Quarterly Report Q1/2006 of CENTROTEC Sustainable AG

Transcription

1 Quarterly Report Q1/2006 of CENTROTEC Sustainable AG Our Earth in Focus

2 Highlights Rise in revenue from EUR 32.7 million to EUR 62.0 million; of this, EUR 26.2 million from consolidation of CENTROSOLAR AG; largely organic revenue growth of 11 % in the remaining segments Organic growth in Gas Flue Systems segment still in single figures at 8 %, largely due to the particularly long winter with high snowfall (even more than in previous year) double-digit growth expected for remainder of year Climate Systems burdened by integration costs in first half of year CENTROSOLAR achieves successful, profitable start to year in spite of long winter Medical Technology & Engineering Plastics posts 16 % rise in revenue; however, not possible to pass on higher raw materials costs to customers in full Net earnings (EAT) up EUR 3.3 million on prior-year figure at EUR 5.5 million EPS (earnings per share) rise to EUR 0.67 (previous year EUR 0.27), of which EUR 0.46 attributable to one-off effects (capital increases) from CENTROSOLAR EBIT down EUR 0.1 million on prior-year period at EUR 3.6 million Equity ratio at high level of 47.2 % (December 31, 2005: 47.6 %) EUR 9.7 million rise in working capital since start of year to EUR 41.5 million primarily due to seasonal factors (build up of inventories) Net financial liabilities of EUR 54.9 million represents an increase of EUR 8.6 million on start of year, in particular due to rise in working capital (including at CENTROSOLAR) Expansion of CENTROSOLAR continues with full takeover of Solara AG (start of January) and Biohaus (in Mai) 1

3 Outlook The healthy current level of orders for Gas Flue Systems, continuing growth for Climate Systems and Medical Technology & Engineering Plastics and the high demand for Solar Systems will in all probability lead to a strong second half of 2006 As a result of the moves by CENTROSOLAR AG to switch to the Prime Standard of the Frankfurt Stock Exchange, it is currently not possible to publish any up-to-date forecasts for the Solar Systems segment. Because of this, the CENTROTEC forecasts for the 2006 financial year published in February (revenue EUR 330 to 360 million; operating EPS EUR 1.85 to 1.95) have not been adjusted to reflect the acquisition of Biohaus. The detailed forecasts for the Gas Flue Systems, Climate Systems and Medical Technology & Engineering Plastics segments are proving accurate In addition, further gains will arise within CENTROTEC as a result of from dilutive effects from capital increases by CENTROSOLAR AG Medium-term EPS growth in excess of 20 % p.a. expected Strategic emphasis on sustainability systematically maintained 2

4 1. Consolidated entities The structure and extent of consolidation of the CENTROTEC Group have changed in the accounts for the first quarter of 2006 compared with the position at December 31, 2005 as a result of the following business developments: at the start of January, Solara AG, Hamburg, and its subsidiary Solara Sonnenstromfabrik Wismar GmbH, Wismar, were acquired in full. These two companies, which had still been consolidated at 8.66 % using the equity method in the accounts for 2005, have been fully consolidated within CENTROSOLAR AG since the start of the year. 2. Development in revenue and earnings: revenue rises to EUR 62.0 million CENTROTEC Sustainable AG posted revenue of EUR 62.0 million in the first three months of the year. Revenue for the prior-year quarter was EUR 32.7 million. Approx. EUR 26 million of this substantial rise in revenue is attributable to the consolidation of the Solar Systems segment. However, even without the Solar Systems segment revenue would have shown a rise of 10.9 %. The following table shows the revenues for the current segment structure: Revenue in EUR million Q1/2006 Q1/2005 Year-on-year change Gas Flue Systems % Climate Systems % Solar Systems n.a. Med. Technology & EP % Total % 3 With the exception of the Solar Systems segment, growth is attributable predominantly to organic growth. The growth rate is highest for the Medical Technology & Engineering Plastics segment. In the Gas Flue Systems segment, growth was still hampered somewhat by the long, snow-bound winter. Higher growth rates are to be expected over the next quarters. The consolidation of CENTROSOLAR also resulted in a significant change in gross income (net revenue less direct material costs). In view of the lower degree of manufacturing penetration of solar activities compared with the longer-established segments, the gross income ratio fell to 34 % (previous year excluding Solar Systems 58 %). This change also reflects the higher direct material costs in all segments, caused to some degree by the rise in the price of oil. EBITDA rose from EUR 4.9 million to EUR 5.5 million. Earnings before interest and taxes (EBIT) for the CENTROTEC Group fell in absolute terms by EUR 0.1 million, to EUR 3.6 million. This also includes amortisation on the intangible assets that arose in the Solar Systems segment during the purchase price allocation process. The EBIT margin in the first three months was 5.8 % (previous year 11.4 %). This halving of the margin is largely due to the Solar Systems segment's high share of revenue. On the one hand, CENTROSOLAR has lower gross margins and EBIT margins as a result of its structure. On the other hand, its capacity utilisation and therefore its margin are particularly low in the first quarter due to high seasonality (Solar EBIT margin for Q1: 2.6 %).

5 As a result of further acquisitions in the Solar Systems segment, paid for in part by the issue of new shares, the shareholders of CENTROTEC experienced a dilution in the interest of CENTROSOLAR AG, which fell from % at December 31, 2005 to % at the reporting date of March 31, This reduction in the ownership interest was reflected in the income statement, as in the financial statements for 2005 (modified parent model) and resulted in a positive earnings effect of EUR 3.6 million. To maintain operational transparency, we choose deliberately not to report this effect in EBIT, but rather as separate income (profit from transactions with minority interests), with the result that the results for the segments are not affected. The difference arising as a result of the reduction in the ownership interest was booked to income and determined from the difference in the shareholders' equity of the CENTROSOLAR sub-group that was attributable to CENTROTEC at the reporting dates before and after the date on which dilution occurred. The cumulative earnings effect is as follows: Earnings effect in EUR '000 Proportional shareholders' equity prior to dilution 17,132 Proportional shareholders' equity after dilution 20,771 Earnings effect from the involvement of minority interests 3,639 The pre-tax profit (EBT) rose to EUR 6.5 million (previous year EUR 3.2 million) as a result of the extraordinary effect of EUR 3.6 million outlined above. As this profit from the transaction with minority interests is not taxable, the net profit for the period after interest and taxes (EAT) rose disproportionately from EUR 2.2 million in Q1/2005 to EUR 5.5 million. Earnings per share (EPS) consequently rose to EUR 0.67 (previous year EUR 0.27) despite the higher number of shares. Without the effect described above, EPS would have been EUR Development of the segments 3.1. Gas Flue Systems In the Gas Flue Systems segment, revenue in the first three months was increased from EUR 16.3 million to EUR 17.7 million (+ 8.2 %) despite the long period of winter weather. This also corresponds to organic growth, as the revenue of Ubbink Econergy Solar of EUR 0.4 million was reallocated to the Solar Systems segment within the revenue for the corresponding quarter of Key figures in EUR '000 Q1/2006 Q1/2005 Revenue from third parties 17,658 16,314 Revenue from other segments Cost of materials (8,970) (7,488) Employee benefit costs (4,088) (3,649) Depreciation and amortisation (701) (654) Other income and expense (2,530) (2,987) EBIT 1,645 1,602 4

6 The heating sector as a whole had a satisfactory first quarter. The leading boiler manufacturers are expecting growth to gain further momentum over the next few months. Particularly in Germany, the winter weather was especially long, with high snowfalls, with the result that revenue there was only marginally up on the previous year. On the other hand, business in the Netherlands, France, Belgium and Italy produced double-digit growth rates. The acquisition costs for certain materials and purchased parts continued to rise on the previous year. In the context of these cost increases, it was simultaneously possible to increase the prices of our products thanks to our good market position. EBIT was slightly up on the prior-year figure at EUR 1.6 million. The EBIT margin, which is below the average for the year for seasonal reasons, slipped back marginally from 9.8 % in the previous year to 9.2 %. Further improvements to stabilise the margins in the production and distribution sphere have been implemented. These include extended facilities in Germany and the construction of a new logistics centre in Belgium, which is scheduled to go into operation this September. The Gas Flue Systems segment expects to make good progress in The forecast annual revenue of EUR 79 to 81 million and the rise in EBIT can be confirmed, as the rate of growth will pick up in the second half of the year. In addition to the seasonal effect described, the following expectations play a part: on the one hand, progress is being made with increasing our international spread. Activities in Eastern Europe and Spain in particular are being stepped up, underpinned by the recruitment of additional personnel for European key account management. Greater attention will likewise be devoted to the Asian and US sales markets in the medium term. On the other hand, the research and development activities in this segment have been restructured and will be coordinated even more efficiently in the future Climate Systems Total revenue in the Climate Systems segment totalled EUR 10.2 million in the first three months, and was thus EUR 1.1 million or 12.2 % up on the previous year. The major driving forces of growth were the industrial market for heat recovery systems in the Netherlands, nascent growth for residential buildings outside the Netherlands and the initial consolidation of Innosource. 5 Key figures in EUR '000 Q1/2006 Q1/2005 Revenue from third parties 10,203 9,097 Revenue from other segments Cost of materials (4,586) (3,759) Employee benefit costs (3,004) (2,614) Depreciation and amortisation (270) (148) Other income and expense (1,234) (8,758) EBIT 1,160 1,836 The result for the segment in the quarter under review was burdened in particular by the integration costs, which were higher than expected. The explanation is that areas and functions within the Climate Systems segment were combined to a much greater degree and at a much swifter pace than had originally been planned. From mid-way through the year, the purchasing, production, logistics, warehousing, planning,

7 research & development and in-house sales force will be centralised at Staphorst. Personnel will consequently also be laid off at the previous Innosource base, as is essence only the sales function will then be based at Lisse, which is around 200 km from Staphorst. The costs of these extensive measures were already incurred in part in the first quarter. The expenses still to be absorbed will continue to produce negative results at Innosource in the second quarter. In all, Innosource diminished the result for the segment by around EUR 0.5 million, though this dip is also to some extent due to Innosource's seasonally asymmetrical revenue pattern. By virtue of its numerous new products, we expect to see substantially higher Innosource revenues in the second half of the year. The integration of Innosource will then no longer be diminishing the result. The licence agreement with Fiwihex B.V., Almelo (NL), is expected to stimulate growth within the Brink Group. Brink has secured the production and distribution rights for a new heat exchanger technology based on the thermal conductivity of copper from the developer Fiwihex. This technology (which goes under the product name of Breathing Window) offers several advantages: it exhibits a very high level of efficiency; it permits very complex designs; only an extremely low level of condensation occurs, therefore avoiding the typical problems of freezing. It is therefore ideally suited to small, non-central ventilation systems with heat recovery. Although there are already products in what is a highly promising sub-market thanks to its much greater potential unit total relative to the new-building sector the existing solutions are very expensive due to their high production costs. The new design of heat exchange is simpler and more compact to make, thus significantly cutting the production costs, with the result that a new market segment with considerable growth potential is being tapped. This licence agreement, valid worldwide and with almost worldwide exclusivity, runs initially for five years. Brink is planning to make its first deliveries of the standard products in mid The tougher energy-saving standards that took effect in the Netherlands on January 1, 2006 will by their very nature only filter through into the figures after a certain time lapse. At present, almost all the projects being handled had already been given the go-ahead before the end of Although business is expected to pick up in the second half of the year, a substantial rise in revenue is not expected until Ventilation with heat recovery ought by then to become the norm in new buildings. The need for further-reaching energy savings in the residential sphere is currently fuelling an interesting political debate on what scope exists in the renovation sector. We expect to see such systems in the renovation sector forcefully promoted in one to two years by energy-saving guidelines becoming law. We are ideally prepared with Innosource's products and non-central heat recovery systems. The European market for ventilation systems with heat recovery is becoming increasingly attractive outside the Netherlands, too. CENTROTEC is well positioned by virtue of its companies. The Climate Systems segment has in addition started to increase its presence throughout Europe and will be represented by its own companies in the UK and Austria in the near future. Revenue is expected to reach EUR 46 to 48 million (previous year EUR 39.6 million) in

8 3.3. Solar Systems The Solar Systems segment posted revenue of EUR 26.2 million in the first quarter. This corresponds to almost 15 % of the scheduled annual revenue of at least EUR 175 million. This figure is at the upper end of the quarterly share of the photovoltaics sector, which is typically able to post sales amounting to 10 to 15 % of the volume for the full year for sales to end customers. An added factor was that this year, there was snow lying on Germany's roofs for around two months, preventing any "snow-free time windows" during which solar energy systems could be installed. As a result of this, installers extended their stock levels only to a limited extent, whereas the level of finished and semi-finished products at producers rose. This led to weak overall capacity utilisation in the solar sector and meant that the degree to which fixed costs were being met was unrepresentative. The market has recovered strongly since April. 7 Key figures in EUR '000 Q1/2006 Q1/2005 Revenue from third parties 26, Revenue from other segments 0 0 Cost of materials (24,682) (332) Employee benefit costs (2,240) (14) Depreciation and amortisation (612) (1) Other income and expense 2,049 (52) EBIT 684 (23) The key figures for Q1/2005 in the above table include the figures for the reallocated entity Ubbink Econergy Solar. It should be noted by way of explanation that the item Other income and expense includes EUR 4.0 million resulting from the change in inventories (and in particular the build up of stock levels). At the procurement end, the prices of silicon have continued to rise. It was, however, possible by and large to pass on this rise in direct material costs to customers in the form of price increases. On the procurement market, many intensive discussions were held with suppliers with the aim of assuring existing supply agreements, but also to generate supplementary volumes for the production and distribution of solar modules. Various purchases could be made on the spot market. On the other hand, one supplier was behind with deliveries. In all, the supply targets for the first quarter were met. The Solar Systems segment has continued to work on expansion projects. The acquisition of Biohaus PV Handels GmbH, Paderborn, is one outcome of this expansion policy. CENTROSOLAR is in addition focusing intensively on the establishment and expansion of its international markets. Here again, Biohaus is an important building block in the strategy thanks to its Spanish partner Isofoton. Further steps will follow. In parallel, the company is recruiting its own sales staff in Southern Europe and pushing ahead with its search for venture partners and takeover candidates. The prospects for the Solar Systems segment are bright. The individual companies in this segment are on track and will as matters stand achieve their targets. Because of the additional revenue and earnings from Biohaus, the previous target figures are out of date. As a result of the planned switch to the Prime Standard of Deutsche Börse and the listing prospectus that is to be issued for that purpose, CENTROSOLAR AG

9 is unable to publish target figures of its own until it has been admitted. We expect that research reports offering an external assessment of the future prospects of CENTROSOLAR will be appearing shortly. Once it has secured admission, we intend to resume our accustomed in-depth communication of our plans for this segment too Medical Technology & Engineering Plastics The Medical Technology & Engineering Plastics segment was able to boost revenue by over 15 % from EUR 6.9 million to EUR 8.0 million. This growth was generated in particular by the strong revenue performance in Germany, Denmark and the special area of fibre composites. Centrotec Composites in specific, a company that specialises in the processing of light, heat-shaped composite materials, achieved a substantial leap in revenue thanks to the start of volume production of automotive components. Business in the area of manufacturing loudspeaker cones, which got underway in the previous quarter, is moreover bearing fruit. With CENTROTEC having established that area from scratch since 2001, this now represents the breakthrough. Composites, a lightweight, highstrength material of the future, has potential for high growth rates for many years to come. Key figures in EUR '000 Q1/2006 Q1/2005 Revenue from third parties 7,990 6,914 Revenue from other segments Cost of materials (2,950) (2,531) Employee benefit costs (3,411) (3,013) Depreciation and amortisation (354) (339) Other income and expense (1,371) (945) EBIT Despite the higher revenue, earnings (EBIT) fell slightly on the previous year by EUR 0.2 million to EUR 0.1 million. One of the principal factors behind this development was the start of volume production of composites, which led to one-off and start-up costs. In the Medical Technology area, the focus was on two priority topics alongside a great many projects under development. On the one hand, production structures and processes are being realigned and optimised. The aim is to boost production throughput, while reducing the costs of the production stages which take place predominantly on a contract basis. It has thus already been possible to achieve improvements, which led to higher stock levels of semi-finished and prefabricated parts in the first quarter in view of sluggish sales. The final development stage of an entirely new, patented high-end medical technology product by the name of "LiquoGuard" was moreover completed in the first quarter. This first fluid drainage system with integral hose pump is used for regulating the intra-cranial pressure of patients suffering e.g. from a brain tumour. It is capable of simultaneously draining off cerebrospinal fluid and automatically monitoring the pressure of the fluid via two pressure sensors which monitor each other. This has previously been performed manually, which is not only costly, but also susceptible to

10 errors. Interest in this new product is correspondingly high. Deliveries are to commence in September. LiquoGuard marks Möller Medical's entry into the growth market for neurosurgical devices. Other product developments are moving forward. The increased development activity and further progress with promoting our own channels of distribution resulted in a higher level of expenditure in the continuing start-up phase. The strategy in the Engineering Plastics area of marketing products that deliver a higher added value is long-term in nature and was already adopted two years ago. For example, there is increasing demand for materials and products from medical technology, but also from the food industry. Rolf Schmidt Industriplast in Denmark secured a sizeable contract for precision components from a manufacture of medical devices at the start of the year. However, changes to the product mix can only be pushed through in the medium term, as refocusing on new applications involves certain lead times. Thanks to the positive development in revenue in the first months of the year and the very healthy level of orders, as matters stand the revenue target for the Medical Technology & Engineering Plastics segment of EUR 30 to 31 million should easily be met. The EBIT margin should moreover rise in the course of the year. 4. Financial position The balance sheet total rose by 15.3 % to EUR million compared with December 31, The equity ratio fell only slightly to 47.2 % (December 31, 2005: 47.6 %). This compares with a ratio of 41.1 % at the corresponding point last year. The rise in current assets from EUR 81.4 million to EUR 97.6 million is attributable both to seasonal factors and to acquisitions. Inventories in particular rose by almost one-third to the present level of EUR 39.3 million, reflecting both the typically low stock levels at the end of the year and the build up of stock described above as a result of the longer winter during the first quarter. Trade accounts receivable rose by EUR 4.8 million to EUR 32.0 million. As at the start of the year, the group has considerable cash and cash equivalents of EUR 16.2 million. Within non-current assets, there was merely a slight rise in property, plant and equipment to EUR 42.9 million. Furthermore, goodwill rose by EUR 21.3 million to EUR 76.6 million as a result of the consolidation of Solara; it should be noted in this connection that the Solara investment is no longer recognised using the equity method. On the equity and liabilities side, the equity ratio remained very comfortable at 47.2 %. The levels of current and non-current liabilities likewise remained virtually unchanged, each representing 26.4 % of the balance sheet total. Net working capital (current assets cash and cash equivalents short-term, noninterest-bearing borrowings) rose from EUR 31.8 million (December 31, 2005) to EUR 41.5 million. The biggest change affected inventories, which rose by all of EUR 9.7 million compared with the end of This sharp rise in inventories occurred in the main within the Solar Systems segment. The rise is also attributable to the reporting-date effect at the end of the year, when the levels of receivables and inventories are typically very low. As in previous years, this figure is expected to fall again by the end of the year. 9

11 Cash flow I (EAT plus depreciation and amortisation) was substantially up on the prior-year figure of EUR 3.3 million at EUR 7.5 million, as a result of the high net earnings. The cash flow from operating activities is EUR -7.9 million (EUR -0.2 million in Q1/2005) in the first quarter. This figure results principally from the rise in inventories and the higher accounts receivable in conjunction with the lower rate of increase in accounts payable. The cash flow from financing activities rose to EUR 5.6 million, as the repayment of EUR 1.5 million in non-current financial liabilities was counterbalanced by an increase of EUR 7.1 million. Net financial liabilities (current and non-current loans less cash and cash equivalents) amounted to EUR 54.9 million, compared with EUR 46.3 million at December 31, This figure has risen substantially since the previous year as a result of the rapid expansion of business volume (figure at March 31, 2005: EUR 19.3 million). 5. Capital expenditure The total extent of capital expenditure including goodwill amounted to EUR 26.2 million in the first quarter. Of this sum, EUR 23.7 million was due to acquisitions. Ongoing capital expenditure that was not attributable to acquisitions reached a volume of EUR 2.5 million in the first quarter, and was consequently up on the previous year (EUR 0.9 million). Over 85 % of capital expenditure is attributable to the category property, plant and equipment. Broken down by segment, the largest share of EUR 0.9 million was spent on the Gas Flue Systems segment, EUR 0.7 million on Medical Technology & Engineering Plastics, EUR 0.7 million on Solar Systems and EUR 0.2 million on Climate Systems. The most notable investment projects include the construction of the new logistics centre in Belgium and two CNC processing machines for the Medical Technology & Engineering Plastics segment. A major construction project to create additional production area at Brilon was in addition kicked off at the end of the quarter, and will be completed by the end of the third quarter or the start of the fourth quarter of In addition to the major investment projects mentioned, capital expenditure at the operating plants focused on the maintenance and extension of plant and machinery. 6. Development in employees As a result of the consolidation of the Solar Systems segment in the first quarter, the average number of employees in FTE (full time equivalents) rose sharply. With 1,256 FTE (previous year 942 FTE) as an average for the quarter, the total is 314 FTE or 22 % up on the previous year. This corresponds to a total number of individuals of 1,331 (previous year 980). Of the 1,256 employees (FTE), an average of 307 employees (FTE) were employed by the Solar Systems segment in the first quarter of The higher number of employees has also meant that personnel expenses have risen substantially. This item was EUR 3.45 million or 37 % up on the previous year. In addition to the higher number of employees in absolute terms, this increase is also attributable to an increase in the number of well-qualified employees. As a result of the Solar acquisitions, whose new employees are based predominantly in Germany, the proportion of German employees has risen from 47 % in the previous year to 50 %. The second-largest contingent of employees is, as before, in the 10

12 Netherlands, where 37 % (previous year 36 %) are based. The employee structure has shifted only slightly; the proportion of industrial employees was 63 % (previous year 61 %). 7. Share price developments In the first six weeks of the year, the price of CENTROTEC shares rose from EUR (year-start position) to EUR at the end of March, thus maintaining the upward trend. The share price reached a new all-time high of EUR on the Frankfurt Stock Exchange on March 7. Source: Market capitalisation at the end of the reporting period was EUR 230 million, based on EUR 8.03 million shares. CENTROTEC shares continue to attract considerable interest internationally. The trading volume in the first quarter remained unchanged from the relatively high level of the previous year, with just under 20,000 shares traded in Xetra daily. 8. Opportunities and risks There have been no significant changes to our assessment of the opportunities and risks compared with the position outlined in the Annual Report for the year ending December 31, The general risks of cyclical developments and changes in the customer and competitor structure continue to apply. 11

13 Additional opportunities arose in particular after the end of the quarter as a result of the improved market access provided by Biohaus in the Solar Systems segment, coupled with the improved access to the solar procurement market as a result of the takeover. The licence obtained from Fiwihex provides an extra technological guarantee in the Climate Systems segment. Extensive integration in the Climate Systems segment naturally also entails risks in the sphere of employee motivation and short-term coordination risks as a result of the relocation of entire working processes. On the other hand, there are prospects of higher profits as a result of the anticipated improvement in efficiency. In the Solar Systems segment, the most significant risk continues to take the form of delayed delivery by suppliers. Regulatory changes and state subsidies are nevertheless creating further opportunities in the solar sector. For example, more countries are introducing payments for supplies of solar power to the grid. Extensions to silicon production plants in conjunction with the improved power yield of silicon wafers should ease the pressure on prices for the latter and consequently create further growth in volume up until Events occurring after the end of the quarter At the start of April 2006 Norbert Vroege took charge of the Climate Systems segment, in the place of Rob Slemmer, who has now retired; Vroege has been a member of the Management Board of CENTROTEC Sustainable AG since that date. Mr Vroege previously founded Innosource B.V., Lisse, and was its Managing Director. He is an acknowledged market expert and has brought numerous innovations onto the market in the ventilation sector, in particular solutions for noise protection and non-central energy-saving systems. On May 9, 2006 CENTROSOLAR AG acquired Biohaus PV Handels GmbH. The purchase price was paid predominantly in the form of 0.7 million new shares of CENTROSOLAR AG, the total shares in which consequently rose to 12.4 million. This acquisition reduces CENTROTEC's interest in CENTROSOLAR to 36 %. As a result of a voting trust agreement, CENTROTEC nevertheless retains a de facto voting majority and will continue to include CENTROSOLAR in full in its consolidated financial statements. 12

14 10. Expectations for 2006 As a result of the planned switch by CENTROSOLAR AG to the Prime Standard of Deutsche Börse, it is currently not possible to publish any internal forecasts for the Solar Systems segment. Because of this, the CENTROTEC forecasts published in February for the 2006 financial year (revenue EUR 330 to 360 million; EBITDA EUR 44 to 48 million; EBIT EUR 32 to 36 million; operating EPS EUR 1.85 to 1.95) have not been adjusted following the acquisition of Biohaus. The detailed forecasts for the Gas Flue Systems, Climate Systems and Medical Technology & Engineering Plastics segments are proving accurate. We expect a moderate "catch-up effect" for Gas Flue Systems and the customary seasonal effects for Solar Systems. The second half of the year will consequently make a substantially higher contribution towards revenue and earnings. We are confronted with the perpetual risks of cyclical and customerspecific uncertainties in our principal sales markets, as well as the supply situation in the Solar sector; these factors could potentially have an adverse effect on attainment of our targets. We remain confident about the development in earnings in 2006, for all the burden imposed by the Climate Systems segment in the first quarter. Net earnings and EPS will develop positively, particularly by virtue of the income effect of transactions with minority interests. It moreover remains the strategy of CENTROTEC and CENTROSOLAR to accelerate growth by making targeted corporate acquisitions. Brilon, May 2006 The Management Board 13

15 KEY FIGURES GROUP in thousand EUR KEY FIGURES Changes Total revenue ,7% Medical Technology & Engineering Plastics ,6% Climate Systems ,2% Gas Flue Systems ,2% Solar Systems ,0% Earnings EBITDA ,9% EBIT ,2% EBIT Yield (in %) 5,8% 11,4% EBT ,7% EAT ,3% EPS (in EUR; basic) 0,67 0,27 148,1% Capital Structure *** Balance sheet total ,3% Shareholders' equity ,2% Equity ratio (in %) 47,2% 47,6% Property, plant and equipment ,8% Intangible Assets ,0% Goodwill ,5% Net financial liabilities ,4% Net Working Capital ,4% Cash Flow Statement Cash flow I (EAT & depreciation/amortisation) ,3% Cash flow from operating activities (7.858) (210) 3.641,9% Cash flow from investing activities (2.190) (1.584) 38,3% Employees Total (in FTE) ,3% Shares* Number of shares** ,9% Share price ,15 21,90 Year-high 34,36 26,00 Year-low 25,15 20,95 Share price ,60 23,35 * Quotation in EUR ** Weighted average shares outstanding (basic; in thousand) *** Previous period is related to December,

16 CONSOLIDATED BALANCE SHEET in thousand EUR ASSETS Current assets Cash and cash equivalents Short-term Investments / Marketable securities Trade account receivables Inventories Other assets Income tax receivable Non current assets Property, plant and equipment Intangible assets Goodwill Loans Financial investments accounted for using the equtiy method Deferred tax Other assets Assets

17 CONSOLIDATED BALANCE SHEET in thousand EUR EQUITY AND LIABILITIES Current liabilities Financial liabilities and current portion of non-current financial liabilities Trade accounts payable Other accruals Income tax payable Other liabilities Non current liabilities Financial liabilities Deferred tax Pension accruals Other accruals Other liabilities Shareholders` equity Share capital Additional paid-in-capital Treasury stock (112) (112) Share benefit reserve Deferred tax reserve Currency translation reserve (289) (375) Retained earnings Profit attributable to share capital holders of the Centrotec Sustainable AG Minority interest, presented within equity Equity and Liabilities

18 CONSOLIDATED INCOME STATEMENT from January 1 to March 31, 2006 in thousand EUR INCOME STATEMENT Revenues Other operating income Changes in inventories of finished goods and work in progress Production for own fixed assets capitalized Cost of purchased materials and services (40.649) (13.759) Personnel expenses (12.743) (9.290) Depreciation and amortisation (1.936) (1.142) Other operating expenses (10.057) (5.540) Operating income (EBIT) Interest income and expenses (715) (482) Profit from transactions with minorities Result of financial assets At Equity Entities 7 0 Result before income taxes (EBT) Income tax (1.004) (1.082) Net income (EAT) Profit or loss attributable to minority interest Profit attributable to share capital holders of the Centrotec Sustainable AG EPS (Earnings per share in EUR) Earnings per share (basic) 0,67 0,27 Earnings per share (diluted) 0,64 0,26 Weighted average shares outstanding (in numbers; basic) Weighted average shares outstanding (in numbers; diluted)

19 CONSOLIDATED CASH FLOW STATEMENT from January 1 to March 31, 2006 in thousand EUR CASH FLOW STATEMENT Net income before taxes and interest (EBIT) Depreciation Gain/loss on disposal of non-current assets (93) (5) Other non-cash items Increase/decrease in provisions Increase/decrease in inventories, trade receivables and other assets that cannot be allocated to investing or financing activities (10.812) (3.299) Increase/decrease in trade payables and other liabilities that cannot be allocated to investing or financing activities (3.221) (1.353) Interest paid (339) (482) Income taxes paid 703 (527) Cash Flow from operating activities (7.858) (210) Acquisition of share in participations - net of cash acquired and outstanding earn outs to be paid (4.916) (680) Transactions with Minorities - cash received Purchase of property, plant and equipment/ intangible assets (2.462) (912) Proceeds from disposal of property, plant and equipment/intangible assets 0 8 Cash Flow from investing activities (2.190) (1.584) Proceeds from issuance of shares 0 32 Proceeds from borrowings/repayment of borrowings (818) Cash Flow from financing activities (786) Change in liquid funds (4.497) (2.580) Liquid funds at the beginning of the financial year (1.193) Liquid funds at the end of the period (3.773) 18

20 STATEMENT OF MOVEMENTS IN EQUITY AND SEGMENT REPORT from January 1 to March 31, 2006 in thousand EUR STATEMENT OF MOVEMENTS IN EQUITY Share capital Additional paid-in capital Treasury stock Stock option reserve Deferred tax reserve Revaluation reserves Profit Minority attributable to interest share capital presented holders of within CENTROTEC equity Retained earnings and profit carryforward Consolidated equity December 31, (112) (359) Payment into revenue reserves (10.135) 0 Change from the exercise of options Share option plan Changes due to acquisition activities Fair Value adjustment interest rate derivatives (21) (21) Correction IAS 8 (33) (33) Currency translation differences 5 5 Profit attributable to sharholders of CENTROTEC Profit or loss attributable to minority interest (5) (5) December 31, (112) (375) Payment into revenue reserves (17.958) 0 Share option plan Changes due to acquisition activities Fair Value adjustment interest rate derivatives Currency translation differences Profit attributable to sharholders of CENTROTEC Profit or loss attributable to minority interest March 31, (112) (289)

21 STATEMENT OF MOVEMENTS IN EQUITY AND SEGMENT REPORT from January 1 to March 31, 2006 in thousand EUR SEGMENT REPORT Segment Structure in EUR '000 Medical Technology & Engineering Plastics Climate Systems Gas Flue Systems Solar Systems Consolidation Total Statement of Earnings Revenue from third parties Revenue from other segments (540) (306) 0 0 Cost of purchased materials (2.950) (2.531) (4.587) (3.759) (8.970) (7.443) (24.682) (332) (40.649) (13.759) Personnel expenses (3.411) (3.013) (3.004) (2.614) (4.088) (3.649) (2.240) (14) 0 0 (12.743) (9.290) Depreciation and amortisation (354) (339) (269) (148) (701) (654) (612) (1) 0 0 (1.936) (1.142) Other income and expense (1.371) (946) (1.234) (758) (2.530) (3.032) (52) 0 0 (3.086) (4.788) EBIT (23) Interest result (715) (482) Profit from transactions with minorities Result of financial assets At Equity Entities EBT Income tax (1.004) (1.082) Net income (EAT) Profit or loss attributable to minority interest Profit attributable to shareholders Balance Sheet Key Figures* Assets equity method Entitlement to income tax rebates** Total liabilities Financial liabilities Income tax payable** Investments Investments in non current assets*** * Previous year is related to December, ** Including deferred tax *** Incl. Goodwill and value of non current assets out of acquisitions 20

22 Explanatory Notes 1. Accounting standards and policies This Quarterly Report has been drawn up in accordance with the International Financial Reporting Standards (IFRS) and the guidelines of Deutsche Börse AG on "Structured Quarterly Reports". The accounting standards published by the IASB (International Accounting Standards Board) have been applied. The accounting policies explained in the annual financial statements have likewise been applied in this Quarterly Report. 2. Changes in the first quarter Change in company and investment structure The composition of the company's structure has not changed substantially since the 2005 annual financial statements. The business activities of CENTROTEC continue to be allocated to the segments Medical Technology & Engineering Plastics, Climate Systems, Solar Systems, and Gas Flue Systems/Other. In January 2006, CENTROSOLAR AG acquired a further 78.9 % of Solara AG, Hamburg, and of its subsidiary Solara Sonnenstromfabrik Wismar GmbH, Wismar, as a result of which the latter have been comprehensively consolidated within CENTROSOLAR AG since the start of 2006 (interest was recognised using the equity method in 2005). At the start of February 2006, all shares of CENTROSOLAR AG in Ubbink Econergy Solar GmbH and Ubbink Solar Modules B.V. were moreover transferred at their carrying amounts by an intra-group transaction to Centrosolar International B.V., Doesburg, a fully owned subsidiary of CENTROSOLAR AG. The fixed portion of the purchase price for Solara AG and Solara Sonnenstromfabrik amounts to EUR 19.1 million. This includes EUR 7.5 million representing the market value of the shares issued, and a purchase price liability of EUR 4.0 million. Acquisition costs of EUR 0.3 million are already included in the acquisition costs of EUR 8.4 million using the equity method from the purchase of the initial 21.1 % stake. The total goodwill for the Solara acquisition now amounts to EUR 20.7 million, EUR 6.6 million of which results from the acquisition of the 21.1 % stake in November 2005 and EUR 14.1 million from the acquisition of the remaining shares this January. The following table shows the effects on the group of the acquisition of the remaining shares in Solara AG and its subsidiary at the start of January The figures have changed from those contained in the Notes to the Consolidated Financial Statements for As a result of temporal restrictions, some of the following figures were and are only provisional. It is possible that further changes in these figures may arise in the accounts for the second quarter of Cumulatively, the changes are as follows: 21

23 Explanatory Notes Figures in EUR '000 Market values Carrying amounts Fair values Net assets carried at December 31, ,187 5,724 2,463 Net assets 6,835 6, Change (1,352) 402 (1,754) Goodwill carried at December 31, ,157 Goodwill 20,659 Change 1,502 In addition to the changes in net assets, other measurement differences of EUR 150 thousand have arisen as a result of the gradual acquisition of shares. Change in composition of Supervisory Board and Management Board There has been a change on the Supervisory Board compared with the 2005 accounts. Herr Christian C. Pochtler joined the Supervisory Board with effect from March 8, 2006 (pursuant to Section 104 of German Stock Corporation Law). Wim Brink ceased to belong to the Supervisory Board from the same date. The Climate Systems segment is now represented on the Management Board by Norbert Vroege. Rob Slemmer has left the Management Board of CENTROTEC Sustainable AG to take his retirement. Contingent liabilities There has been no significant change in contingent liabilities since the balance sheet date. Reportable security holdings The totals of reportable shares and stock options are shown in the following table: 22 Total shares Total options* Management Board Dr. Gert-Jan Huisman 16,016 96,473 Martin Beijer 0 55,754 Dr. Alexander Kirsch 16, ,644 Rob Slemmer 0 63,520 Dr. Christoph Traxler 0 36,722 Supervisory Board Guido A. Krass 1,200,000 0 Dr. Bernhard Heiss 0 0 Christian C. Pochtler 0 0 CENTROTEC Ordinary shares 8,032,576 0 Treasury stock 6,040 0 * The maximum possible number of options has been indicated. How many options can actually be exercised depends on the attainment of specified targets.

24 Explanatory Notes After March 31, 2006, a total of 110,564 new shares were created through the exercising of options during the exercise period, with the result that the current total number of shares at the end of April is now 8,143,140. Dividend payments No dividend payment was made for the 2005 financial year, nor is such a payment envisaged for the current financial year. Significant events occurring after the reporting date CENTROSOLAR AG, Munich, acquired Biohaus PV Handels GmbH, Paderborn in full in May As well as Biohaus PV Handelsgesellschaft mbh, the group includes investments that will probably not be comprehensively consolidated. The acquisition was paid for partly in the form of a contribution in kind in exchange for the issue of 694,444 new shares in CENTROSOLAR AG. The total purchase price is in the order of EUR 21 million. As a result of the issue of CENTROSOLAR shares, the stake held in CENTROSOLAR AG by CENTROTEC Sustainable AG has fallen further from 39 % to 36 %. Due to the recent nature of this acquisition, no IFRS details of the acquired group are available yet. The figures quoted in the following table refer to the accounts of Biohaus PV Handels GmbH at December 31, 2005, which were prepared in accordance with the German Commercial Code. These figures will differ from the IFRS figures and particulars for initial consolidation in the second-quarter accounts for 2006, not least because of the purchase price allocation process and rollover in Key data for Biohaus at March 31, 2005 in EUR million (German GAAP - HGB) Fixed assets 2.0 Current assets 9.4 Total liabilities 9.2 Revenues 34.0 EBITDA 1.4 Gross operating result

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