QUARTERLY REPORT III NORDEX AG

Transcription

1 QUARTERLY REPORT III NORDEX AG

2 CONTENTS. 2 Contents Preface 3 Stock performance 4 Commentary on the third quarter of Market trends 5 Business performance 7 Earnings situation 9 Financial condition and net assets 9 Capital spending 10 Research and development 10 Personnel 10 Changes to the Supervisory Board 10 Outlook 11 Notes on the consolidated financial statements for the 3rd quarter of Income statement 12 Balance sheet 13 Cash flow statement 14 Statement of equity movements 15 Explanations 16 Corporate governance bodies /calendar of events 20 Contents

3 PREFACE. 3 Preface Dear shareholders, In the third quarter, we continued our successful turnaround following the completion of our restructuring activities. With your support, we have been able to place the Company on a viable basis for the future in time to make the most of the economic upswing. This is something that our customers have also acknowledged. In the last quarter alone, Nordex doubled its order intake over the previous year, accompanied by a more than 20 % increase in total revenues. With capacity utilization additionally improving, we were also able to initiate an earnings turnaround. In fact, we posted operating profit in the quarter under review for the first time since the end of business in some markets on our strength. This particularly applies to France, where our subsidiary has evolved into the leading project developer. In China, Nordex has gained considerable experience in operating local manufacturing structures via a joint venture established in Today, this is serving us well as the Chinese government stipulates 70 % local content in manufacturing orders. For this reason, we successfully set up rotor blade production operations in China last spring, with work on the first major order already under way. Here and in other markets, we are looking for suitable partners and are already engaged in talks with interested companies. Now, the task facing us is to improve our earnings. For one thing, this involves increasing capacity utilization still further and the contracts required to achieve this have already been signed. As component suppliers are currently operating at close to full capacity utilization, they cannot deliver all the components required at short notice, meaning that we will not be able to execute part of our unexpectedly high volume of new business until next year. At the same time, we must allow for higher working capital requirements in the future as a result of work commenced on current projects. For another, we have implemented further cost-cutting measures. This second earnings improvement program was launched in March To date, around 90 % of the necessary measures have been defined and some 15 % implemented. Over the past few months, we have developed numerous activities outside Germany to benefit from the prosperous international markets. Although Germany will continue to play an important role for Nordex over the next few years, an increasingly growing volume of sales will be generated in other countries. At an international level, we are able to extend Spurred by the boom in our sector, the wind turbine industry has recovered, pulling up the stocks of companies engaged in this sector in its wake. This is a development which is most encouraging for us all. We want the value created over the past few months to be sustained. For this reason as well, efforts to improve earnings will remain on the agenda in the near future. Yours sincerely Thomas Richterich Chief Executive Officer Preface

4 STOCK PERFORMANCE. 4 Stock performance In the third quarter, Nordex stock advanced by 54 % to EUR Mirroring the stocks of other listed regenerative energy companies, it benefited from reinvigorated confidence in the sustained political commitment to clean energy production as well as strong international demand. On top of this however, Nordex has been able to reclaim the confidence of the capital markets following the successful completion of its operative and financial restructuring measures. This is also reflected in the strong interest on the part of analysts and fund managers. Some of these contacts have culminated in the commencement or resumption of regular coverage by analysts. A number of analysts have upgraded their recommendation from underweight to hold or even buy. The average daily trading volumes (Xetra trading) came to around 68,000 shares in the period under review. Even after the expiry of the lock-up period for the new principal shareholders on September 19, 2005, there was no rise in average trading volumes. The key purpose of investor relations is to prevent short-term speculative fluctuation in the stock by means of appropriate management of expectations and by stabilizing the shareholder structure. This is being achieved by building up comprehensive and serious coverage of Nordex stock as well as close and ongoing contact with potential shareholders. Stock performance between July 1 and October 31, 2005 EUR 4,5 4,0 3,5 3,0 2,5 2, Stock performance

5 MARKET TRENDS. 5 Market trends The market for wind turbines rebounded sharply in 2005 following a slight decline in international demand in the previous year. After being adjusted across the industry in 2004, capacity is being utilized in full in the short to medium term following the boom in demand unleashed by North American customers in summer This was primarily due to the early extension until the end of 2007 of the production tax credit (PTC) system, which lowers the income tax burden of wind farm operators in the United States. Given the limited production resources available in the United States, many European plants are now also operating at close to maximum capacity. As a result, numerous turbine producers and suppliers of core components are unable to keep up with demand. The positive trend has led to a global increase in the cost of wind turbine systems on the sell side. With production capacity set to remain limited in the short term, analysts and research institutes expect new installed output to rise by a maximum of some 30 % this year. However, experts see considerable market potential in the years after Thus, one major UK investment bank projects average annual growth of 25 % between now and 2010, with industry association BTM expecting average growth per year of 13.5 % up until This is equivalent to an increase of 466 % in installed capacity from around 48,000 megawatts (end of 2004) to over 271,500 megawatts in United States The United States is expected to evolve into the world s largest market for wind turbines this year. At the moment, projects accounting for a volume of some 2,700 MW are under construction, while an annual figure of around 3,000 MW is expected for 2006 and What are the reasons for this enormous growth in demand? The main factor is the extension of the PTC system until the end of 2007 in tandem with growing political environmental awareness in the wake of the havoc wreaked by the hurricanes in Florida, rising prices of conventional sources of energy as well as consolidation on the part of domestic customers of wind farms. Thus, numerous developers have been taken over by large independent power producers or financial investors. Examples include the acquisition of Seawest Wind Power by AES, of AREC by PPM Energy and the purchase by Goldman Sachs of a stake in Zilkha Renewable Energy. At the same time, utilities are increasingly figuring as wind farm operators. Nordex is making preparations to market its large turbine system in North America. To this end, the N80/N90 series is being adapted to meet the specific requirements of this market. Until now, smaller stall regulated turbines have been supplied for US projects. Germany Uncertainty on the part of investors concerning the future support of renewable energies following the federal elections and ensuing attempts to form a new government in Germany has been largely dispelled with the conclusion of the coalition talks. The provisional upshot of the talks is that responsibility for renewable energies will remain with the Ministry of the Environment (which will be held by the previous governing party SPD), while there is now no longer any talk of amending the Renewable Energies Act. At most, the remuneration for non-coastal wind farms may be adjusted, although a decision on this is not scheduled until Given more stringent rules for the granting of construction permits in some cases in tandem with declining feed-in rates, sales volumes in Germany are expected to taper off. The development of the new offshore market segment has been delayed again, with BTM citing as the reason for this the still unclear cost situation with respect to German projects (bases in water depths of up to 40 meters) and the limited availability of the necessary technology. Market trends

6 MARKET TRENDS. 6 Market trends Western Europe There are signs of substantial growth in the installation of new capacity in Portugal in In the first three quarters, roughly 360 MW were fed into the national grid for the first time, translating into an increase of over 30 % over the previous year during this period. At this stage, tenders have been invited for projects involving volumes of 1,500 1,700 MW for completion by With a share of 13 % of the Portuguese market, Nordex is well positioned as the fourth largest manufacturer. The Irish government is preparing a changeover from the quota to a fixed-price system. Experts initially expect volumes to remain confined to MW. In France, great effort is going into the development of new wind farms now that projects with a capacity of more than 12 MW are also eligible for the statutory feed-in remuneration. As the leader in the project development market, Nordex is working very successfully on its own and third-party projects in France. Asia The high hopes being pinned to the wind power industry in Asia are primarily due to the strong economy in India and the enormous market potential in China. Thanks to a combination of tax allowances and feed-in remuneration, India evolved into the world s third largest market in 2004 (growth of 875 MW). This year, further growth is expected in this market. Nordex has continued its talks with potential regional partners so that it will be able to supply wind turbine systems to India again in With its natural resources, surging energy requirements and political goals providing for massive extensions to the wind energy base (from today 800 MW to 30,000 MW until 2020), China is considered to be one of the biggest wind enery markets of the world in the medium term. In the short term, however, technical problems such as an inadequate public electricity grid will place a damper on growth in this market. In addition, many investors are awaiting the announcement of the remuneration rates for the Renewable Energies Act, which takes effect on January 1, Nordex has had its own Chinese production facilities in Xi an since 1998 and strengthened this commitment at the beginning of 2005 with the establishment of rotor blade production operations there. The next step will be for a joint venture to be established for the production of 1.5 MW turbines. The reasons for this decision include the rising demand for large-scale turbines, the local content requirements applicable to new tenders (70 %) and the savings that can be achieved in production costs. Key financials as of September 30, 2005 As of September 30, 2005 As of September 30, 2004 Change Order receipts % Sales % EBIT before one-off items % Personnel ,6 % Market trends

7 BUSINESS PERFORMANCE. 7 Business performance Following the completion of its recapitalization activities, Nordex benefited in the second and third quarters from the upswing in the wind power market. Order receipts rose by 60 % year on year to roughly EUR 280 million (previous year: EUR 175 million), with new business doubling to EUR million (previous year: EUR 61.2 million) in the third quarter alone. This performance was underpinned by international business, which contributed roughly 60 % of the new orders received (particularly France and Portugal). In the third quarter alone, international business accounted for 83 %. This is largely also reflected in order books. As of September 30, 2005, the value of orders at hand had risen by 88 % to EUR million (previous year: EUR 139 million). Accounting for 78 %, foreign projects dominate the order books. Nearly 70 % of the orders at hand are for projects involving the N80/N90 series, Nordex s largest and most modern turbine. Sales in the first nine months of the year rose by 13 % to EUR million (previous year: EUR million). At EUR 70.4 million, sales in the third quarter were on a par with the previous quarter (second quarter: EUR 69.8 million) and 7.7 % on the year-ago quarter (EUR 65.4 million). In spite of ample order books, it was not possible to generate higher sales due to delays in the manufacturing process caused by shortfalls in the availability of components in the wake of the international boom in demand for wind turbines and the non-availability of credit insurance in the first half of the year. With a delivery period of up to 200 days for core components, this situation caused a backup into the second half of 2005 in some cases. Changes in inventories increased to EUR 9.5 million particularly due to a greater volume of initial work on projects. As of September 30, 2005, total revenues had risen by 20.8 % to EUR million (previous year: EUR million). Roughly 91 % of sales in the period under review were due to turbine construction and the remaining 9 % to service business (previous year: 5.6 %). This increase in service revenues is primarily due to a wider scope covered by the contracts entered into. The foreign share of turbine construction remained steady at 52 % (previous year: 54 %). Exports primarily went to Western Europe and, to a minor extent, Asia. The main source of sales was the N80/N90 series. Nordex derived around 64 % of its sales from these turbines (previous year: 48 %), 29 % from the S70/S77 (previous year: 35 %) and 8 % with the N60/N62 (previous year: 16 %) Turbine construction sales by region (2005 /1/1 2005/9/30) Asia 3 % Germany 48 % Western Europe 49 % (excluding Germany) Business performance

8 BUSINESS PERFORMANCE. 8 Business performance Turbine construction sales by region (2004/1/1 2004/9/30) Asia 5 % America 4 % Germany 46 % Western Europe 45 % (excluding Germany) Turbine construction sales by turbine (2005 /1/1 2005/9/30) N60/62 7 % S70/ S77 29 % N80/N90 64 % Turbine construction sales by turbine (2004/1/1 2004/9/30) N60/62 16 % sub MW 1 % S70/ S77 35 % N80/N90 48 % Business performance

9 BUSINESS PERFORMANCE. 9 Business performance Earnings situation In the year to date, Nordex has reduced its operating loss (Ebit before one-off items) by 51 %. In the period under review, loss before taxes, interest and one-off items came to EUR 9.1 million (previous year: operating loss before one-off items 18.5 million). Roughly 80 % of these losses arose prior to the implementation of the recapitalization as a result of low capacity utilization in the first quarter of With the substantial growth in business volumes, Nordex was able to generate an operating profit of EUR 0.1 million in the third quarter (previous year: loss of EUR 6.2 million). Despite higher capacity utilization, the Company was able to continue working at the lower cost level. The cost of materials ratio held steady at 78 %, while the staff costs ratio contracted again slightly. However, it must be remembered that production capacity was also increased by using temporary staff. The one-off items of EUR 3.1 million primarily relate to current assets and the cost of recapitalization arising in the first half of the year. The net loss for the period contracted by 40 % to EUR 14.6 million (previous year: EUR 24.4 million). In the third quarter of 2005, net loss stood at only EUR 0.6 million (previous year: EUR 9.6 million). Second earnings improvement program Following the completion of its operative restructuring, Nordex embarked on a new earnings improvement program in March 2005 with the aim of achieving an EBIT margin of 10 % in tandem with substantially higher sales in To achieve this goal, it must cut costs on a sustained basis over the next few years. The recently completed restructuring program generated savings of over EUR 73 million. This year, Nordex has defined roughly 90 % of the necessary cost-cutting activities in detail and assigned staff with responsibility for individual implementation modules. The definition phase is to be completed by spring 2006, upon which work on implementing the measures will be commenced. At the end of September 2005, roughly 10 % of the planned activities had been executed. This should show up in earnings in the next few quarters. Financial condition and net assets In the third quarter, the Nordex Group s financial condition was reinforced decisively with the recapitalization program which had been successfully completed in spring As a result, the equity ratio rose to around 27 % as of September 30, 2005 (December 31, 2004: 1.3 %). At the same time, Nordex had net cash at banks of around EUR 10.3 million on the balance sheet date, replacing the net bank liabilities of around EUR 28.2 million which it had held on December 31, Changes in current assets are primarily due to greater stockpiling of inventories. In preparation for shortterm orders, Nordex was forced to invest in the procurement of components. Inventories were up 47.4 % as of September 30, 2005, climbing to EUR 70.0 million (December 31, 2004: EUR 47.5 million). Trade receivables and future receivables from construction contracts contracted by EUR 14.1 million allowing for advance payments received. Among other things, this is due to a higher ratio of advance payments of % (December 31, 2004: %). Following the completion of the recapitalization, liabilities have continued to decline this year. They were down 25.5 % as of September 30, 2005, dropping to EUR 85.9 million (December 31, 2004: EUR million), underpinned in particular by the significant decline in bank liabilities from EUR 37.6 million to EUR 3.7 million. All told, the working capital ratio widened over the previous year to 13.3 % (December 31, 2004: 7.3 %) but contracted again during the year. As of June 30, 2005, it stood at 16.8 %. Within this expansionary sector, a level of over 30 % is normal. Business performance

10 BUSINESS PERFORMANCE. 10 Business performance A positive net cash flow of EUR 4.6 million has been generated in the year to date. Cash inflow from financing activities of EUR 35.6 million was offset by a cash outflow from operating and investing activities of a combined EUR 31.0 million primarily resulting from additional inventories in response to growing business volumes. Capital spending In the period under review, the Nordex Group increased its non-current assets by a total of some EUR 6.4 million (previous year: EUR 9.3 million). Capital spending focused on capitalized development activities (EUR 4.0 million), particularly product maintenance and further development of the N80/N90 series. In autumn 2005, Nordex released a new generation of the N90 with an output of 2,500 kw and onshore/offshore capabilities. Nordex spent roughly EUR 1.1 million on operating and business equipment and EUR 0.5 million on plant and machinery, while additional funds were channeled into concessions, land and buildings. Research and development Engineering activities concentrated on the development of the new N90/2,500 kw. Compared with its predecessor, this turbine has been optimized in many respects. This particularly concerns a reduction in the operating load of the turbine. For the first time, a new type of gearbox, which Nordex has developed in conjunction with its supplier, is available as an option. This particularly compact and light-weight component features an innovative output distribution. The gearbox can be considered to represent the first stage of a system which will be used in future turbines with a capacity of over 3 MW. A further special aspect is the fact that the N90 is available as a fast or slow runner, meaning that it is suitable and also certified for strong and weak-wind sites. Nordex has also designed a new rotor blade for the N90, which can be fitted to both the old and the new model. This development work was completed in the first half of the year. In addition, the engineering department was involved in the establishment of a facility for the production of 30 meter blades in China. These activities also included redesigning the rotor blade and structural testing. Other activities entailed the maintenance of and detail improvements to the S70/77 and N60 series. Personnel As at September 30, 2005, the number of employees within the consolidated Nordex Group rose by 1.6 % to 702 (previous year: 691). In this connection, the number of employees at foreign subsidiaries increased by a disproportionately strong 57 %. At the same time, the Company made greater use of temporary staff particularly in the production area. On September 30, 2005, 115 external temporary employees were working across the Nordex Group. This proportion is to be reduced again step by step in favor of internal staff. Changes to the Supervisory Board On June 10, 2005, the shareholders elected a new Supervisory Board at Nordex AG s annual general meeting. The new Supervisory Board comprises the following members: Dr.-Ing. Hans Fechner, Düsseldorf, chairman of the management board of G. Siempelkamp GmbH & Co. KG in Krefeld; Jan Klatten, Munich, managing director of Momentum Beteiligungsgesellschaft mbh in Munich; Martin Rey, Weßling, managing director of Babcock & Brown GmbH in Munich and executive director of Babcock & Brown Limited in Sydney, Australia; Jens-Peter Schmitt, Haan, attorney at law; Yves Schmitt, Gelnhausen, managing director of CMP Capital Management-Partners GmbH in Berlin and CMP Fonds I GmbH in Berlin; and Dr.-Ing. Hans Seifert, Krailling, management Business performance

11 OUTLOOK. 11 Outlook consultant. On July 4, 2005, the Supervisory Board elected Mr. Yves Schmitt chairman and Mr. Jens-Peter Schmitt deputy chairman. In addition, the following committees were formed: management committee, audit committee, committee for strategy and engineering. Outlook Given the strong demand, Nordex has raised its order receipt forecast for fiscal 2005 from EUR 300 million to over EUR 350 million (previous year: EUR 237 million). Otherwise, it is still on track to meeting its full-year targets due to expected delays in the delivery of components for new contracts not yet included in the production plan. Nordex projects a business volume of a total of EUR 280 million for fiscal 2005 (previous year: EUR 214 million). For the fourth quarter, this translates into rising capacity utilization, a business volume of around EUR 100 million as well as a profit for the quarter. However, it will not be able to fully recoup the losses sustained in the first quarter of 2005 in particular over the year as a whole. Management projects an operating loss of around EUR 2 million for fiscal 2005 as a whole. Spurred by consistently high capacity utilization, the Company expects to achieve net profit for As it has reserved the necessary volumes with its main suppliers at an early stage, deliveries of the necessary core components have for the most part been secured for With business volumes expected to come more than EUR 400 million, Nordex projects an EBIT margin of 2.5 %. Sales growth of over 20 % is forecast for fiscal 2007 and 2008, respectively, with earnings expected to improve step by step. Outlook

12 FINANCIAL STATEMENTS OF NORDEX GROUP INCOME STATEMENT (IFRS). 12 Financial statements Consolidated IFRS income statement for the Nordex Group for the period commencing January 1, 2005 and ending September 30, /1/2005 1/1/2004 7/1/2005 7/1/2004-9/30/2005-9/30/2004-9/30/2005-9/30/2004 EUR 000s EUR 000s EUR 000s EUR 000s Sales 175, ,751 70,418 65,390 Changes in inventories and other own work capitalized 12, ,914 1,081 Total revenues 187, ,354 81,332 66,471 Other operating income 2,765-2, ,178 Cost of materials -146, ,004-64,214-53,188 Personnel costs -25,692-25,618-8,384-8,475 Depreciation/amortization -8,758-8,602-3,149-3,244 Other operating expenses -19,053-15,923-5,760 1,730 Operating profit/loss before one-off items -9,141-17, ,884 one-off items -3,098-2, ,516 Operating profit/loss after one-off items - 12,239-20, ,400 Net interest expenditure -2,372-3, ,982 Goodwill amortization Profit/loss from ordinary activity -14,611-24,871-1,463-10,382 Income taxes 87 1, ,417 Other taxes Net loss/income for the year -14,585-24, ,635 Financial statements

13 FINANCIAL STATEMENTS OF NORDEX GROUP BALANCE SHEET. 13 Financial statements Nordex Group balance sheet as of September 30, 2005 Assets 9/30/ /31/2004 EUR 000s EUR 000s Non-current assets Intangible assets 23,817 24,727 Property, plant and equipment 21,513 23,300 Financial assets 6,211 6,178 51,541 54,205 Current assets Inventories 70,042 47,528 Trade receivables and future receivables from production orders 27,245 29,931 Receivables from affiliated companies 4,837 3,240 Receivables from subsidiaries Other assets 10,762 10,570 43,037 44,604 Securities 4,592 4,592 Cash equivalents 14,028 9, , ,131 Deferred taxes 25,091 23,895 Prepaid expenses 1,400 2, , ,382 Shareholders equity and liabilities 9/30/ /31/2004 EUR 000s EUR 000s Shareholders equity Issued share capital 58,819 52,050 Share premium account 16, ,843 Retained earnings -28,076-4,664 Foreign-currency equalization item Profit carried forward 24, ,137 Net loss for the fiscal year -14,586-7,712 56,810 2,490 Provisions Pension provisions Tax provisions 453 2,257 Other provisions 58,091 59,451 58,920 62,084 Liabilities Liabilities to banks 3,688 37,566 Future liabilities from production orders 0 0 Trade payables 33,942 39,842 Advance payments received 35,383 23,989 Liabilities to affiliated companies Liabilities to subsidiaries 0 0 Other liabilities 12,652 13,455 85, ,247 Deferred taxes 5,954 5,182 Deferred income 2,157 1, , ,382 Financial statements

14 FINANCIAL STATEMENTS OF NORDEX GROUP CASH FLOW STATEMENT (IFRS). 14 Financial statements Consolidated cash flow statement (IFRS) for the period from January 1, 2005 until September 30, /1/2005-9/30/2004-9/30/2005-9/30/2004 EUR 000s EUR 000s Net profit/loss for the year -14,585-24,427 Depreciation on non-current assets 8,787 9,524 Decrease/increase in pension provisions 0 46 Increase/decrease in other provisions and tax provisions -3,164-7,888 Loss from disposal of non-current assets Increase/decrease in inventories -22,514 26,246 Increase/decrease in trade receivables and future receivables from production orders as well as other assets not assigned to investing or financing activities 2,318 5,443 Decrease/increase in trade payables and other liabilities not allocated to investing or financing activities 4,663-14,392 Changes in deferred taxes Cash flow from operating activities -24,919-5,387 Payments received from the disposal of property, plant and equipment/intangible assets Payments received from the disposal of financial assets Payments made for investments in property, plant and equipment/intangible assets -6,123-4,730 Payments made for investments in financial assets Cash flow from investing activities -6,123-4,019 Payments received on account of capital increase 69,539 0 Change in short-term bank loans -33,878 9,295 Cash flow from financing activities 35,661 9,295 Cash change in liquidity 4, Cash and cash equivalents at the beginning of the period 9,407 2,152 Effect of changes in exchange rates Cash and cash equivalents at the end of the period 14,028 1,930 Financial statements

15 FINANCIAL STATEMENTS OF NORDEX GROUP STATEMENT OF EQUITY MOVEMENTS. 15 Financial statements Consolidated statement of equity movements (IFRS) for the period from January 1, 2005 until September 30, 2005 Issued Share Retained Foreign Consolidated Consoli- Total capital premium earnings currency net profit/losst dated net equity earnings equalization item carried forward profit/loss EUR 000s EUR 000s EUR 000s EUR 000s EUR 000s EUR 000s EUR 000s Jan. 1, , ,843-4, ,137-7,712 2,490 Consolidated net loss for the year (stub fiscal year) added to consolidated net profit/loss carried forward ,712 7,712 0 Withdrawals from share premium account 0-147, , Income from capital reduction -46, , Capital increase Cash capital increase 41, ,640 Non-cash capital increase 11,974 15, ,899 Provisions from differences from first-time consolidation 0 15,050-15, Provisions from netting of IPO costs 0 8,362-8, costs of capital increase Exchange rate differences Consolidated net loss for ,586-14,586 Sep. 30, ,819 17,123-28, ,053-14,525 56,810 for the period from October 1, 2003 until September 30, 2004 Issued Share Retained Foreign Consolidated Consoli- Total capital premium earnings currency net profit/losst dated net equity earnings equalization item carried forward profit/loss EUR 000s EUR 000s EUR 000s EUR 000s EUR 000s EUR 000s EUR 000s Oct. 1, , ,843-3, , ,095 44,866 Transfer of consolidated cumulative losses 2002/2003 to consolidated net profit/loss carried forward , ,095 0 Disposal of hedge 0 0-1, ,048 Exchange rate differences Consolidated cumulative loss 2003/ ,457-33,457 September 30, , ,843-4, ,680-33, Financial statements

16 NOTES GENERAL. 16 Notes The Nordex Group s interim financial statements as of September 30, 2005 are compiled in accordance with the International Financial Reporting Standards (IFRS). We have followed the presentation rules laid down in the German Commercial Code. The notes have been compiled in the interests of maximizing clarity, conciseness and materiality. The accounting, valuation and consolidation methods used in compiling the Nordex Group s consolidated financial statements provided for by IFRS but deviating from the German Commercial Code primarily concern intangible assets (IAS 38), the use of the percentage-of-completion method for measuring inventories and receivables, accounting for deferred taxes, the capitalization of leases and the recognition of pension provisions and other provisions (IAS 37). As a matter of principle, the consolidated domestic and foreign companies are included in Nordex AG s consolidated financial statements on the basis of IFRS accounting principles. The financial statements for the quarter ending September 30, 2005 include Nordex AG as well as all the companies which are capable of being controlled and which are of material importance for depicting the Group s assets, financial condition and earnings. Shares in subsidiaries of a subordinate importance are recognized at historical cost based on IAS 39 as they do not constitute marketable assets for which a fair value can be reliably determined. Notes

17 NOTES ON BALANCE SHEET. 17 Notes 1. Non-current assets As of September 30, 2005, capital spending came to EUR 6.4 million, disposals at residual book values EUR 0.3 million and depreciation expense EUR 8.8 million. Of the additions, a sum of EUR 4.0 million concerns research and development costs primarily related to the optimization and enhancement of the large N80/N90 turbines. As well as this, a sum of EUR 1.1 million was spent on operating and business equipment as well as EUR 0.5 million on machinery and technical equipment. 2. Current assets Inventories increased as of September 30, 2005 primarily due to the procurement of large components for current and impending orders. Trade receivables as of September 30, 2005 declined from EUR 22.0 million to EUR 16.7 million. The trade receivables carried as of September 30, 2005 include value adjustments of EUR 6.4 million. Of the future gross receivables from construction contracts of EUR 66.5 million, advance payments received of EUR 55.9 million were capitalized. In addition, advance payments received of EUR 35.4 million were assigned to liabilities for production orders. Other assets are valued at EUR 10.8 million as of September 30, 2005, i. e. virtually unchanged over December 31, Receivables with a residual maturity of more than one year were valued at EUR 0.6 million. Other receivables include tax recovery claims of EUR 4.6 million. 3. Deferred taxes Deferred tax assets include EUR 25.0 million by way of loss carryforwards, which the Company expects to be able to deduct from corporate and trade tax liability. 4. Prepaid expenses This item primarily comprises advance payments for insurance policies. 5. Shareholders equity Shareholders equity increased to EUR 56.8 million as a result of the cash capital increase of EUR 41.6 million and the non-cash capital increase of EUR 27.9 million. In addition, reference is made to Nordex AG s statement of equity movements. Expense in connection with the capital increase is recognized in equity under reserves from the netting of capital increase costs. All in all, the capital increase costs of EUR 1.1 million were offset by deferred taxes of EUR 0.4 million. 6. Short-term liabilities At EUR 33.9 million, trade payables are EUR 5.9 million lower than on December 31, Provisions contracted by EUR 3.2 million to EUR 58.9 million and primarily relate to general and individual guarantees in connection with order provisions as well as post-completion costs. Notes

18 NOTES ON INCOME STATEMENT. 18 Notes 1. Sales Sales increased by 13.1 % over the same period one year earlier from EUR million to EUR million. They break down by region as follows: 1/1/2005 9/30/2005 1/1/2004 9/30/2004 EUR mn EUR mn Germany Rest of Europe Rest of world Total Changes in inventories and other own work capitalized Changes in inventories and other own work capitalized totaled EUR 12.5 million in the first nine months of On the one hand, inventories fell by EUR 8.3 million while, on the other, other own work capitalized materially comprised research and development expenditure of EUR 4.2 million. 3. Other operating income Other operating income comprises grid feed-in income and credit notes issued by suppliers, among other things. 4. Cost of materials The cost of materials breaks down as follows: 1/1/2005 9/30/2005 1/1/2004 9/30/2004 EUR mn EUR mn Cost of raw materials and supplies Cost of services bought The cost of raw materials and supplies also includes the cost of components and energy. The cost of services bought results from external freight, changes in order provisions, commission, externally sourced order-handling services and external staff. Notes

19 NOTES ON INCOME STATEMENT. 19 Notes 5. Personnel costs 1/1/2005 9/30/2005 1/1/2004 9/30/2004 EUR mn EUR mn Wages and salaries Social security and pension and support expenses Group employee numbers were as follows: On September 30 Fiscal Fiscal 2003/ Change 11 Personnel numbers as of September 30, 2005 were up 11 compared with the same period of fiscal 2003/ Other operating expenses Other operating expenses include travel expenses, legal and consulting costs, rentals and leasing payments. 7. Net interest expenditure 1/1/2005 9/30/2005 1/1/2004 9/30/2004 EUR mn EUR mn Other interest and similar income Interest and similar expenses One-off items The one-off items carried as of September 30, 2005 primarily comprise writedown charges taken on current assets as well as the recapitalization costs not assigned to the reserves for netting the cost of the capital increase. Notes

20 CORPORATE GOVERNANCE BODIES CARLENDAR OF EVENTS. 20 Corporate govonance bodies Stock and stock options held by members of the Company s corporate-governance bodies Stocks Stock options Carsten Pedersen, COO Sales 9,000 and a further 2.83 million through 16,666 a 50 % holding in Nordvest A/S Thomas Richterich, President and Chief Executive Officer 250,000* Dr. Hansjörg Müller, Chief Operating Officer 200,000* *Sub-share with the financial investors Termine April 26, 2006 Report on fiscal 2005 with press and analyst conference Production credits Nordex AG Bornbarch Norderstedt Germany Telephone Fax Design Heuer & Sachse Werbeagentur GmbH, Paul-Dessau-Straße 3c, Hamburg Lithografie LITHOKONTOR WENIG GmbH, Hamburg, Photos Nordex Corporate governance bodies