher than in Germany. The foreign sales of the German solar industry will therefore increase by 50 per cent to 1.5 billion e. In the medium term the BSW expects the worldwide solar market to grow be 20 per cent annually. The German solar industry should be capable of attaining a growth rate of between 20 and 25 per cent. Until 2020 an increase in export revenues to 20 billion e is expected. The number of employees in the German solar industry can, according to BSW estimates, go up from 54,000 today to 90,000 in 2012 and 200,000 by EEG amendment in In the 2nd half of 2007 the German government is expected to submit its proposals for the amendment of the law on renewable energies (EEG). Since the government is interested in the healthy development of the German solar market as it has made clear at the third energy summit which took place in Berlin after the end of the reporting period it is safe to assume that the feed-in rates will be adjusted in a way that does justice to the economic possibilities of the solar industry. Amendments to the EEG are to come into force effective 1 January Energy summit confirms climate policy Germany biggest market. According to the information of the BSW Germany also remains the biggest solar market in Experts expect the growth rate to be at the level of the previous year. Spain will expand its position as the second largest European market. Observers think that Spain will be able to double its volume in 2007 versus that of the previous year to 120 MW. In Italy a tripling of the market is expected, according to the European Photovoltaic Industry Association (EPIA). For France the environmental and energy agency Adème expects a doubling of the market in 2007 after 14.1 MW in Roof-integrated systems will be able to benefit disproportionately due to the attractive levels of compensation. Strong growth is also to be expected in the second largest Asian market South Korea. Observers consider it possible for the market to grow by a multiple to 25 MW in the year USA with large renewable potential. The American Council for Renewable Energies (ACORE) sees a potential for the expansion of renewable energies in the USA of 635 Gigawatt (GW) by the year A study puts the possible wind power output at around 248 GW, solar power at 164 GW and biomass and biofuels at 100 GW. 19

24 INDICATORS PROFILE LETTER BY THE CHAIRMAN I. THE SOLARWORLD STOCK II. MARKET AND BACKGROUND CONDITIONS III. BUSINESS DEVELOPMENT 2 ND QUARTER 2007 IV. EARNINGS, FINANCIAL AND NET WORTH POSITION 2. Future business development Raw materials activities expanded group-wide Supplementary Report Wafer capacities growing continuously. The capacity expansion in the new DS 1000 wafer production in Freiberg to 500 MW will be successively implemented as scheduled until the end of As far as the further expansion to 1 Gigawatt at the Freiberg location is concerned we are currently entering the planning phase. We back the group-wide capacity growth with the further development of the different procurement options. In Sunicon AG we will in future bundle the group-wide activities to secure silicon supplies. Expansion of production in the USA. For the technical equipment in our new wafer and cell production including crystallization in Hillsboro we will be placing the orders in the 3rd quarter of the year. We are expecting installation of the equipment from 2008 and the first products from the production process in the 2nd half of At the same time the module capacities at the Camarillo site will be enhanced to 100 MW. Until the start of the new production at Hillsboro we will continue to manufacture crystals, wafers and cells at the Vancouver and Camarillo sites. Strong trading growth. In our core market Germany we expect in fiscal year 2007 a sales increase of between 15 and 20 per cent over the previous year. In Spain we are expecting sales to go up by more than 50 per cent. In Italy we are seeing a multiplication of our business and a double digit market share. In Belgium, France and Greece we will successfully position ourselves for future growth in the year 2007 as planned. In the USA and in Asia we are expecting a business expansion by 20 per cent over the previous year in both cases. In the context of the off-grid business we will start in the 2nd half of the year to implement the new China program for the electrification of 44 villages. For the full year 2007 we are planning to reach a share of foreign business of around 50 (previous year: 34) per cent. 3. Expected sales and earnings development After the successful 1st half of the year 2007 we confirm our sales forecast of 620 million e for the full year of We strive to exceed the growth forecast of 20 per cent. Also on the basis of the adjusted earnings figures for 2006 (EBIT: 118 million e) SolarWorld AG expects a growth of the operating result of at least 20 per cent. Taking into consideration all subsidies we are assuming that the result of the newly acquired companies in the full year will be a balanced one. We are expecting to break even in the 2nd half of the year

25 V. BUSINESS WITH PERSONS CLOSE TO THE COMPANY VI. SUPPLEMENTARY REPORT VII. RISKS/OPPORTUNITIES VIII. FORECAST REPORT IX. CONSOLIDATED INTERIM FINANCIAL STATEMENTS X. ASSURANCE OF LEGAL REPRESENTATIVES 4. Alignment of the SolarWorld Group in Fiscal Year 2007 Overall statement of the Board of Management The focus of our business in 2007 continues to be the rapid expansion along the entire solar value chain with the emphasis on the wafer business. On the basis of our profitable business development and the positive assessment of the future development of the worldwide solar market we decided in the 2nd quarter of 2007 to expand our investment activities. As a result we increased our expansion targets in the USA and in Freiberg to 1.5 Gigawatt. 21

26 Consolidated interim financial statements 1 st half of 2007

27

28 INDICATORS PROFILE LETTER BY THE CHAIRMAN I. THE SOLARWORLD STOCK II. MARKET AND BACKGROUND CONDITIONS III. BUSINESS DEVELOPMENT 2 ND QUARTER 2007 IV. EARNINGS, FINANCIAL AND NET WORTH POSITION IX. CONSOLIDATED INTERIM FINANCIAL STATEMENTS OF THE SOLARWORLD GROUP Consolidated Income Statement for the 1 st half of previous year te te 1. Sales revenues 313, , Change in inventoy of finished goods -15,361 4, Own work capitalized Other operating income 23,833 8, Cost of material -146,212-77, Staff costs -37,836-22, Depreciation and amortization -19,097-11, Other operating expenses -34,597-20, Operating result 84,829 64, Result of shares valued at equity Interest revenues 11,241 4, Interest expenses -16,370-3, Earnings before taxes on income 78,715 64, Income taxes -30,472-24, Consolidated net profit 48,243 40, Earnings per share a) Consolidated net profit (in tz) 48,243 40,086 b) Weighted average of shares in circulation (in 1,000) 111, ,718 c) Earnings per share (in A)

29 V. BUSINESS WITH PERSONS CLOSE TO THE COMPANY VI. SUPPLEMENTARY REPORT VII. RISKS/OPPORTUNITIES VIII. FORECAST REPORT IX. CONSOLIDATED INTERIM FINANCIAL STATEMENTS X. ASSURANCE OF LEGAL REPRESENTATIVES Consolidated Income Statement for the 2 nd quarter of previous year te te 1. Sales revenues 180, , Change in inventory of finished goods -37,492-5, Own work capitalized Other operating income 12,173 4, Cost of material -59,915-34, Staff costs -19,556-11, Depreciation and amortization -9,304-5, Other operating expenses -16,965-11, Operating result 49,698 37, Result of shares valued at equity Interest revenues 4,339 2, Interest expenses -9,856-1, Earnings before taxes on income 43,640 38, Income taxes -16,796-14, Consolidated net profit 26,844 23, Earnings per share a) Consolidated net profit (in tz) 26,844 23,567 b) Wheighted average of shares in circulation (in 1,000) 111, ,665 c) Earnings per share (in A)

30 INDICATORS PROFILE LETTER BY THE CHAIRMAN I. THE SOLARWORLD STOCK II. MARKET AND BACKGROUND CONDITIONS III. BUSINESS DEVELOPMENT 2 ND QUARTER 2007 IV. EARNINGS, FINANCIAL AND NET WORTH POSITION Balance sheet Assets te te A. Noncurrent assets 405, ,514 I. Intangible assets 34,166 34,498 II. Property, plant and equipment 332, ,646 III. Investments accounted for using the equity method 19,867 19,377 IV. Deferred taxes on the assets side 19,500 17,993 B. Current assets 1,127, ,896 I. Inventories 269, ,989 II. Trade accounts receivable 115,016 72,030 III. Income tax claims 4, IV. Other receivables and assets 18,562 21,870 V. Other financial assets 559,949 98,573 VI. Liquid funds 158, ,655 VII.Prepaid expenses 1,379 2,133 1,533,518 1,004,410 Liabilities te te A. Shareholder s equity 633, ,321 I. Subscribed capital 111,720 55,860 II. Capital reserve 296, ,349 III. Other reserve -3,333-2,321 IV. Accumulated profit 228, ,433 B. Noncurrent liabilities 776, ,722 I. Noncurrent financial liabilities 575, ,577 II. Accrued investment grants 53,682 57,106 III. Noncurrent provisions 17,086 18,119 IV. Other noncurrent liabilities 116,828 75,429 V. Deferred taxes on the liabilities side 13,485 10,491 C. Current liabilities 123, ,367 I. Current financial liabilities 45,149 50,960 II. Trade accounts payable 36,835 31,909 III. Income tax liabilities 12,440 20,266 IV. Current provisions 3,354 1,188 V. Deferred income 837 1,278 VI. Other current liabilities 24,739 27,766 1,533,518 1,004,410 26

31 V. BUSINESS WITH PERSONS CLOSE TO THE COMPANY VI. SUPPLEMENTARY REPORT VII. RISKS/OPPORTUNITIES VIII. FORECAST REPORT IX. CONSOLIDATED INTERIM FINANCIAL STATEMENTS X. ASSURANCE OF LEGAL REPRESENTATIVES Statement of changes in equity for the 1 st half of 2007 in te Subscribed Capital Other reserve Accumulated Total capital reserve Translation IAS 39 profit reserve reserve Balance as at , , , ,056 Capital increase 43, , ,717 Differences from currency translation -1,643-1,643 Group profit for the year 130, ,566 Dividends paid -6,983-6,983 Other equity capital changes Balance as at , ,349-1, , ,321 Capital increase 55,860-55,860 0 Differences from currency translation -2,257-2,257 Group profit for the year 48,243 48,243 Dividends paid -11,172-11,172 Other equity capital changes 1,245 1,245 Balance as at , ,489-4, , ,380 27

32 INDICATORS PROFILE LETTER BY THE CHAIRMAN I. THE SOLARWORLD STOCK II. MARKET AND BACKGROUND CONDITIONS III. BUSINESS DEVELOPMENT 2 ND QUARTER 2007 IV. EARNINGS, FINANCIAL AND NET WORTH POSITION Cash flow statement for the 1 st half of previous year te te Net profit before taxes 78,715 64,669 + Depreciation and amortization 19,097 11,528 -/+ Net interest income 5, Loss from at-equity measurement /- Loss/gain from disposal of non-current assets Reversal of accrued investment grants -3,831-3,319 = Cash flow from operating result 100,454 73,075 -/+ Increase/decrease in inventories -27,399-54,703 -/+ Increase/decrease in other net assets 67,517-75,747 = Cash flow from operating activities 140,572-57,375 + Interest received 7,317 3,153 - Income tax paid -40,870-14,158 = Cash flow from current business activities 107,019-68,380 - Cash outflow for investments in non-current assets -68,916-39,703 + Cash inflow from investment grants Cash inflow from sale of non-current assets /- Cash in-/outflow from investments in securities -517,427 0 = Cash flow from investing activities -585,549-39,664 + Proceeds from non-current borrowings 485,224 29,763 - Redemption of non-current borrowings -37,568-6,893 - Interest paid -8,187-2,606 + Proceeds from additions to equity 0 233,355 - Disbursements due to dividends paid -11,172-6,983 = Cash flow from financing activities 428, ,636 +/- Net change in cash and cash equivalents -50, ,592 +/- Exchange rate effects on cash and cash equivalents Cash and cash equivalents at beginning of period 194,253 95,897 = Cash and cash equivalents at end of period 143, ,306 28

33 V. BUSINESS WITH PERSONS CLOSE TO THE COMPANY VI. SUPPLEMENTARY REPORT VII. RISKS/OPPORTUNITIES VIII. FORECAST REPORT IX. CONSOLIDATED INTERIM FINANCIAL STATEMENTS X. ASSURANCE OF LEGAL REPRESENTATIVES Notes to the consolidated interim financial statements 1. Accounting according to International Financial Reporting Standards (IFRS) Pursuant to Article 4 of Regulation (EC) No. 1606/2002 of the European Parliament and of the Council of 19 July 2002 on the application of international accounting standards SolarWorld AG is obliged to apply the international accounting standards adopted in accordance with Articles 2, 3 and 6 of said Regulation. These interim financial statements as per 30 June 2007 have accordingly also been prepared in accordance with IAS 34. These consolidated interim financial statements have not been subjected to inspection by an auditor. 2. Accounting and valuation methods In preparing the interim financial statements and establishing the comparative figures for the previous year the same consolidation principles and accounting and valuation methods as in the 2006 consolidated financial statements have been in principle applied. A detailed description of these methods has been published in the Notes to the 2006 Annual Report which can be reviewed in and downloaded from the Internet under Deviating from these accounting methods and due to the first time application of IFRS 7 the net gains and losses respectively from other financial assets were carried in the financial result. Besides the interest income net gains and losses contain gains and losses from the valuation as well as the sale of financial instruments. In determining the earnings per share in the same quarter of the previous year the number of shares in circulation was reconciled with the numbers published in the interim report of the previous year because in the May 2006 Annual General Meeting (AGM) three bonus shares were granted and in the May 2007 AGM one bonus share was granted. 3. Group of consolidated companies In comparison with the last annual financial statements the group of consolidated companies has been increased by the addition of the newly formed company SolarWorld Properties Inc., Hillsboro, USA. Thus, the group of consolidated companies essentially consists of the following subsidiaries: > Deutsche Cell GmbH, Freiberg/Saxony > Deutsche Solar AG, Freiberg/Saxony > Go!Sun GmbH & Co. KG, Bonn > Gällivare PhotoVoltaic AB, Gällivare/Sweden > Solar Factory GmbH, Freiberg/Saxony > SolarWorld Africa (Pty.) Ltd. (formerly SunGrid (Pty.) Ltd.), Johannesburg/South Africa > SolarWorld Asia Pacific PTE Ltd., Singapore/Singapore > SolarWorld California Inc., San Diego/USA > SolarWorld Ibérica S.L., Madrid/Spain > SolarWorld Industries America LLC, Camarillo/USA > SolarWorld Industries America LP, Camarillo/USA > SolarWorld Industries America Services Inc., Camarillo/USA > SolarWorld Industries Deutschland GmbH, Munich > SolarWorld Industries Schalke GmbH, Gelsenkirchen > SolarWorld Properties Inc., Hillsboro/USA 29

34 INDICATORS PROFILE LETTER BY THE CHAIRMAN I. THE SOLARWORLD STOCK II. MARKET AND BACKGROUND CONDITIONS III. BUSINESS DEVELOPMENT 2 ND QUARTER 2007 IV. EARNINGS, FINANCIAL AND NET WORTH POSITION Directly or indirectly SolarWorld AG holds a 100 per cent stake in all these companies. 4. Other financial assets and debts The other financial assets include financial instruments of the categories Receivables (e 25,000,000; previous year: e 0), held for trading (Trading) (e 42,086,000; previous year: e 97,957) and financial assets designated as at fair value through profit and loss (FVTPL) (e 491,162; previous year: e 0). The interest income disclosed in the Profit & Loss Statement includes the net gains and losses from financial instruments of the categories Trading (e 2,399,000; previous year: e 302,000) and FVTPL (e -679,000; previous year: e 0). Besides the interest income net gains and losses contain gains and losses from the valuation as well as the sale of financial instruments. The financial instruments measured at amortized costs ( Receivables ) account for interest income amounting to e 104,000 (previous year: e 0). Interest paid exclusively contains interest expenditure from liabilities that were not measured at fair value. 5. Post-end-of-quarter events of particular importance On 6 July 2007 the Bundesrat (upper chamber of the German parliament) passed the Company Tax Reform Act 2008 as a result of which the overall tax burden for German companies can be expected to be lower in the future. For the calculation of deferred taxes in the consolidated annual financial statement the deferred tax claims and liabilities have to be valued on the basis of the lower tax rates provided in the law. However, since the law was not passed until after the cut-off date for the 1st half financial statements the tax effects resulting from this can only be reflected in the financial statements for the 3rd quarter of According to our current calculation the re-evaluation will probably lead to an impact on the result of round about 2 million e. 30

35 V. BUSINESS WITH PERSONS CLOSE TO THE COMPANY VI. SUPPLEMENTARY REPORT VII. RISKS/OPPORTUNITIES VIII. FORECAST REPORT IX. CONSOLIDATED INTERIM FINANCIAL STATEMENTS X. ASSURANCE OF LEGAL REPRESENTATIVES Information on business segments from to in million E Wafer Cell Module Trade Eliminations Consolidated Sales External sales Inter-segment sales Total sales Earnings Segment earnings Unallocated income 0 Unallocated expenses -1 Earnings before interest and tax (EBIT) 85 Interest paid -17 Interest received 11 Income taxes -31 Net profit for the period 48 Information on business segments from to in millione Wafer Cell Module Trade Eliminations Consolidated Sales External sales Inter-segment sales Total sales Earnings Segment earnings Unallocated income 0 Unallocated expenses -1 Earnings before interest and tax (EBIT) 65 Interest paid -4 Interest received 4 Income taxes -24 Net profit for the period 41 31

36 INDICATORS PROFILE LETTER BY THE CHAIRMAN I. THE SOLARWORLD STOCK II. MARKET AND BACKGROUND CONDITIONS III. BUSINESS DEVELOPMENT 2 ND QUARTER 2007 IV. EARNINGS, FINANCIAL AND NET WORTH POSITION X. ASSURANCE OF LEGAL REPRESENTATIVES According to the best of our knowledge we give our assurance that the applied principles of adequate and orderly group interim reporting in the SolarWorld AG interim financial statements give a true and fair view of the asset, finance and earnings situation of the group and that the group interim management report adequately describes the business development including the business results and the situation of the SolarWorld Group in such a way that a true and fair view is given of the actual conditions as well as the major opportunities and risks of the expected development of the group in the remaining course of the fiscal year. Bonn, 9. August 2007 Dipl.-Ing. Frank H. Asbeck (CEO) Dipl.-Kfm. tech. Philipp Koecke (CPO) Dipl.-Ing. Boris Klebensberger (COO) Dipl.-Wirtschaftsing. Frank Henn (CSO) 32