Q03 03/2008 Quarterly Report

Transcription

1 03/2008 Quarterly Report The European Energy- Saving Company. Highlight 1 Revenue and earnings growth well into double figures Highlight revenue forecast increased, earnings target will definitely be met

2 CENTROTEC Quartalsbericht 03/2008 Highlights Highlights: strong revenue growth, easily overproportional earnings growth Consolidated results for the first nine months Market developments Revenue for the CENTROTEC Group reached EUR million in the first nine months of 2008 and was therefore up 20 % on the prioryear period (EUR million). The operating earnings were EBITDA of EUR 34.6 million and EBIT of EUR 22.9 million, and thus again disproportionately high compared with revenue. Earnings before taxes (EBT) almost doubled to EUR 19.1 million (previous year EUR 10.4 million). Earnings after tax (EAT) rose to EUR 13.8 million (previous year EUR 11.2 million). It should be noted here that the validity of the prior-year figure for purposes of comparison is limited due to a positive tax effect. Earnings per share (EPS) of EUR 0.84 EUR for the first nine months (previous year EUR 0.69, incl. positive tax effect). The equity investment CENTROSOLAR reports revenue growth of almost 60 % and a very sharp rise in earnings. The German heating market grew steadily and enjoyed very strong growth in the Renewable Energies area. Very satisfying growth for solar thermal systems, in excess of overall market growth Government initiatives in more and more countries require and promote the use of innovative, efficient heating and energy systems. The trend towards condensing boiler technology continues unabated in all European markets Earnings reflect the high purchase prices for materials in the first three quarters. However, materials prices are expected to ease in the near future. After the period under review, the CHP supplier Kuntschar + Schlüter was acquired by Wolf by way of an asset deal with effect from November 1, Outlook: revenue forecast increased to EUR million. Thanks to very positive business progress the forecast for consolidated revenue for the current financial year is being upgraded to EUR million, from a previous EUR million. The forecast operating result (EBITDA of EUR 47 to 49 million, EBIT of EUR 32 to 34 million) will be at least at the upper end of the forecast range based on the financial year's good progress to date. The anticipated earnings per share of EUR will probably be exceeded, among other reasons thanks to the positive development in the investment result. The prospects for CENTROTEC in 2009 are still regarded as bright, despite widespread uncertainty about general economic developments, thanks to the particularly pioneering nature of the industry; the expectation remains that moderate revenue and earnings growth will be achieved. Business outside the core markets of Germany and the Netherlands will continue to contribute further revenue and earnings growth across all segments in the long term. Products for energy conservation and climate protection represent an important market of the future, and one that is expected to continue delivering strong growth driven in part by the planned increases in subsidies in Germany, in spite of the weakening of the economy as a whole and the low level of new construction activity. The expansion of the Medical Technology area will continue. Strategically and operationally very good progress for the equity investment CENTROSOLAR set to continue thanks to its continuing good market position. Forecasts for full-year revenue and earnings likely to be exceeded. 2

3 CENTROTEC Quarterly Report 03/2008 KEY FIGURES GROUP in thousand EUR Changes Total revenue ,5% Gas Flue Systems ,9% Climate Systems ,3% Medical Technology & Engineering Plastics ,7% Earnings EBITDA ,8% EBIT ,3% EBIT Yield (in %) 6,6% 5,6% EBT ,7% EAT ,5% EPS (in EUR; basic) 0,84 0,69 21,7% Balance Structure*** Balance sheet total ,5% Shareholders' equity ,6% Equity ratio (in %) 31,9% 30,1% Property, plant and equipment ,6% Intangible Assets ,7% Goodwill ,6% Net financial liabilities ,5% Net Working Capital ,1% Cash Flow Statement Cash flow I (EAT & depreciation/amortisation) ,9% Cash flow from operating activities ,2% Cash flow from investing activities (10.648) (12.426) -14,3% Employees Total (in FTE) ,5% Shares* Number of shares**/*** ,5% Share price ,66 12,20 Year-high 16,14 18,35 Year-low 9,80 12,20 Share price ,30 13,94 * Quotation in EUR, Information corresponds to the day final course XETRA ** Weighted average shares outstanding (basic; in thousand) *** Previous period is related to December,

4 CENTROTEC Quartalsbericht 03/2008 Konzernzwischenlagebericht 1. Consolidated entities and segment structure The structure and extent of consolidation of the CENTROTEC Group hereinafter also referred to as CENTROTEC have not changed compared with the annual financial statements at December 31, Compared with the equivalent figures for the nine months of 2007, the group has been extended marginally through the acquisition in September 2007 of bricon ag, which was integrated into the "Medical Technology & Engineering Plastics" division. The segment structure was unchanged compared with the end of the 2007 financial year and comprises the segments "Gas Flue Systems", "Climate Systems" and "Medical Technology & Engineering Plastics". 2. Development in revenue and earnings Thanks to the continued recovery of the German heating market and growing demand for heating and air conditioning systems that conserve energy and use renewable energies, revenue and earnings rose yet again by a substantial amount in the third quarter. Overall, consolidated revenue was therefore 19.5 % higher than at the corresponding point of the previous year. Consolidated revenue in the third quarter of 2008 was 23.0 % up on the figure for the same quarter of the previous year. This sharp percentage increase has nevertheless been favoured by the decidedly difficult conditions experienced by the German heating market from the second quarter of the previous year on, as a result of which the previous year does not provide valid terms of reference for the future. Revenue (in EUR million) Q Q Year-on-year change Q1 Q Q1 Q Year-on-year change Gas Flue Systems Climate Systems Medical Technology & Engineering Plastics Total % % % % % % % % 4

5 CENTROTEC Quartalsbericht 03/2008 Konzernzwischenlagebericht All segments of the group achieved double-digit revenue growth for the first nine months of The two core segments of the group that focus on energy-saving solutions for buildings achieved the highest rates of growth: 23 % for the Gas Flue Systems segment and 19 % for the Climate Systems segment. The third quarter saw revenue rise yet again by a disproportionately high degree compared with the cumulative figures. Nevertheless, in this view both segments benefit from the relatively weak development in the corresponding prior-year period. The Medical Technology & Engineering Plastics segment succeeded in maintaining its steady growth and increased its revenue in the period under review by 12 % on the prior-year period. The steady expansion of international business over recent years meant that well over one-third of consolidated revenue is now consistently earned outside the home markets of Germany and the Netherlands. Despite the distinct recovery of the German heating market this year and the associated growth in domestic revenue, the proportion of consolidated revenue achieved outside the core markets in the first nine months of 2008 remained in excess of 35 %. Growth in Eastern Europe, the Mediterranean region and the USA, in some cases in excess of 30 %, has played a major part in this. Along with these steady rises in revenue, as in previous quarters the various earnings figures have shown markedly overproportional growth right across the board. For instance EBITDA for the first nine months was up 23.8 % to EUR 34.6 million, and EBIT rose by 40.3 % to EUR 22.9 million. These figures reflect the effectiveness of the improvement processes being implemented continually by the group and its subsidiaries, by which means the desired economies of scale are being realised. These disproportionately high growth rates for earnings should also be viewed in the context of a slight rise in the materials ratio. This latter development has been prompted by the continuing high materials prices and a slight shift in the product mix, with a higher proportion of materialintensive products. Recently, however, there have been signs of materials prices easing or starting to come down again. The particularly acute situation in the first quarter of earnings being diminished by exchange rate effects has likewise eased, and this factor has been less significant in the past two quarters. Earnings before tax (EBT) after the first three quarters of the current financial year amounted to EUR 19.1 million, almost double the 2007 figure. Key factors behind this improvement were the slight improvement in the interest result despite the significantly increased volume of business, and the rise of over EUR 2 million in the investment result. Scope for comparing the result after tax is limited due to the non-recurring positive tax effect of the German corporate tax reform, which was observed for the first time in the third quarter of Even though that effect no longer applies in the current financial year, EAT in relation to revenue still showed a disproportionately high improvement and climbed 23.5 % to EUR 13.8 million, producing undiluted earnings per share of EUR 0.84 (previous year EUR 0.69). The EUR 2.0 million higher investment result included in EAT also includes a one-off earnings contribution of EUR 1.1 million (EUR 0.06 per share). This stems from a nonrecurring effect from the capital increase at CENTROSOLAR and the associated dilution of 5

6 CENTROTEC Quartalsbericht 03/2008 Konzernzwischenlagebericht CENTROTEC's interest (please refer to the Notes for a detailed explanation). 3. Development of the segments 3.1 Gas Flue Systems Revenue for the Gas Flue Systems segment in the first nine months rose by 23 % to EUR 85.8 million (previous year EUR 69.8 million), among other reasons as a result of robust growth in the German heating market and the positive development of those international markets that are of significance to CENTROTEC. Meanwhile the result for the segment at EBITDA and EBIT levels rose in each case by 7 %, to EUR 9.1 million (previous year EUR 8.5 million) and EUR 6.2 million (previous year EUR 5.8 million) respectively. Key figures Gas Flue Systems (in EUR '000) Q1 Q Q1 Q Revenue from third parties 85,760 69,804 Revenue from other segments Change in inventories of 473 1,441 finished goods and work in progress Cost of purchased materials (46,720) (36,878) Employee benefit costs (16,875) (14,790) Other income and expense (13,934) (11,502) EBITDA 9,051 8,458 Depreciation and amortisation (2,823) (2,662) EBIT 6,228 5,796 This disproportionately low earnings growth is attributable to various effects that arose in the course of the year. A changed product mix with a higher proportion of merchandise and materialintensive products thus resulted in lower margins. Particularly in the first few months of the financial year, start-up costs for sales operations and adverse exchange rates likewise had a very marked impact on the result for the segment. However, the negative exchange rate effects were subsequently brought under control by corresponding hedges and changes in purchasing practices. The purchase prices for materials were moreover at a very high level in the first nine months of 2008 and could only be passed on to customers to a limited extent. The fall in materials prices that can currently be observed provides opportunities that are being actively seized and should help to bring down the materials ratio in future. The sustained positive revenue development of the CENTROTEC companies belonging to this segment is underpinned to a great extent this year by the healthy progress of the German heating market, which is increasingly compensating for last year's slump. The process of accessing relevant international markets moreover continues. The competitive advantages here specifically include flexible, easy-to-install gas flue systems that are tailored to requirements, statutory regulations and user expectations that vary from country to country. For example, growth in Gas Flue business in the USA was maintained in the past quarter despite the difficult situation in the US property market. Sales are expected to continue rising in the coming quarter and in the 2009 financial year despite the difficult overall economic context. Solar mounting systems and solar integrated systems, which are sold principally by Ubbink France to the wholesale trade, are another mainstay of growth. Innovative, efficient systems will ensure that vast potential can be tapped even in an increasingly difficult market environment. CENTROTEC has consciously decided to tap this potential for growth, and is prepared to tolerate a slight dilution of its profit margin in return. The fundamentally positive development of the segment is being bolstered by 6

7 CENTROTEC Quartalsbericht 03/2008 Konzernzwischenlagebericht the trend towards energy-efficient condensing boiler systems that is now increasingly spreading to Eastern and Southern Europe, too. CENTROTEC companies have achieved notable market successes in Eastern Europe in particular. Against the backdrop of this very positive current and long-term market situation and the revenue growth of 23 % achieved in the year to date for the segment, the revenue target of EUR 110 million for the year as a whole is likely to be exceeded. Various external factors that have arisen in the course of the financial year, such as the high materials purchase prices and the negative exchange rate effects, will however prevent earnings from reflecting in full the segment's positive revenue performance and keep the current EBIT margin below the target double-digit percentage range. 3.2 Climate Systems Climate Systems, the highest-revenue segment in the CENTROTEC Group in the first nine months with revenue amounting to EUR million (previous year EUR million), turned in a highly positive performance in both revenue and earnings. For instance, revenue for the segment rose by 19 %, EBITDA by 34 % (EUR 21.7 million / previous year EUR 16.2 million) and EBIT by an impressive 70 % (EUR 14.3 million / previous year EUR 8.4 million). This is tangible proof that the forecast growth in this segment can be achieved profitably and that the ongoing programmes to optimise processes and cost structures are having an effect. Key figures Q1 Q3 Q1 Q3 Climate Systems (in EUR '000) Revenue from third parties 231, ,055 Revenue from other segments Change in inventories of finished goods and work in progress Cost of purchased materials (118,270) (98,100) Employee benefit costs (62,066) (57,241) Other income and expense (30,486) (23,193) EBITDA 21,706 16,190 Depreciation and amortisation (7,449) (7,803) EBIT 14,257 8,387 Revenue growth will continue to be realised in both the domestic and international renovation market and the new construction market, albeit to a lesser extent in the latter case due to the current difficulties it is experiencing. Business in the German market has staged a marked recovery compared with the very weak prior-year level, and revenue is growing by double-digit rates in virtually all product areas. The long-term pattern of a gradual ageing of heating systems in Germany moreover means that 7

8 CENTROTEC Quartalsbericht 03/2008 Konzernzwischenlagebericht renovation and replacement business is becoming increasingly important. The Wolf Group, with its innovative, versatile, highly efficient heating, air conditioning and ventilation systems, is benefiting in particular measure from this trend; backed by a dense network of branches and partners, it is coming increasingly to be perceived as a customerfocused supplier of technologically pioneering products. Business based on renewable energies, in particular thermal solar systems and integrated solar thermal concepts, is progressing particularly well. As in previous quarters, the entire area of renewable energies continues to enjoy revenue growth that is well above the average for the group. In the field of solar thermal, revenue has actually more than doubled compared with the equivalent prior-year period. The new COB oil condensing boiler launched by Wolf this year has in addition enjoyed a sharp rise in sales. As this new oil condensing boiler the winner of a test conducted by the consumer watchdog Stiftung Warentest in May 2008 only went on sale earlier on this year, this product area is expected to provide a sharply rising revenue contribution in 2009 as a whole. The assets of Energietechnik Kuntschar + Schlüter GmbH were acquired after the period under review, with effect from November 1, 2008; this company specialises in the development, construction and maintenance of combined heat and power (CHP) units. The acquisition of this CHP business that specialises in the use of renewable energies such as biogas and sewage gas provides a boost to Wolf's innovative product range of highly efficient energy-saving systems in the area of co-generation of heat and power. According to the German government's plans, the proportion of power generated by such plants is to double from 12 % to 25 % by 2020 under the Integrated Energy and Climate Programme. In export business, the previous year's very strong position was again extended. Here, too, there was a marked increase in the field of modern systems using renewable energies. Significant revenue growth was achieved e.g. in France, the Ukraine, Switzerland and again in Russia. Steadily growing worldwide awareness that energy conservation based on efficiency and the use of renewable energies as a solution to climate change and long-term rises in energy prices fundamentally establishes an excellent basis for sales of awardwinning, high-quality CENTROTEC energy-saving solutions with the "Made in Germany" seal of approval. National and international reference projects such as the Berlin "O 2 World" and Vienna's "Viertel Zwei", for which energy-efficient Wolf systems were used for the air conditioning infrastructure, also help in gaining access to new markets and penetrating existing ones. During visits to Wolf, various leading politicians have moreover applauded its role as an innovative developer and manufacturer of energy-saving and climate protection systems; this has served to underline the company's growing importance as well as the 8

9 CENTROTEC Quartalsbericht 03/2008 Konzernzwischenlagebericht general perception in society that there is a vital shift towards greater energy efficiency and renewable energies. The German government's planned economic programme lends further weight to this development. One of the pillars of that programme is the package of incentives to encourage energy-efficient renovation of buildings. This will add to the existing enormous short and long-term potential in the market for energy efficiency in buildings. Based on this development and the highly pleasing revenue and earnings figures for the first nine months of 2008, and despite current financial and non-monetary uncertainties, it appears that the fullyear forecast for revenue will be easily exceeded. CENTROTEC consequently now expects revenue for the segment of more than EUR 310 million (previously EUR 290 million) coupled with an EBIT margin remaining between 6 and 7 percent. 3.3 Medical Technology & Engineering Plastics Revenue in the Medical Technology & Engineering Plastics segment was again boosted by a doubledigit rate in the first nine months of 2008 and, at EUR 29.6 million, was 12 % up on the revenue for the prior-year period (EUR 26.5 million). Due to cyclical reasons, however, in the Engineering Plastics area revenue growth from certain nonmedical technology customers levelled off in the course of the financial year. With EBITDA growing by 16 % to EUR 3.9 million and EBIT increasing by 13 % to EUR 2.4 million, this segment too posted disproportionately high earnings growth, realised for example by reducing the integration costs for bricon and improving sales processes. Key figures for MT & EP (in EUR '000) Q1 Q Q1 Q Revenue from third parties 29,553 26,453 Revenue from other segments Change in inventories of finished goods and work in progress 1, Cost of purchased materials (11,898) (10,631) Employee benefit costs (10,898) (9,591) Other income and expense (4,876) (4,288) EBITDA 3,890 3,345 Depreciation and amortisation (1,501) (1,226) EBIT 2,389 2,119 Revenue growth in the Medical Technology & Engineering Plastics segment was kept up e.g. by broadening the product range and stepping up sales activities in the area of medical technology. For instance, in the field of spinal implants further merchandise for lumbal intervertebral disc prostheses and surgical port systems have extended the product range. In the cannulae / neurosurgery product area, the successful partnership with a Swiss group on a vertebroplasty set has been extended. Additional groups of customers have been tapped for HPLC hardware, the components for the chemical analysis and separation of mixtures, as a result of which a significant rise in revenue in this product area is expected in the coming financial year. In the area of hose pumps, an OEP project on the use of medical special solutions in a new area of application has been clinched. The field of high-performance plastics, which comes under the Engineering Plastics area of the segment, involves the small and medium series manufacturing of high-quality semi-finished plastic parts and technical prefabricated parts; the good 9

10 CENTROTEC Quartalsbericht 03/2008 Konzernzwischenlagebericht position here in terms of development and production technology is reflected in the current financial year in the operating results. Expertise in materials and production technology was increased considerably by successfully processing orders from areas of industry not previously served. This opens up horizons in new, pioneering markets. Business performance in the first half of 2008 reflects medimondi AG's value added strategy as endorsed by and implemented with the approval of the CENTROTEC management. Its focus is on organic growth and targeted acquisitions. CENTROTEC is supporting medimondi's management in its continuing efforts to prepare the Medical Technology & Engineering Plastics segment for hiving off as a separate entity under the umbrella of medimondi AG. The medium-term objective is to prepare it for an IPO while never overlooking the operational opportunities of the segment. For the 2008 financial year as a whole, the revenue target of just under EUR 40 million and an EBIT margin of approx. 8 % should be readily attainable despite the difficult economic conditions affecting certain areas of the segment. 4. Development of affiliated companies The investment in CENTROSOLAR Group AG hereinafter referred to as CENTROSOLAR represents the most significant investment of CENTROTEC that is accounted for by the equity method. As described in detail in the report on the second quarter, the interest in CENTROSOLAR fell in-year from % to the present % as a result of a capital increase. The successful business development of the CENTROSOLAR Group, which specialises in the production and sale of solar integrated systems, solar modules and core components for photovoltaic systems, is reflected in the key figures for the first nine months of Over that period, revenue rose 57% compared with the first nine months of 2007 to EUR million (previous year EUR million), and EBITDA by 72 % to EUR 19.1 million (previous year EUR 11.1 million). EBIT reached EUR 11.9 million and was therefore more than three times the prior-year figure of EUR 3.7 million. In considering the earnings figures EBIT, EBT and EAT, it should be borne in mind that they have already been reduced by depreciation and amortisation on predominantly intangible assets newly created in the context of business combinations, such as contracts, customer relationships, expertise, etc. This depreciation and amortisation required pursuant to IFRS 3 amounted to EUR 5.1 million in the first three quarters of 2008 (previous year EUR 6.2 million) but will fall sharply in future, and thus have the direct consequence of increasing earnings. Despite interest expense almost doubling as a result of the increased volume of business and the need for advance payments for deliveries of materials, earnings before tax (EBT) reached 10

11 CENTROTEC Quartalsbericht 03/2008 Konzernzwischenlagebericht EUR 7.2 million, more than five times the level in the same period of the previous year (EUR 1.4 million). Earnings after tax (EAT) at the nine-month mark totalled EUR 5.2 million and were thus 171 % up on the figure of EUR 2.0 million for the first nine months of EAT is incorporated into CENTROTEC's result as the amount of EUR 2.7 million, in line with the latter's interest in the former. This year, the investment result includes a one-off earnings contribution of EUR 1.1 million or EUR 0.06 per share (EPS) from the CENTROSOLAR capital increase in the second quarter of 2008 and the consequent dilution of the CENTROTEC interest. When considering the interest in CENTROSOLAR, it should be borne in mind that because it is carried as an equity investment, the operating earnings (EBITDA, EBIT) and revenue are not reflected in the figures of the CENTROTEC Group. On the other hand, the current price of CENTROTEC shares does include a component for the investment, with the result that any comparison of the key figures that failed to reflect this would lead to distorted results and misinterpretations. As matters stand there is no need for impairment of the 31 % interest in CENTROSOLAR Group AG to reflect the fact that its share price has fallen sharply as a result of the financial crisis, even though its business development remains very positive. In view of the continuing positive underlying conditions for photovoltaic business, the national and international growth prospects and, last but not least, the consistently positive business figures of CENTROSOLAR, the value of the investment is not below the carrying amount. The main driving force behind the CENTROSOLAR Group's profitable growth is its rapidly expanding international business. The export ratio rose to 58 % in the first three quarters of 2008, compared with 33 % in the same period of the previous year. The company posted its biggest growth rates in Italy and France. In order to give this promising development a permanent boost, branches have been established or expanded in France, Italy, Spain, Greece and the USA. During the course of the financial year, sales in Germany moreover emerged as a driving force behind growth. In order to keep pace with this development, CENTROSOLAR is steadily increasing its production capacities. Module production is being increased according to schedule. Work at Doesburg has now been completed, with the result that ultramodern production capacity for modules for 45 MWp per year is now available. Following the laying of the foundation stone in January, the new production hall and warehouse at Wismar are ready to be occupied. The first 20 MWp production line went into operation at the start of August. The plant will reach a total annual capacity of 150 MWp by the end of 2009, when it will be one of the biggest module plants in Europe. Together with the existing production lines at Wismar and Doesburg, CENTROSOLAR will achieve a production capacity 11

12 CENTROTEC Quartalsbericht 03/2008 Konzernzwischenlagebericht of around 115 MWp by the end of 2008, rising to almost 200 MWp by the end of The reason for the slight downturn in CENTROSOLAR's gross profit margin despite its extremely positive business performance is the company's rather unconventional procurement strategy compared with the solar industry as a whole. Since its establishment, CENTROSOLAR has largely avoided committing itself to long-term supply agreements for cells at fixed prices, so that it can respond as flexibly as possible in the event of sharper falls in procurement prices. In the current financial year, however, significant rises in cell purchasing prices were experienced due to the high payment tariff in Spain; prices remained at that level to some extent until the end of the third quarter, and could only be passed on to end customers to a limited degree in the form of higher retail prices. However, the decision not to enter into long-term supply agreements fundamentally appears to make sense given that its own cell production capacity is under construction and solar cell prices are forecast to come down; this should therefore translate into a competitive advantage. In recent months there have been certain regulatory changes in key markets such as the USA, Spain and Germany that should have a positive effect on the photovoltaics industry, and on CENTROSOLAR's market position in specific. The trend towards state subsidies is stabilising, though the extent of the subsidies available is simultaneously being reduced. This provides all market operators with a measure of certainty for planning purposes and brings solar power significantly closer to becoming competitive. Based on the revenue of more than EUR 240 million already achieved by the end of the third quarter and the resulting EBITDA of more than EUR 19 million, CENTROSOLAR is currently faring well with its chosen strategy of international expansion; it has every prospect of exceeding the anticipated export ratio of well over 50 % for the 2008 financial year and a total revenue target of EUR 310 million. Both this revenue target and the forecast EBITDA of EUR 22 million should thus be exceeded. CENTROSOLAR likewise expects moderate revenue and earnings growth for For further information, please refer to the reports published by CENTROSOLAR Group AG. The second equity investment of Bond Laminates GmbH, in which an interest of % is held, completed the expansion of the warehouse and production capacity at its Brilon base according to schedule in the first three quarters of 2008 and reported a positive development in revenue and earnings. 5. Net worth, financial position and financial performance There are no structural changes of material significance in the balance sheet of the CENTROTEC Group at September 30, 2008 compared with the balance sheets for the reference periods. The changes compared with the reporting date of December 31, 2007 and also with the end of the third quarter are predominantly due to seasonal effects. The balance sheet total rose by EUR 27.1 million to EUR million in the first nine months of This increase is largely attributable to the seasonal and revenue-driven rise in net working capita. Net working capital (current assets cash and cash equivalents current, non-interest-bearing 12

13 CENTROTEC Quartalsbericht 03/2008 Konzernzwischenlagebericht liabilities) was up EUR 13.7 million since the start of the year at EUR 68.2 million. The biggest changes were on the assets side, under inventories (up EUR 5.7 million), receivables (up EUR 20.1 million) and cash and cash equivalents (down EUR 3.3 million), due to the traditional rise in business volume as the year progresses. Despite capital expenditure of EUR 10.6 million, financial liabilities were reduced as scheduled during the first three quarters (down EUR 2.7 million). This improved the interest result slightly compared with the first half of 2007, with the terms remaining favourable. The sharp rise in working capital prompted by seasonal factors could be financed largely from business operations, with the result that the net financial liabilities rose only marginally from EUR million to EUR million. By virtue of its existing cash and cash equivalents (EUR 13.8 million) and unutilised credit lines, the CENTROTEC Group continues to have adequate surplus funds in reserve. The group's equity grew by EUR 14.8 million in the first nine months of 2008 to EUR million, predominantly as a result of its earnings. The equity ratio at September 30, 2008 consequently reached 31.9 %, compared with 30.1 % at December 31, In the first nine months of the current financial year cash flow I (EAT plus depreciation and amortisation) rose by EUR 2.7 million to EUR 25.6 million; with depreciation and amortisation rising only slightly, this can be attributed almost exclusively to the earnings performance. The cash flow from operating activities amounted to EUR 8.0 million in the first nine months of 2008 (previous year EUR 11.0 million). This development was attributable to the revenue-driven rise in working capital, which was nevertheless mostly offset by the substantially improved result. Operating cash flow for the year as a whole is expected to be clearly positive. Cash flow from investing activities was EUR million, compared with EUR -9.8 million for the corresponding prior-year period (after adjustment for the deconsolidation of the interest in CENTROSOLAR and the resulting outflow of cash and cash equivalents in accounting terms. 6. Capital expenditure Capital expenditure by the CENTROTEC Group amounted to EUR 10.6 million in the first three quarters of This represents an increase of EUR 2.2 million or 25 % on the position at the corresponding point of This spending represents the basis for the future organic growth of the group and, for the most part, took the form of investment in plant extensions. The total capital expenditure comprises EUR 8.7 million for property, plant and equipment (previous year EUR 6.8 million) and EUR 1.9 million (previous year EUR 2.0 million) for intangible assets. Capital expenditure (in EUR '000) Q1 Q3 2008* Q1 Q3 2007* Gas Flue Systems 3,860 2,799 Climate Systems 4,600 4,028 Med. Tech & Eng. Plast. 2,170 1,968 Total 10,630 8,795 *Excluding capital expenditure for acquisitions The biggest single investment items were at the Mainburg, Marsberg and Doesburg locations and were for the most part for the extension and modernisation of production capacity. A total of 13

14 CENTROTEC Quartalsbericht 03/2008 Konzernzwischenlagebericht EUR 6.1 million was invested throughout the group in plant and machinery in the first nine months of the current financial year. Within intangible assets, the focus of capital expenditure was on the acquisition of software licences and on in-house production capitalised. engulfed the stock markets as a result of the financial crisis, dipping to EUR 6.85 on October 31, 2008 before oscillating in the range of EUR 7 to 10 in early November at significantly elevated trading volumes. 7. Employees The CENTROTEC Group employed an average of 2,651 people over the first nine months of the 2008 financial year. This corresponded to 2,798 individuals at the end of the quarter. Expressed as full time equivalents (FTE), the figure was 2,553 as an average for the first nine months, and 2,688 jobs at September 30, Personnel expenses for the group rose by 10.1 % to EUR 89.8 million in the first nine months of the current financial year, and by a slower rate than revenue. Thanks to the significant rise in capacity utilisation, the personnel expenses ratio therefore fell both compared with the prior-year period and within the year itself. For the first nine months of the current year, the personnel expenses ratio was 25.7 % compared with 27.9 % in the prior-year period. 8. Share price developments The price of CENTROTEC shares in XETRA trading on the Frankfurt Stock Exchange moved between EUR 9.80 and EUR during the first nine months of The XETRA closing price at the end of the quarter on September 30, 2008 was EUR 11.30, approx. 20 % down on the opening price for the year. After the period under review the trading price fell as a result of the turbulence which CENTROTEC share price performance (Xetra) from January to November 2008, source: At the end of the quarter there were 16,580,310 no-par value ordinary shares with the stock exchange code CEV, the securities identification number and the ISIN code DE in circulation. This total includes treasury stock. The increase in the shares total compared with the end of the second quarter is 44,014 units and stems from the exercising of stock options by employees and corporate bodies of the CENTROTEC Group under the stock option scheme. Market capitalisation at the end of the third quarter fell to only approx. EUR 190 million, as CENTROTEC was unable to remain immune to the sharp falls in share prices triggered off by the crisis on financial markets, despite the company's consistently good performance. The inclusion of CENTROTEC shares in the SDAX, which had been on the cards for quite some time, was announced by the stock exchange on September 4, 2008 and implemented on September 14

15 CENTROTEC Quartalsbericht 03/2008 Konzernzwischenlagebericht 22, 2008; this demonstrates the positive long-term development of the group compared with similar companies. When compared both with other operators in the industry and with other companies of a similar size, it is evident that CENTROTEC has consistently turned in an above-average performance. The basis for this development is the management's successful, long-standing buy-andbuild strategy based on sustainably profitable business operations combined with individual strategic acquisitions. 9. Opportunities and risks There have been no fundamental changes in the assessment of opportunities and risks in the core areas of business compared with the position outlined in the 2007 Annual Report. However, in view of the exchange rate effects on earnings in the first quarter, particularly in the Gas Flue Systems segment, as well as hedging the financial risk of exchange rate risks in the short term, various fundamental measures to reduce structural dependence on exchange rate fluctuations were stepped up. These include increased procurement activities in the dollar region and options for producing in the dollar region. The consequences of the global financial crisis and, as a result, the potential non-monetary impact on CENTROTEC, together with the measures that the company will take in response, are explained in further detail below and in the Notes. 10. Expectations After an outstanding performance in the financial year to date and thanks to its decidedly strong position as a growth company with pioneering energy-saving and climate protection products, CENTROTEC is fundamentally in a special situation due to the generally expected impact of the international financial crisis and the associated slowdown in the global economy. If the fourth quarter currently under way continues to progress positively, as expected, 2008 will emerge as the most successful financial year in the history of CENTROTEC. In light of this, the revenue forecast for the current 2008 financial year has been revised upwards from the original EUR million to EUR million. As matters stand the actual earnings figures will at the very least be towards the upper end of the forecast ranges of EUR million at EBITDA level, EUR million at EBIT level and EUR per share (EPS), and the EPS figure is expected to be even higher. At the same time as the company enjoying this highly pleasing progress, the general economic context is characterised by falling investment propensity in many areas of the economy as a result of the financial crisis. It is likely that this investment reticence will also affect systems for energy conservation and climate protection. It is however not currently possible to assess how long this situation will last and what its effect and consequences will be, because it has not as yet had any substantial impact on business. A slowdown in the global economy will particularly affect new construction activity, which accounts for around one-third of CENTROTEC's revenue. It will probably have a milder effect on renovation and replacement business for systems yielding improved energy efficiency. This will be helped not only by the increased subsidies under the German government's planned economic recovery 15

16 CENTROTEC Quartalsbericht 03/2008 Konzernzwischenlagebericht programme for climate protection investments, particularly in the area of building renovation, but also by the efforts of OPEC countries to stem the recent fall in the oil price as a result of the financial crisis. rapidly changing economic climate. The group's ongoing earnings improvement programmes will moreover focus on optimising materials and commodities procurement costs in order to profit from the substantial drop in prices on commodity markets. With regard to the reassessment of investment decisions, three projects for new buildings have for instance been put on ice and will be reconsidered at a later date. CENTROTEC furthermore enjoys a broad base of sales markets and is also able to compensate for dependence on the economic development of individual markets, as was highlighted by the positive business performance of the CENTROTEC Group amid difficult market conditions in CENTROTEC enjoys a high degree of flexibility in its cost structure and cash flow, enabling it to respond proactively to changing market dynamics. The options available to it include using the flexibility in its production capacity by hiring temporary workers and applying flexible working hours models, and reassessing and adapting investment spending for increasing capacity and tapping new markets in response to demand. As in the past, CENTROTEC will closely examine the attractive acquisition options that have arisen amid the increasingly difficult economic environment, and will consider and assess such propositions specifically in terms of their viability in the current As regards finance, at the start of the 2008 financial year CENTROTEC already started to restructure loans that were nearing the end of their term. The overall solution found will secure the short and longterm financing of the group for the next few years, and will be evidenced in the fourth quarter by a slight change in the financing structure. Within the context of the refinancing of the Ubbink Group, the funding lines have moreover been extended to create reserves providing further financial leeway for short-term moves, over and above funding the business expansion of the Ubbink Group. With its excellent position in the market for energysaving and climate protection systems in an industry of the future, its current flexible cost structure and its existing financing structure, CENTROTEC as a whole regards itself as outstandingly well placed to maintain the positive overall development of the group, even if the market conditions and the economic environment may become more difficult. 16

17 CENTROTEC Quartalsbericht 03/2008 Konzernzwischenlagebericht Despite the difficulties in predicting how the economic context will develop in the short term, CENTROTEC remains optimistic about the future and, as matters stand, expects the coming financial year to bring moderate organic growth in revenue and earnings. Brilon, November 2008 The Management Board 17

18 CENTROTEC Quarterly Report 03/2008 Consolidated balance sheet at September 30, 2008 in thousand EUR ASSETS Non current assets Current assets Goodwill Intangible assets Property, plant and equipment Financial investments accounted for using the equtiy method Loans and investments Other assets Deferred tax assets Inventories Trade account receivables Income tax receivable Cash and cash equivalents Other assets ASSETS

19 CENTROTEC Quarterly Report 03/2008 Consolidated balance sheet at September 30, 2008 in thousand EUR EQUITY AND LIABILITIES Shareholders` equity Share capital Additional paid-in-capital Treasury stock (112) (112) Retained earnings Profit attributable to share capital holders of the CENTROTEC Sustainable AG Minority interest, present within equity (154) (39) Non current liabilities Pension accruals Other accruals Financial liabilities Other liabilities Deferred tax liabilities Current liabilities Other accruals Income tax payable Financial liabilities Trade accounts payable Other liabilities EQUITY AND LIABILITIES

20 CENTROTEC Quarterly Report 03/2008 Consolidated income statement from January 1 to September 30, 2008 in thousand EUR Revenues Other income Changes in inventories of finished goods and work in progress Production for own fixed assets capitalized Cost of purchased materials and services ( ) ( ) Personnel expenses (89.839) (81.622) Other expenses (53.975) (45.168) EBITDA Depreciation and amortisation (11.773) (11.691) Operating income (EBIT) Interest income Interest expenses (7.089) (6.809) Result of investments accounted for using the equity method Result before income taxes (EBT) Income tax (5.237) 763 Net income (EAT) Profit or loss attributable to minority interest (66) (78) Profit attributable to share capital holders of CENTROTEC Sustainable AG EPS (Earnings per share in EUR) Earnings per share (basic) 0,84 0,69 Earnings per share (diluted) 0,83 0,67 Weighted average shares outstanding (in units; basic) Weighted average shares outstanding (in units; diluted)

21 CENTROTEC Quarterly Report 03/2008 Consolidated income statement from July 1 to September in thousand EUR Revenues Other income Changes in inventories of finished goods and work in progress Production for own fixed assets capitalized Cost of purchased materials and services (68.779) (54.369) Personnel expenses (30.282) (26.541) Other expenses (18.697) (15.135) EBITDA Depreciation and amortisation (4.099) (3.931) Operating income (EBIT) Interest income Interest expenses (2.422) (2.347) Result of investments accounted for using the equity method Result before income taxes (EBT) Income tax (3.122) Net income (EAT) Profit or loss attributable to minority interest (24) (56) Profit attributable to share capital holders of CENTROTEC Sustainable AG

22 CENTROTEC Quarterly Report 03/2008 CASH FLOW STATEMENT in thousand EUR Net income before taxes and interest (EBIT) Depreciation Gain/loss on disposal of non-current assets 267 (161) Other non-cash items (373) (3.944) Increase/decrease in accruals (408) Increase/decrease in inventories, trade receivables and other assets that cannot be allocated to investing or financing activities (28.403) (16.642) Increase/decrease in trade payables and other liabilities that cannot be allocated to investing or financing activities Interest paid (6.091) (6.256) Income taxes paid (5.548) (602) Cash Flow from operating activities Acquisition of share in participations - net of cash acquired and outstanding earn outs to be paid (320) (867) Change in cash flow as a result of change full consolidation into At Equity 0 (2.583) Purchase of property, plant and equipment/ intangible assets/ investments/ financial assets/ loans receivable (10.454) (9.366) Proceeds from disposal of property, plant and equipment/ intangible assets/ investments/ financial assets/ loans receivable Cash Flow from investing activities (10.648) (12.426) Proceeds from issuance of shares Proceeds from financial liabilities Repayment of financial liabilities (25.824) (17.421) Cash Flow from financing activities (2.619) (4.214) Change in liquid funds (5.290) (5.677) Liquid funds at the beginning of the financial year (1.249) Liquid funds at the end of the period (3.806) (6.926) 22

23 CENTROTEC Quarterly Report 03/2008 STATEMENT OF MOVEMENTS IN EQUITY from January 1 to September 30, 2008 in thousand EUR Share capital Additional paid-in capital Treasury stock Stock option reserve Deferred tax reserve Currency translation differences in shareholders' equity Fair value adjustment of interest rate derivates Retained earnings and profit carryforward Profit attributable to Minority share capital interest holders of presented CENTROTEC within equity Consolidated equity January 1, (112) (358) (39) Transfer to revenue reserves (16.622) 0 Change from the exercise of options (39) 451 Share option plan Fair Value adjustment interest rate derivatives (193) 92 (101) Currency translation differences Profit attributable to shareholders of CENTROTEC Sustainable AG September 30, (112) (128) (253) (39) Profit or loss attributable to minority interest (69) (69) Changes due to minority acquisitions (45) (45) Currency translation differences (1) (1) September 30, (112) (128) (253) (154) Share capital Additional paid-in capital Treasury stock Stock option reserve Deferred tax reserve Currency translation differences in shareholders' equity Fair value adjustment of interest rate derivates Retained earnings and profit carryforward Profit attributable to Minority share capital interest holders of presented CENTROTEC within equity Consolidated equity January 1, (112) (62) Transfer to revenue reserves (14.316) 0 Changes due to the issue of bonus shares (8.212) 0 Change from the exercise of options Share option plan (463) 499 Fair Value adjustment interest rate derivatives Change in status of CENTROSOLAR GROUP 253 (72) (199) (385) (54.763) (55.166) Currency translation differences (12) (12) Profit attributable to shareholders of CENTROTEC Sustainable AG September 30, (112) (273) Profit or loss attributable to minority interest (78) (78) September 30, (112) (273)

24 CENTROTEC Quarterly Report 03/2008 SEGMENT REPORT from January 1 to September 30, 2008 in thousand EUR Segment Structure Gas Flue Systems & Other Climate Systems Medical Technology & Engineering Plastics Consolidation Statement of Earnings Revenue from third parties Revenue from other segments (1.193) (1.311) 0 0 Chang. in invent. of finished goods and work in progress Cost of purchased materials (46.720) (36.878) ( ) (98.100) (11.898) (10.631) ( ) ( ) Employee benefits costs (16.875) (14.790) (62.066) (57.241) (10.898) (9.591) 0 0 (89.839) (81.622) Other income and expenses (13.934) (11.502) (30.486) (23.193) (4.876) (4.288) 0 0 (49.296) (38.983) EBITDA Depreciation and amortisation (2.823) (2.662) (7.449) (7.803) (1.501) (1.226) 0 0 (11.773) (11.691) Segment result (EBIT) Interest income Interest expense (7.089) (6.809) Result of investments accounted for using the equity method EBT Income tax (5.237) 763 Net income (EAT) Profit or loss attributable to minority interest (66) (78) Profit attributable to shareholders CENTROTEC Sustainable AG Balance Sheet Key Figures* Assets Financial investments accounted for using the equtiy method Loans and financial assets available for sale Entitlement to income tax rebates** Liabilities Financial liabilities Income tax payable** Investments Total investments in property, plant, equipment and intangible assets*** Total * Previous year is related to December, ** Including deferred tax *** Incl. Goodwill and values out of business combinations; year to date; without At Equity result 24

25 CENTROTEC Quarterly Report 03/2008 Explanatory Notes & Responsibility Statement by the Management 1. The CENTROTEC Group The CENTROTEC Group (hereinafter referred to as CENTROTEC) is an international group, the focus of whose activities is on the development, production and sale of energy-saving products for air conditioning systems for building. In addition to its existing business activities, CENTROTEC regards its business purpose as including the establishment and acquisition of new business areas and companies. The group parent, CENTROTEC Sustainable AG with registered office in Brilon, is listed in the Prime Standard in the SDAX and GEX indices under the stock exchange codes CEV, WKN and ISIN DE of the Frankfurt Stock Exchange. It is entered on the Commercial Register of the Local Court of Arnsberg, Germany, under the number HRB The company's head office is located at Am Patbergschen Dorn 9, Brilon, Germany. CENTROTEC Sustainable AG is not part of a superordinate group, and is the ultimate parent company of the group presented in these quarterly accounts. Further financial and corporate information on CENTROTEC is available from the above address, or on the homepage 2. Accounting standards and policies These Quarterly Consolidated Financial Statements at September 30, 2008 have been prepared in accordance with the "International Financial Reporting Standards" (IFRS) for interim financial reporting issued by the International Accounting Standards Board (IASB), as applicable within the European Union (EU), taking account of Section 315a (1) of German Commercial Code. All IFRS standards, and in particular IAS 34 (Interim Financial Reporting), that were valid at the reporting date and the application of which was mandatory at that date, have been applied. The accounting policies explained in the Consolidated Financial Statements for 2007 have likewise been applied in this Quarterly Report, unless otherwise indicated, and apply correspondingly. The Quarterly Report should therefore be read in conjunction with the audited Consolidated Financial Statements at December 31, These interim financial statements have not been subjected to any scrutiny by an independent auditor. The reporting date for the quarter for all companies included in the quarterly consolidated financial statements is September 30, The financial statements have been prepared in euros; unless otherwise indicated, the amounts quoted refer to thousand euros (EUR thousand). For mathematical reasons, there may be rounding differences of +/- one unit. The Management Board points out that the forward-looking statements made in the quarterly financial statements are based on current expectations, assumptions and estimates. These statements are not to be interpreted as guarantees that the forecasts made will prove correct. Rather, future developments and occurrences are dependent on a wide range of factors that are subject to risks and uncertainties, the influencing factors of which lie outside the sphere of influence of CENTROTEC. Actual developments may therefore depart from any implicit or explicit forward-looking statements made. 25

26 CENTROTEC Quarterly Report 03/2008 Explanatory Notes & Responsibility Statement by the Management 3. Corporate and investment structure All direct and indirect subsidiaries of the parent company and group parent are included in the Consolidated Financial Statements of CENTROTEC. A total of 45 companies were comprehensively consolidated at September 30, There have been only insignificant changes in consolidation since the annual financial statements at December 31, The business activities of CENTROTEC are classified according to the segments Gas Flue Systems & Other, Climate Systems, and Medical Technology & Engineering Plastics. The classification is unchanged compared with the annual financial statements at December 31, Changes in the investment structure Consolidated companies In June, CENTROTEC acquired a further 24.9 % in the already comprehensively consolidated EnEV- Air GmbH and now holds an interest of 98.9 %. Ned Air companies were established in Poland and France as part of a drive to expand internationally. Centrotec Energiesparsysteme GmbH, Brilon, was established in July. This company will supply integrated energy-saving systems for buildings as well as provide management and other services in respect of the financing and routine operation of such systems and facilities, and in respect of their energy consumption. Investments accounted for using the equity method At the start of May 2008 CENTROSOLAR Group AG, which is accounted for by the equity method, established a joint venture with Qimonda AG, Munich, Germany, for the manufacture of crystalline solar cells. The production plant will be built near Porto, Portugal, directly next to an existing Qimonda semiconductor plant. The joint venture will be investing around EUR 70 million by September Approximately 70 % of the financing will be arranged via banks. In addition, the partners are currently planning to apply to the Portuguese government for a package of EUcompliant subsidies. The equity investment will contribute 49 % of the equity capital required by the joint venture and will consequently receive 49 % of the cells manufactured. CENTROSOLAR has refinanced its share of the equity capital to be contributed to the joint venture through a capital increase of approximately 9.3 % by way of a private placement. As a result of this transaction, CENTROTEC's interest in CENTROSOLAR fell to just under 30.8 %. On July 16, 2008 Itarion Solar Lda., based in Vila do Conde, Portugal, was entered on the Commercial Register of Vila do Conde, Portugal, under the number That company has issued capital of EUR 20 million, 49 % of which was provided by CENTROSOLAR Group AG and 51 % indirectly by Qimonda AG, in proportion to the stakes held in the new entity by the respective companies. Itarion Solar Lda is a company for the manufacture of crystalline solar cells. Detailed information about the CENTROTEC Group, which is accounted for using the equity method, is to be found in the Consolidated Interim Report of CENTROSOLAR Group AG, Munich, at September 30, That report is available at 26

27 CENTROTEC Quarterly Report 03/2008 Explanatory Notes & Responsibility Statement by the Management 4. Notes on the Quarterly Report Seasonal factors Sales of systems and equipment for the airconditioning of building experience seasonal fluctuation over the course of the year. Sales are influenced by the prevailing weather conditions and the completion cycles of buildings. The normal pattern is that replacement parts and systems experience higher demand during the colder seasons, whereas this business is less pronounced in the second half of the year due to the higher number of new buildings being completed. We therefore post lower revenue in the first half and higher revenue in the second half. Seasonal distribution of revenue, EUR million Quarter * I II III IV Total (e) * As if pro forma excluding Solar, including Wolf Recognition and measurement aspects Subsequent adjustments in the purchase price allocation for acquired non-current assets of bricon ag have increased goodwill by EUR 0.1 million. The acquisition of further shares in EnEv Air prompted a further rise in goodwill of around EUR 0.3 million. Forward contracts to hedge foreign currency risks were concluded in the period under review. As they do not satisfy the special requirements for hedge accounting, they are classified as held for trading and are included in the current assets or liabilities. At September 30, 2008 the new values and their volume were considered to be of no material 27 significance for the net worth, financial position and financial performance of CENTROTEC. Changes in the capital stock and the number of shares, issuance of options 87,314 options were exercised in the first three quarters under the stock options scheme. As a result, the capital stock rose by EUR 87,314 or 87,314 shares to a present EUR 16,580,310, divided into 16,580,310 no-par value ordinary shares. On June 23, 2008, 228,000 options for employees, managing directors and Management Board members were issued at a price of EUR Development in shares total, thousands Total, September 30 16,493 8,204 Addition of shares issued through the exercising of options Addition due to the issuance of bonus shares - 8,212 Total, September 30 16,580 16,469 Conditional Capital III By resolution of the Shareholders' Meeting on May 29, 2008 the capital stock is conditionally increased by a further EUR 756,000, divided into 756,000 no par value shares (Conditional Capital III). The Management Board is authorised to issue warrants for subscription to new bearer shares in the company until December 31, 2014, on one or more occasions. Employees, managing directors and Management Board members of the company and of its affiliated companies pursuant to Section 17 of German Stock Corporation Law are entitled to subscribe. New shares are created where the options are exercised. These pay dividends from the beginning of the financial year in which the options are exercised.

28 CENTROTEC Quarterly Report 03/2008 Explanatory Notes & Responsibility Statement by the Management Treasury stock Pursuant to the resolution of the Shareholders' Meeting of May 24, 2007 the company was authorised until November 23, 2008 to acquire treasury stock which, together with existing treasury stock, represents up to 10 percent of the capital stock at the time of the authorisation taking effect. That authorisation was renewed. Pursuant to the resolution of the Shareholders' Meeting of May 29, 2008, while at the same time cancelling the authorisation to acquire treasury stock granted by the Shareholders' Meeting on May 24, 2007, authorisation was granted until November 27, 2009 to acquire treasury stock which, together with existing treasury stock, represents up to 10 percent of the capital stock at the time of the authorisation taking effect. The price for the acquisition of these shares may not be more than 10 % higher or more than 10 % lower than the closing price in Xetra trading on the Frankfurt Stock Exchange (or in an equivalent successor system) for shares of the same class and features on the ten trading days preceding the acquisition. The Management Board is authorised to offer all or some of the shares thus acquired to third parties in (part) payment of the acquisition of companies or investments in companies, excluding the shareholders' right of subscription. The Management Board is furthermore authorised to retire the company's treasury stock without the need for a further resolution to be adopted by the Shareholders' Meeting. The retirement may be restricted to part of the purchased shares. Related party disclosures Within CENTROTEC, goods and services are purchased by a large number of business partners. They are also supplied by or to persons or companies who can be classified as related parties. Transactions with these persons or companies are conducted at arm's length. Transactions with related parties were presented comprehensively in the Consolidated Financial Statements for 2007 as a matter of principle. All reciprocated services such as the use of infrastructure are billed on generally accepted market terms (arm's length principle). The same applies to service relationships between CENTROTEC and companies which are accounted for using the equity method. As the volume of transactions in the first nine months was of lesser significance, it was classified as having no material importance from the viewpoint of CENTROTEC, as a result of which it is not analysed in greater detail in this report. The CENTROSOLAR Group procured goods to the value of approx. EUR 6.2 million from the CENTROTEC Group. These consisted primarily of supplies of fixing devices and mounting systems for solar modules. CENTROTEC procured goods to the value of around EUR 3.7 million from the CENTROSOLAR Group. Investments accounted for using the equity method Where transactions take place with shareholders of CENTROSOLAR Group AG, which is accounted for using the equity method, the reporting company fundamentally has the option of recognising such transactions in an entirely income-neutral manner resulting in direct recognition of the effects within equity or of recognising the income effects in the income statement. The CENTROTEC Group exercises this option to the extent that the income effects from such transactions are reflected in the income statement (modified parent model). 28

29 CENTROTEC Quarterly Report 03/2008 Explanatory Notes & Responsibility Statement by the Management The gains shown in the income statement arose from the dilution of the interest in CENTROSOLAR Group AG, as CENTROTEC did not participate in a capital increase effected by CENTROSOLAR Group AG. The gain reported reflects the net result of two effects. On the one hand, new shareholders made a contribution to CENTROSOLAR Group AG in the context of a capital increase. This initially increased the entire shareholders' equity of CENTROSOLAR. In return, however, the new shareholders share in the equity that was hitherto allocable to the existing shareholders. As CENTROTEC did not participate in the capital increase, being an existing shareholder, it surrendered to the other shareholders equity portions that were hitherto allocable to it. If a gain arises, this means that the new shareholders contributed a higher value, i.e. paid a premium, compared with the equity portion hitherto allocable to existing shareholders that was being surrendered to new shareholders. The resulting gain, which was also recognised in the equity investment result, amounts to EUR 1,065 thousand. At the reporting date of September 30, 2008 the trading price of CENTROSOLAR Group AG, Munich, was EUR 5.71, producing a fair value in the order of EUR 25.5 million for CENTROTEC's interest. This fell further in October 2008 and is below the reported carrying amount of the equity investment. CENTROTEC recognises impairment losses of the amount by which the carrying amount exceeds the recoverable amount. The recoverable amount is the higher of the fair value of the equity investment less the costs of disposal, or the value in use. The value in use of the interest in Centrosolar as determined by means of an impairment test is higher than the fair value and 29 carrying amount of the equity investment. The equity investment is therefore rolled over at its carrying amount. Assumptions made for the purpose of determining the value in use are subject to uncertainties and are therefore examined and adjusted as necessary if there are indications that changes need to be made. Remarks on balance sheet items The steep rise in trade receivables is attributable to seasonal factors, but also a consequence of strong revenue growth. Other liabilities have risen steeply compared with December 31, This rise is largely attributable to the high rate of business expansion and results from increased liabilities from sales tax, deferred turnover-dependent customer bonuses and outstanding, deferred fixed and variable employee remuneration. as in previous years, it is expected that these two balance sheet items will come down considerably by December 31, 2008 as a result of seasonal variation. The 2008 corporate tax reform passed in Germany in the corresponding period of the previous year, and first observed in the third quarter of 2007, resulted in tax relief for CENTROTEC; this took the form of a non-recurring effect within income of more than EUR 4 million in the prior-year figures at September 30, It is attributable to the reduction of deferred tax liabilities in response to changes in the tax rate. Reportable security holdings and options The totals of reportable shares and stock options at September 30, 2008 are shown in the following table.

30 CENTROTEC Quarterly Report 03/2008 Explanatory Notes & Responsibility Statement by the Management Management Board Shares Options* Dr. Gert-Jan Huisman 65, ,284 Alfred Gaffal 7,000 99,000 Anton Hans 0 31,000 Pieter van der Poel 0 24,000 Dr. Christoph Traxler 3, ,330 Supervisory Board Guido A. Krass 2,400,000 0 Dr. Bernhard Heiss 0 0 Christian C. Pochtler 0 0 CENTROTEC Ordinary shares 16,580,310 0 Treasury stock 12,080 0 * The maximum possible number of options has been indicated. How many options can actually be exercised depends on the attainment of specified targets. Notices pursuant to Section 26 (1) of German Securities Trading Law (WpHG) Withdrawal of the voting rights notice published on July 23, 2007 pursuant to Section 21 (1) of German Securities Trading Law in respect of exceeding the 3 % threshold on July 11, 2007, and of the voting rights notice published on December 3, 2007 pursuant to Section 21 (1) of German Securities Trading Law in respect of exceeding the 5 % threshold on November 27, UBS AG, Zurich, Switzerland, notified us on July 15, 2008 that it withdraws the voting rights notices communicated to us on July 13, 2007 pursuant to Section 21 (1) of German Securities Trading Law in respect of exceeding the 3 % threshold in CENTROTEC Sustainable AG, Brilon, Germany, ISIN: DE , WKN: , on July 11, 2007, and also on November 30, 2007 in respect of exceeding the 5 % threshold in the same company on November 27, 2007, as no thresholds were passed at the dates indicated therein and therefore no obligation of notice existed. 30 UBS AG, Zurich, Switzerland, notified us on July 15, 2008 pursuant to Section 21 (1) of German Securities Trading Law that its share of voting rights in CENTROTEC Sustainable AG, Brilon, Germany, ISIN: DE , WKN: exceeded the threshold of 3 % of voting rights on April 10, 2008 on the basis of its shares and is now 3.03 % (equivalent to 501,020 voting rights) % of the voting rights (equivalent to 348,667 voting rights) are allocable to the company pursuant to Section 22 (1), first sentence, item 1 of German Securities Trading Law. UBS AG, Zurich, Switzerland, notified us on July 15, 2008 pursuant to Section 21 (1) of German Securities Trading Law that its share of voting rights in CENTROTEC Sustainable AG, Brilon, Germany, ISIN: DE , WKN: fell below the threshold of 3 % of voting rights on April 24, 2008 on the basis of its shares and is now 2.74 % (equivalent to 453,020 voting rights) % of the voting rights (equivalent to 348,667 voting rights) are allocable to the company pursuant to Section 22 (1), first sentence, item 1 of German Securities Trading Law. Impax Asset Management Limited, London, UK, notified us on April 24, 2008 pursuant to Section 21 (1) of German Securities Trading Law that its share of voting rights in CENTROTEC Sustainable AG, Brilon, Germany, ISIN: DE , securities identification number: , exceeded the threshold of 3 % of voting rights on July 10, 2007 on the basis of its shares and is now % (equivalent to 496,704 voting rights out of a total of 16,424,164 voting rights) % of the voting rights (equivalent to 496,704 voting rights) are allocable to the company pursuant to Section 22 (1), first sentence, item 6 of German Securities Trading Law.

31 CENTROTEC Quarterly Report 03/2008 Explanatory Notes & Responsibility Statement by the Management Furthermore Impax Group plc, London, UK, notified us on April 24, 2008 pursuant to Section 21 (1) of German Securities Trading Law that its share of voting rights in CENTROTEC Sustainable AG, Brilon, Germany, ISIN: DE , securities identification number: , exceeded the threshold of 3 % of voting rights on July 10, 2007 on the basis of its shares and is now % (equivalent to 496,704 voting rights out of a total of 16,424,164 voting rights) % of the voting rights (equivalent to 496,704 voting rights) are allocable to the company pursuant to Section 22 (1), first sentence, item 6 and second sentence of German Securities Trading Law. Contingent liabilities To accelerate the start of operations by Itarion, bridge financing of EUR 30 million was agreed with two Portuguese banks, for which Qimonda AG and CENTROSOLAR Group AG are jointly and severally liable alongside Itarion Solar Lda. The bridge financing was replaced by a structured overall package of financing from the same banks after the end of the quarter, on October 29, Only Itarion Solar Lda is now directly liable for this structured financing. It will take effect when funds are next drawn (probably during the course of Q4/2008). However, CENTROSOLAR and Qimonda have an obligation towards Itarion Solar Lda to complete the planned production plant and to purchase a proportion of cell output that is in line with their respective interests in the joint company, at cost price plus 3.5 %. In 2008, CENTROSOLAR furnished bank guarantees totalling EUR 2,250 thousand to the Spanish authorities in order to obtain building permits for solar parks. There has been no significant change in CENTROTEC's contingent liabilities since the balance sheet date of December 31, Dividend payments No dividend payment was made for the 2007 financial year, nor is such a payment envisaged for the current financial year. Changes on the Management Board Martin Beijer entered retirement at the start of April 2008 and therefore left the Management Board. 5. Significant events occurring after the reporting date for the quarter The Wolf Group, which is part of CENTROTEC, acquired the assets of Energietechnik Kuntschar + Schlüter GmbH, based in Hesse, with effect from November 1, This company, established in 1978, specialises in the development, construction and maintenance of combined heat and power (CHP) units, and in particular those that are fuelled by renewable energy sources such as bio/sewage gas; it posted revenue of around EUR 5.1 million in The acquisition of this CHP business provides a boost to Wolf's product range of efficient energy-saving systems in the area of co-generation of heat and power. According to initial estimates, the assets to be newly consolidated amount to approx. EUR million, and the liabilities to approx. EUR million. Essential real estate, certain technical facilities and plant and equipment will be rented for an initial three years. No goodwill will probably be recorded. The effects on consolidated revenue and consolidated earnings for 2008 are estimated to be immaterial. There were no further significant events after the reporting date for the quarter. 31

32 CENTROTEC Quarterly Report 03/2008 Explanatory Notes & Responsibility Statement by the Management 6. Management Board and Supervisory Board The members of the Management Board at the reporting date were: Dr. Gert-Jan Huisman, Nijkerk, Netherlands, merchant (Chairman); CEO Martin Beijer, Doesburg, Netherlands, merchant (until April 1, 2008); Gas Flue Systems Alfred Gaffal, Mainburg, Germany, merchant; Climate Systems Anton Hans, Apeldoorn, Netherlands, merchant (since January 1, 2008); CFO Pieter van der Poel, Velp, Netherlands, merchant; Gas Flue Systems Dr. Christoph Traxler, Fulda, Germany, physicist; Medical Technology & Engineering Plastics The members of the Supervisory Board at the reporting date were: Guido A. Krass, Wadhurst, United Kingdom, entrepreneur (Chairman) Dr. Bernhard Heiss, Munich, Germany, entrepreneur Christian C. Pochtler, MA, Vienna, Austria, entrepreneur 7. Other particulars Corporate Governance Code The Management Boards and Supervisory Boards of both CENTROTEC Sustainable AG and of CENTROSOLAR Group AG have, pursuant to Section 161 of German Stock Corporation Law, declared the extent to they have complied with and will comply with the recommendations of the Government Commission on the German Corporate Governance Code. The regularly submitted declarations and explanations are permanently available on the websites of CENTROTEC Sustainable AG and CENTROSOLAR Group AG. Responsibility Statement by the Management In accordance with German Securities Trading Law (WpHG) in conjunction with German Commercial Code (HGB), the Management Board declares: "To the best of our knowledge, and in accordance with the applicable reporting principles for interim financial reporting, the interim consolidated financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the group, and the interim management report of the group includes a fair review of the development and performance of the business and the position of the group, together with a description of the principal opportunities and risks associated with the expected development of the group for the remaining months of the financial year." Brilon, November 10, 2008 Financial Calendar 2008 Nov 10 Publication of 03/2008 Quarterly Report Nov German Equity Forum, Frankfurt Prospective dates in 2009: March 26 Annual Press Conference, Frankft 12/2008 May 14 Publication of 01/2009 Quarterly Report 32

33 _CENTROTEC Sustainable AG Am Patbergschen Dorn 9 D Brilon Tel. +49 (0) Fax +49 (0) ir@centrotec.de