Third QUarter 2010 CONSOLIDATED INTERIM REPORT SOLARWORLD AG

Transcription

1 Third QUarter 2010 CONSOLIDATED INTERIM REPORT SOLARWORLD AG

2 solarworld Third QUarter 2010 Further information on the quarterly figures Inside cover // 01 Selected indicators // in k Financial indicators 3rd quarter rd quarter 2009 Change Revenue 337, , % EBITDA 74,034 52, % EBIT 51,374 36, % EBIT in % of revenue 15.2% 15.5% -0.3%-points Consolidated net income 18,054 16, % Financial indicators 1st-3rd quarter st-3rd quarter 2009 Change Revenue 945, , % Foreign quota (in %) 40.0% 32.4% 7.6%-points EBITDA 195, , % EBIT 132, , % EBIT in % of revenue 14.0% 18.8% -4.8%-points Capital employed (key date)* 1,176,728 1,089, % ROCE ** (in %) 11.3% 11.0% 0.3%-points Consolidated net income 52,864 67, % Consolidated net income in % of revenue 5.6% 10.6% -5.0%-points Total assets 2,811,304 2,168, % Equity 874, , % Equity ratio (in %) 31.1% 40.0% -8.9%-points Return on equity (in %) 6.0% 7.8% -1.8%-points Cash flow from operating activities 229, ,715 n/a Net liquidity *** -355, , % Investments in intangible assets and property, plant and equipment 152, , % Employee indicators Employees (key date) 2,307 1, % of which trainees (key date) % Personnel costs ratio (in %) 9.3% 9.8% -0.5%-points Revenue per employee (in k ) % EBIT per employee (in k ) % * Intangible assets and property, plant and equipment less deferred investments subsidies plus net current assets except for current net liquidity ** EBIT/Capital employed *** Liquid funds and other financial asstes less financial liabilities

3 solarworld Third QUarter 2010 Further information on the quarterly figures Front cover // 02 Quarterly comparison of the Consolidated Income Statements // in k Q Q Q Q Q Change (%) Revenue 375, , , , , Inventory change in products -70,428 28,778-34,633 14,157 33, Own work capitalized 2, Other operating income 12,413 18,273 17,579 15,785 12, Cost of materials -214, , , , , Personnel expenses -25,530-27,438-31,034-30,778-23, Amortization and depreciation -16,978-19,163-21,421-22,660-16, Other operating charges -31,429-28,156-39,153-42,246-29, Result of operations 32,278 24,793 56,369 51,374 36, Financial result 1,400-13,000-7,874-19,570-8, Pre-income tax result 33,678 11,793 48,495 31,804 27, Taxes on income -42,404-6,515-18,963-13,750-11, Group profit/loss -8,726 5,278 29,532 18,054 16, indicators of the SolarWorld stock Prime Standard/TecDAX 1st-3rd quarter st-3rd quarter 2009 Number of shares m m Market capitalization as of Sept b 1.9 b Average trading volume (12 months) 4.1 b 7.7 b Earnings per share Lowest price Highest price Opening price at beginning of year Closing price per Sept Development in per cent since beginning of year % +6.4 % ISIN (International Securities Identification Number) DE WKN (Wertpapier-Kenn-Nummer) Stock exchange abbreviation SWV 04 Revenue by region // in Million 80.6 U.S Germany 22.7 U.S Germany 70.1 Asia 57.0 Asia 18.6 ROW 1st-3rd quarter Rest of Europe 6.2 ROW 1st-3rd quarter Rest of Europe

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5 consolidated interim report Third Quarter 2010 COntent 03 Letter By the Chairman 05 interim group management report Third Quarter Consolidated interim financial statements Third Quarter 2010

6 SolarWorld is Success We sell our quality products in all solar markets worldwide

7 Dr.-Ing. E.h. Frank Asbeck Chairman and CEO of SolarWorld AG Letter by the Chairman Dear customers, shareholders, employees and friends of SolarWorld AG America is on the rise! Our U.S. business is making good progress. In the first three quarters of 2010, we sold three times as much as in the whole of last year. In mid-october at the Solar Power International in Los Angeles, the largest industry event in North America, it became perfectly obvious: This market has reached a totally new level of maturity! Your own solar power plant on the roof that precisely matches the ideal of freedom and independence that will continue to characterize America in the future. We will have a hand in shaping the further growth of the solar markets in the United States and on the entire American continent. To this end, we have, as you know, made massive investments at the Camarillo and Hillsboro locations. As early as in September, the first module came off our new, highly advanced production line in Hillsboro. For our U.S. customers, we are supplying an additional sales argument because we make our products in their country and create new jobs. Producing at the highest technological level right in our markets is and will continue to be our strategy of success. The very gratifying development in the United States shows that outside Germany we are dealing with markets that show stable growth, too. Also in Italy and France, and really almost everywhere in the world, the question is no longer: solar yes or no? Rather, the question is which competitor has the edge. And in this regard, we at SolarWorld have fought to attain an advantage because we were present sooner than others and we made a name for ourselves as a provider of high quality products. The German market, even though somewhat quieter in the third quarter, is breaking all records this year. Let me put it very clearly: The German customers have done no less than trigger an energy revolution with their demand for solar power products! In the first nine months of the year, 5.3 GW were newly installed enough output to fully replace almost four nuclear power stations. The German customers are demonstrating it: The era of renewable energies is feasible even without nuclear power as a so-called bridge technology. And we at SolarWorld offer the supreme path into the age of a clean, safe and fair energy supply with our high quality, crystalline solar power products. And we do so worldwide! The future remains exciting! I am looking forward to it together with you! Sunny regards, Dr.-Ing. E.h. Frank Asbeck Chairman and CEO of SolarWorld AG

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9 interim group management Report 06 Business Development Third Quarter The SolarWorld Stock 09 the market 11 sales, production, brand 13 earnings, finance and asset situation 18 material related party transactions 19 supplemantary report 20 report on expected development with its major opportunities and risks 20 forecast report Cf. to text passage page// 10 Cf. to to chart page // //

10 Solarworld 2010 interim group management Report Third quarter Business Development 06 Business Development Third QUarter 2010 The SolarWorld Stock The international capital markets were marked by a high level of volatility in the first nine months of the year. At the end of July 2010, weaker-than-expected economic data from China caused concerns about the world economy among investors. The promise of additional measures to stimulate the U.S. economy made by President Barrack Obama and Ben Bernanke, the chairman of the U.S. Federal Reserve, triggered uncertainties in the capital markets. Only at the end of the quarter did markets recover slightly. In Germany, the positive development was additionally strengthened by the rising Ifo Business Climate Index. The DAX closed on 6,229 points at the cut-off date (Sept. 30, 2010). That is an increase of 5.8 percent in the course of the third quarter and a plus of 4.2 percent since the beginning of the year (Jan. 4, 2010). In the course of the third quarter the TexDAX increased by 7.4 percent closing on 782 points at the cut-off date of Sept. 30, In comparison with the opening price of the year (818 points), the technology stocks did, however, lose 3.5 percent in the first nine months. The final approval of the amendment to the Renewable Energy Sources Act (EEG) in Germany gave solar stocks new impetus at the beginning of the third quarter. Yet, in August they dropped back again. Announcement of a reduction in the feed-in compensation in the vigorously growing French market were the main reason for this development. The agreed lifetime extension for nuclear power plants in Germany also caused some unrest among investors. The SolarWorld stock reported a closing price of 9.20 (Sept. 30, 2010) and was thus two percent firmer than at the beginning of the third quarter (July 1, 2010: 9.02). In the first nine months of 2010 the stock price declined by 39 percent (Jan. 4, 2010: 15.20). The price of the SolarWorld stock peaked at while the lowest price during that period was 7.99.

11 Solarworld 2010 interim group management Report Third quarter Business Development 05 Development of SolarWorld stock price versus DAX and TecDAX Period: Oct. 1, 2009 Sept. 30, 2010 // Source: Deutsche Börse, % DAX 3.35% TecDAX % SolarWorld Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep The capital stock remained unchanged in the period under review being divided into 111,720,000 no par value bearer shares with an imputed nominal value of 1.00 per share. In the course of the third quarter the company made use of the authorization granted by the Annual General Meeting to acquire treasury stock pursuant to 71 Sec. 1 No. 8 AktG (German Stock Corporation Act) to the tune of ten percent of the capital stock. Group Interim Report First Half 2010/The SolarWorld Stock p. 8 // A total of 21,000 stocks were acquired in the third quarter of the year. As a result, the company held 4,838,723 treasury stocks at the cut-off date (Sept. 30, 2010), which is equivalent to a share of 4.33 percent. As a result, only 106,881,277 stocks were entitled to vote and receive dividends at the cut-off date pursuant to 71b AktG. This is equivalent to a share of percent. The authorization to acquire treasury stock is limited in time to the end of business on Nov. 20, In order to live up to our claim of transparency vis-à-vis shareholders and stakeholders, we publish the information on the stock buyback under sharebuyback //. In the reporting period, no voting right information as per 21 et seq. WpHG (German Securities Trading Act) was published.

12 Solarworld 2010 interim group management Report Third quarter Business Development Shareholder Structure as of September 30, % Free Float % Dr.-Ing. E.h. Frank Asbeck 2.23 % FMR LLC (Fidelity Group) 2.11 % BlackRock Inc % DWS Investment GmbH 1.92 % UBS AG 4.33 % SolarWorld AG (Treasury Stock) The interest of the capital market in SolarWorld AG remains high: 40 analysts cover our company (Q3 2009: 41). In the period under review, we further strengthened our capital market contacts. Thus, we participated in different road shows and conferences, for example in New York/U.S., Valencia/Spain and Frankfurt/Germany. In addition, we conducted individual talks with analysts, investors and share holders. The top priority for us is to meet the increasing requirements of the international capital market. Transparency and service for our stakeholders form an important basis of our corporate value. In this context, we attach particular importance to our financial reporting. SolarWorld AG s 2009 annual report was awarded first place in the TecDAX category of the renowned Best Annual Report competition of Manager Magazin and was Number 8 in the overall ranking of the roughly 160 reports analyzed. Our online report for fiscal year 2009 already received several accolades, for example the LACP Award in Gold and an award in the Annual Report Competition of MerCom Inc./The International Academy of Arts & Sciences.

13 Solarworld 2010 interim group management Report Third quarter Business Development THE MARKET 09 ECONOMIC ENVIRONMENT The world economy grew distinctly less quickly in the third quarter than in the first six months of the year. The reason for this was among other things that the governments of several industrialized countries introduced a more restrictive financial policy. In spite of this, the Kiel Institute for the World Economy (IfW) expects the world economy to grow by a total of 4.7 percent in the year 2010 (2009: -0.9 percent). In the Euro zone the high production increase of the first half of the year also declined in the third quarter. For the year 2010, the IfW expects a Gross Domestic Product (GDP) of 1.6 (2009: -4.1) percent. With the economic stimulus programs running out at the end of the first half of the year, the economic recovery will also slow down noticeably in the United States. Clear improvements in the labor market and in the real estate sector have so far failed to materialize. Thus, uncertainty continues to run high and slipping back into a renewed recession cannot be ruled out. At the moment, a GDP of 2.7 (2009: -2.6) percent is being expected for the year In Germany, on the other hand, industry s mood has remained positive in spite of lower growth figures. The recovery is by now no longer supported by exports alone but also by the domestic economy: Private consumption and corporate investments increased noticeably in the period under review. According to the information provided by the IfW, German industry will grow by 3.5 (2009: -4.9) percent in THE WORLD ENERGY MARKET After the strong fluctuations in the second quarter of 2010, the oil price remained at an almost unchanged level in the third quarter. From July through September, the average price for the WTI grade declined only slightly from 76.3 US$/barrel in July to 75.2 US$/barrel in September. In the first nine months of the year, the domestic electricity price in Germany rose by up to six percent according to Verivox. In the U.S., the electricity price for private households increased by an average of around two percent in the course of the first three quarters of 2010 according to the Energy Information Administration (EIA). THE SOLAR POWER MARKET In the first nine months of the year, the international solar markets grew more vigorously than originally expected.

14 Solarworld 2010 interim group management Report Third quarter Business Development 10 Above all, the German solar market contributed significantly to this development. According to the current figures of the Federal Grid Agency (Bundesnetzagentur), 5.3 GW were newly installed in Germany by the month of September. This is substantially more than in the entire year of 2009 (3.8 GW). As forecast in the interim report for the first half of 2010, new construction slowed down as the cut in feed-in compensation came into force at the beginning of July. However, on the whole, demand for solar power products remained strong in the second half of the year. The Italian and French markets developed positively in the first nine months, too. In the third quarter the high level of dynamism in these markets compensated for the declining demand in Germany. According to the Italian power authority Gestore Servizi Energetici (GSE), the newly installed solar output capacity in Italy doubled in the first nine months in comparison with the same period of the previous year to 447 (Q1- Q3 2009: 217) MW. In France the feed-in tariffs were already cut with effect from Sept. 1, 2010, so that the reduction came sooner than expected. Only small-scale fully integrated solar plants with an output of below three kw are not affected by the tariff cuts. They will continue to be subsidized with 58 Eurocent/ kwh. The tariffs for all other systems were reduced by an average of 12 percent. Tax grants for solar systems also were reduced by 50 percent to 4,000 maximally. The U.S. solar market received a new impetus in the reporting period: The U.S. Energy Ministry extended the guarantee program in favor of renewable energies until Oct. 5, 2010 (previously: July 9, 2010). All in all, guarantees amounting to some US$ 800 million per month are to be committed in the next two years. California will remain the most attractive solar region in the United States. In the first nine months, applications for new installations in the order of 415 (Q1-Q3 2009: 103) MW were received by the Californian Public Utilities Commission. In the period under review, the regulatory conditions for solar power in Asia and the Pacific region improved. In the Philippines and in Malaysia, new laws for feed-in compensation were introduced in line with the German role model. They are expected to come into force at the beginning of India and China continued deploying different solar programs. However, mainly local solar power companies should benefit from them. EFFECTS OF GENERAL CONDITIONS ON BUSINESS DEVELOPMENT SolarWorld as an established provider of high quality solar power products has made use of the strong growth of the international solar markets to increase shipments and to further profile itself in both, national and international solar markets. In the process, we were able to benefit on the one hand from our strong brand. On the other hand our product range, specifically tailored to meet the relevant market requirements, has turned out to be a competitive advantage again. Thus, as a proven roof specialist we were for example able to benefit especially from our Energyroof in the French market. With our investments in new production capacities, we consider ourselves prepared to take on increasing competition and to sustain our market position.

15 Solarworld 2010 interim group management Report Third quarter Business Development SALES, PRODUCTION, BRAND 11 SolarWorld has expanded its business successfully and sustainably. In comparison with the previous year we increased our shipments in the first nine months of the year 2010 by over 50 percent. Revenue and Earnings Development p. 13 // This rate of growth was not only supported by the German market; we also strengthened our positions in the United States and in other European countries. This shows: SolarWorld has established itself internationally as a brand manufacturer of high quality solar power products. This development has been fostered by marketing measures specifically geared to our business strategy i.e. the strengthening of our position as a quality provider and the expansion of our market share, especially in the segment of roof-mounted systems. The German solar market settled down again as expected in the third quarter after the first hot six months of the year On the whole, it remained at a high level. In this phase, we could benefit from SolarWorld s high brand awareness. With our Larry Hagman campaign launched in the summer and the expansion of our already established specialist partner program, we successfully continued our tried and tested Push&Pull strategy. At the same time, we again redoubled our international efforts in order to promote the sustainable brand formation in important markets. In the U.S., our Larry Hagman campaign broke in July accompanied by a very broad national response in the media. In addition, we continued our diversification strategy. For example, we are offering new forms of financing for solar power arrays in cooperation with external service providers, successfully opening up access to new client groups. In the first nine months of the year we multiplied our shipments in the United States. Other markets of the region like Canada or Latin America also grew vigorously. Supplementary Report/Events of Particular Importance and Their Repercussions p. 19 // A substantial leap forward was made by the Italian market during the third quarter. Expected Development of the Solar Power Market p. 21 // In this market, influenced by pull-in effects, we were able to increase our sales significantly. In France, we obtained an excellent market feedback in the third quarter. Demand for our integrated roof solutions Energyroof and SunKits was high. Thanks to our subsidiary SolarWorld France SAS, established in the second quarter of 2010, we continued to improve the service quality to our French customers. In Great Britain, we are working with increased vigor to expand our sales structures and distributor network so as to be able to profit from expected market growth.

16 Solarworld 2010 interim group management Report Third quarter Business Development 12 Due to high demand for our products and the increase in our international sales activities, our group-wide production capacities were fully utilized in the first nine months of the year. Their ramp-up advanced further during the third quarter. An overview of our planned production capacities can be found under Future Business Development p. 22 // Thus, the construction of the new module manufacturing plant Solar Factory III at our German production site in Freiberg progressed according to schedule, after the foundation stone had been laid on July 13. The first complete production line is to be delivered by the end of the year so that mass production can start in the first half of We have already created the necessary logistics prerequisites to achieve a future total module capacity of 550 MW at the Freiberg location: The extension building to our logistics center could already be commissioned at the beginning of the third quarter. As a result, we were able to increase our throughput speed once more. During the third quarter, we started working on the second phase of the wafer production in the Industrial Estate East. In 2011, we will thus reach a wafer production capacity in Germany amounting to 1 GW. The expansion of our U.S. production sites is also on schedule. On Sept. 14, the first module of the new production at the Hillsboro site came off the production line. After the ramp-up, we will have a module nominal year-end capacity of 350 MW in Hillsboro. In the wafer and cell areas the expansion is progressing smoothly. The international capacity increase profited from the close cooperation between our German and U.S. production sites. Annual Report 2009/Corporate Technology p. 34 // We successfully implemented our tried and tested product strategy in the first nine months of the year 2010 and differentiated ourselves from competitors with new product offers like the Suncarport. The demand for this solar filling station is high. At the moment, we are working on additional product versions in order to meet customer wishes even more specifically. Our new Blackmodules are also well received by the market. We are continuously working on new products, always following the motto to increase quality and cut costs. Our Research and Development activities are pooled at our German location in Freiberg. In mid-september, we officially inaugurated our new R&D Center. It covers the entire value chain from raw material silicon to solar kits while working close to actual production conditions. In this way, we secure important competitive advantages in the future as well as higher cost cutting potentials. For the current research priorities as well as individual research projects we refer you to our Annual Report 2009/Innovation Report 2009 p. 90 //.

17 Solarworld 2010 interim group management Report Third quarter Earnings, Finance and Asset Situation EARNINGS, FINANCE AND ASSET SITUATION 13 Earnings situation REVENUE AND EARNINGS DEVELOPMENT The SolarWorld group was able to expand its business successfully and sustainably. In the third quarter of 2010, shipments of wafers and solar modules increased by 53 percent to 191 (Q3 2009: 125) MW. In the first nine months of 2010, sales rose by 56 percent over the same period of the previous year to 568 (Q1-Q3 2009: 364) MW. This development has been driven particularly by our strongly growing business in the international solar markets like for example the United States or Italy where we managed to boost our sales substantially. Sales, Production, Brand p. 11 // This has increased the groupwide foreign quota in the third quarter to 53.4 (Q3 2009: 22.6) percent. In the first nine months of the year, it reached 40.0 percent, which was also higher than in the same period of the previous year (Q1-Q3 2009: 32.4 percent). Due to the groupwide rise in shipments, SolarWorld was able to increase its group revenue despite an industry-wide drop in prices. Revenue went up in the third quarter of 2010 by 44.6 percent and million to million (Q3 2009: 233.4m). In the first nine months of the year 2010, group revenue increased in comparison to the same period of the previous year by 48.5 percent and million to million (Q1-Q3 2009: 636.7m). It was especially the Trade segment that contributed to this development with a revenue increase of 64 percent to 743 million (Q1-Q3 2009: 454m). This increase in revenue is also attributable to the rise in shipments of solar kits and complete systems solutions. In the Production Germany segment, which also includes the external wafer business the revenue of 296 million matched the level of the previous year (Q1-Q3 2009: 296m). Segment Reporting p. 39 // As planned, earnings in segment Production U.S. were negatively affected by the launch and ramp-up costs of our module production line in Hillsboro. The line started producing only at the end of the third quarter. Sales, Production, Brand p. 11 //

18 Solarworld 2010 interim group management Report Third quarter Earnings, Finance and Asset Situation 14 Groupwide earnings before interest and taxes (EBIT) grew in the third quarter 2010 by 41.9 percent and 15.2 million to 51.4 million (Q3 2009: 36.2m). In the first nine months of 2010, EBIT went up by 10.9 percent and 13.0 million to million (Q1-Q3 2009: 119.5m). Earnings before interest, taxes, depreciation and amortization (EBITDA) grew in the third quarter of 2010 by 21.4 million to 74.0 million (Q3 2009: 52.6m). In the first nine months of 2010, EBITDA was increased by 29.6 million to million. In spite of industry-wide price reductions at the beginning of the third quarter (July 1, 2010), we were able to keep the groupwide EBIT margin almost constant at 15.2 (Q3 2009: 15.5) percent, particularly thanks to a number of cost cutting measures. In the first nine months of 2010, the EBIT margin amounted to 14.0 (Q1-Q3 2009: 18.8) percent. The financial result changed in comparison with the third quarter of 2009 by 11.0 million to million (Q3 2009: -8.6m). This development was due to temporary variations in fair value of interest hedging instruments. In the first nine months of 2010, the financial result was significantly influenced by the increase in long-term financial debts and amounted to million (Q1-Q3 2009: -21.5m). Financing Analysis p. 15 // Group profits rose in the third quarter of 2010 by 2.1 million to 18.1 million (Q3 2009: 16.0m). In the first nine months of 2010, group profits amounted to 52.9 million (Q1-Q3 2009: 67.7m). DEVELOPMENT OF Material Income Statement Items Personnel expenses increased through up-staffing in the areas of production and sales in the first nine months of 2010 versus the same period of the previous year by 15.0 million to 89.3 million (Q1-Q3 2009: 74.3m). Due to the over-proportionate increase in revenue, the rate of personnel expenses improved at the same time in the first nine months of 2010 to 9.3 (Q1-Q3 2009: 9.8) percent. The rate of cost of materials rose in the first nine months of the year to 64.1 (Q1-Q3 2009: 63.0) percent. In the third quarter of 2010, it amounted to 62.7 percent and therefore fell 2.6 percentage points short of the same quarter of the previous year (65.3 percent). Amortization and depreciation increased as a result of the scheduled continuation of investments in the expansion of production capacities by 16.5 million to 63.2 million (Q1-Q3 2009: 46.7m). Other operating expenses changed by 32.2 million to million (Q1-Q3 2009: 77.4m). This is essentially due to the increased expenditure caused by the higher production and shipment volume, the investments in the strengthening of the brand as well as the spending on raw material transactions that are not part of our core business. The rate of expenditure amounted to 11.5 (Q1-Q3 2009: 10.2) percent. Other operating income increased in comparison with the same period of the previous year especially due to earnings from raw material transactions that are not part of our core business by 13.4 million to 51.6 million (Q1-Q3 2009: 38.2m).

19 Solarworld 2010 interim group management Report Third quarter Earnings, Finance and Asset Situation FINANCE SITUATION 15 FINANCING ANALYSIS The equity capital increased versus Dec. 31, 2009 by 9.2 million to million (Dec. 31, 2009: 865.5m). The equity ratio declined at the balance sheet date to 31.1 (Dec. 31, 2009: 39.0) percent. This was caused by higher financial liabilities. In the first nine months of 2010, they went up by million to 1,343.7 million (Dec. 31, 2009: 789.5m), 93.8 percent of which are allocated to the non-current liabilities. This increase is primarily due to the placement of a bond with a volume of 400 million in the first quarter of 2010 and the call for the second part of a syndicated credit line of 100 million. With the help of these financing measures, we have secured the necessary financial flexibility for our growth and have limited our financial risks. The investment grants and allowances carried under non-current liabilities amounted to 63.7 million (Dec. 31, 2009: 68.3m) at the balance sheet date. These public funds for the expansion of our production capacity are accrued on the liabilities side of the balance sheet and will be written back through profit and loss over the period of utilization of the subsidized investments. The other non-current liabilities were reduced by 17.0 million to million (Dec. 31, 2009: 250.7m). The non-current portion of the down payments received for long-term wafer delivery contracts contained in this figure amounted to million (Dec. 31, 2009: 242.9m) at the balance sheet date. INVESTMENT ANALYSIS Investments in intangible assets and property, plant and equipment of the SolarWorld group totaled million (Q1-Q3 2009: 193.5m) in the first nine months of The emphasis of our investment activities was on the expansion of our integrated cell and wafer production at the Hillsboro/U.S. site ( 74.9 m) as well as our wafer production ( 38.7 m) and our module production ( 23.5 m) at the Freiberg/Germany location. Through these investments, we can strengthen our market position Future Business Development p. 22 // and also benefit from economies of scale on the cost side. We invested another 9.9 million in our Research & Development activities. Furthermore, a total of 5.9 million went into the expansion of additional locations of the SolarWorld group. As a result of the first-time consolidation of SolarWorld AG & Solar Holding GmbH in GbR Auermühle the group received tangible fixed assets amounting to 39.5 million. The purchase price of the shareholding amounted to 9.0 million. By making this acquisition, we have created the prerequisite for the further growth of Bonn as a sales location. The investment in the shareholding in Qatar Solar Technologies Q.S.C. valued at equity amounted to 17.2 million.

20 Solarworld 2010 interim group management Report Third quarter Earnings, Finance and Asset Situation 16 LIQUIDITY ANALYSIS The liquid funds amounting to million (Dec. 31, 2009: 428.1m) at the cut-off date on Sept. 30, 2010 include cash and cash equivalents mainly composed of overnight money and fixed-term deposits. In addition, SolarWorld holds short-term financial assets worth million (Dec. 31, 2009: 81.6m). The cash flow from ongoing business activities in the first nine months of 2010 reached million (Q1-Q3 2009: m). The cash flow from investment activities amounted to million (Q1-Q3 2009: 111.8m). It was particularly influenced by pay-outs for investments in tangible fixed assets amounting to million. The payment for short-term financial investments amounted to 37.7 million and the acquisition of shares in a consolidated company 9.0 million. Conversely, the cash inflows from the disposal of tangible fixed assets amounted to 11.1 million, and the inflow from investment grants was 3.3 million. The cash flow from financing activities amounted to 406,9 million (Q1-Q3 2009: -55.8m). It was influenced by the placement of a bond with a volume of 400 million as well as the call for the second part of a syndicated credit line of 100 million. Additionally, it includes cash outflows due to dividend distributions and the acquisition of treasury stock amounting to million, interest payments of million and the departure of funds for the repayment of financial credits amounting to million and cash inflow from external shareholders amounting to 7.4 million. ASSET SITUATION ASSET STRUCTURE ANALYSIS The balance sheet total increased versus Dec. 31, 2009 by million to 2,811.3 million (Dec. 31, 2009: 2,217.1m). In the first nine months of 2010, the non-current assets increased by million to 1,027.1 million. This development is above all attributable to the increase in tangible fixed assets caused by expansion investments. Working capital was reduced at the end of the third quarter by 60.6 million to million (Dec. 31, 2009: 449.6m). This is especially a consequence of the reduction in accounts receivable as per Sept. 30, 2010 by 46.8 million to million. In comparison with Dec. 31, 2009 ( m) inventories remained stable at million. The down-payments carried under inventories amounted to million (Dec. 31, 2009: 384.3m). Trade liabilities increased versus Dec. 31, 2009 by 19.0 million to million (Dec. 31, 2009: 83.9m). The received down-payments amounted to a total of million (Dec. 31, 2009: 276.0m) at the balance sheet date.

21 Solarworld 2010 interim group management Report Third quarter Earnings, Finance and Asset Situation Off-Balance sheet financing instruments 17 Off-balance sheet financing instruments have no influence on the asset situation of the group. Off-balance sheet assets At the cut-off date Sept. 30, 2010, our group had no assets that would not be financially visible. HUMAN RESOURCES In the period under review, the SolarWorld headcount continued to increase. At the cut-off date (Sept. 30, 2010), we had 2,307 (Sept. 30, 2009: 1,971) employees on our payroll group-wide. 07 Group employees // as at September 30 Employees as at Sept. 30, 2010 Employees as at Sept. 30, /- absolute Germany 1,464* 1,331** +133 U.S Rest of the world Total 2,307 1, * incl. 90 trainees/apprentices ** incl. 86 trainees/apprentices Including our temporary staff 3,294 (Sept. 30, 2009: 2,678) people worked for SolarWorld group worldwide at the cut-off date. In the third quarter of 2010 there were no personnel changes on the Executive Board and the Supervisory Board of SolarWorld AG.

22 Solarworld 2010 interim group management Report Third quarter material related party transactions 18 Material Related Party Transactions In the first nine months, project services and module deliveries were rendered to the engineer office Asbeck as well as to Frank Asbeck in amount of 3.5 million (Q1-Q3 2009: 0m). As of April 30, 2010, 49 percent of the shares in SolarWorld AG & Solar Holding GmbH in GbR Auermühle have been purchased at a purchase price of 9 million by SolarWorld AG from Solar Holding Beteiligungsgesellschaft mbh of which Frank Asbeck holds the majority of the shares. Furthermore, in connection with the purchase of the shares SolarWorld AG and Solar Holding Beteiligungsgesellschaft mbh respectively have received the right to purchase or sell further shares of the company, 45 percent at a maximum. Therefrom, a purchase price liability in amount of 8.3 million has been set up as at purchase date. In the first nine months SolarWorld group did not receive any toll manufacturing services from associated companies (Q1-Q3 2009: 10.1m), whereas it provided module deliveries and project services amounting to 24.9 million (Q1-Q3 2009: 35.4m) to associated companies. In addition, in the first nine months, SolarWorld group granted a new short-term loan to an associated company in a net amount of 5 million (Q1-Q3 2009: 0m). In this connection, interest income of 0.2 million (Q1-Q3 2009: 0m) was recognized. In the first nine months fixed assets, toll manufacturing services and goods in amount of 91.6 million (Q1-Q3 2009: 49.9m) were purchased from joint venture companies. Furthermore, SolarWorld group sold goods and provided miscellaneous services to joint venture companies amounting to 33.4 million (Q1-Q3 2009: 7.1m from toll manufacturing services). Additionally, in the first nine months, SolarWorld group granted a new loan to a joint venture company in amount of 16 million (Q1-Q3 2009: 0m). In connection with the loan receivables, interest income of 0.5 million (Q1-Q3 2009: 0.1m) was recognized. Apart from these transactions there were no related party transactions with a material effect on the net assets, financial position and results of operations of SolarWorld group.

23 Solarworld 2010 interim group management Report Third quarter Supplementary Report Supplementary Report 19 EVENTS OF PARTICULAR IMPORTANCE AND THEIR REPURCUSSIONS SolarWorld California LLC, a wholly owned subsidiary of SolarWorld AG, has been trading under the name of SolarWorld Americas LLC since Oct. 1, The new name takes account of the fact that since its establishment in the year 2005 the company s sales area has been substantially increased. While at the beginning sales activities in the Californian market were the main focus of the company, now our U.S. sales subsidiary also serves other regional U.S. markets as well as North and Latin America. 09 New Group Structure as of October 1, 2010 p. 24 // For the second time after 2008, SolarWorld AG has been endowed with the Deloitte Sustained Excellence Award. With this award the management consultancy honors companies characterized not only by long-term growth but also by innovative strength and financial performance. In addition, SolarWorld AG is again among the Deloitte Fast 50, i.e. it belongs to the most rapidly growing companies in the technology sector. Deutsche Solar AG has signed a letter of intent to sell its 35 percent share in RGS to one of the other shareholders. OVERALL MANAGEMENT STATEMENT ON THE ECONOMIC SITUATION AT THE TIME OF REPORTING The management of SolarWorld AG judges the economic situation of the company to be consistently positive against the background of the earnings, finance and asset situation as portrayed in the figures for the third quarter of 2010 as well as taking into consideration the ongoing business at the time when the group interim report was drawn up. SolarWorld AG will continue its path of growth successfully and profitably.

24 Solarworld 2010 interim group management Report Third quarter expected development 20 Report on Expected Development with its Major Opportunities and Risks OPPORTUNITIES AND RISKS In the course of the third quarter of 2010, no major changes occurred in the external and/or internal conditions and factors of influence of the company. With regard to the individual opportunities and risks, we therefore refer you to the Group Annual Report 2009/Report on Expected Developments with Their Major Opportunities and Risks p. 114 // At the time of reporting for the third quarter of 2010, there were no risks that might jeopardize the continued existence of the SolarWorld group. The Management Board of SolarWorld AG does not expect any fundamental changes in the risk situation from today s point of view. FORECAST REPORT EXPECTED MACROECONOMIC ENVIRONMENT In spite of the weakening of the growth in the world economy, experts are forecasting a positive economic development for the year Projections are, however, more moderate than for World trade is forecast to go up by 6.8 (2010e: 12.0) percent in On the whole, the world economy will grow by 3.6 (2010e: 4.7) percent according estimates by the Institute for the World Economy (IfW). A similar development is likely for the U.S. economy. For the year 2011, experts are predicting a growth rate of around 2.0 (2010e: 2.7) percent. This development is still considered to be unstable even though the extremely expansive monetary policy of the U.S. government as well as the announced economic stimulus measures should stabilize the economic situation.

25 Solarworld 2010 interim group management Report Third quarter expected development The Euro zone should also achieve a positive development in The leading economic institutes are expecting the European Gross Domestic Product (GDP) to grow by 1.3 (2010e: 1.6) percent. 21 In Germany, the economic recovery should continue in 2011 according to the opinion of experts, albeit more slowly than in The main reason for that is that economic expansion will lose its impetus and as a result German exports will no longer rise. The IfW forecasts a GDP growth of 2.0 (2010e: 3.5) percent in Germany in the year EXPECTED DEVELOPMENT OF THE WORLD ENERGY MARKET For the remainder of the year 2010, the Energy Information Administration (EIA) expects a stable development of the oil price. As of the year 2011, it can be expected to go up again. The reasons for this are, according to EIA information, the declining oil stockpiles, the OPEC price policy and the expected recovery of the world economy. In Germany, the Federal Association of the Energy and Water Industry (BDEW) is expecting electricity prices to continue to rise in In the U.S., domestic power is estimated to go up in price. EIA is forecasting an average increase of 1.4 percent in EXPECTED DEVELOPMENT OF THE SOLAR POWER MARKET For 2011, analysts anticipate further growth in the international solar markets even though this may be more moderate than in Thus, in its most recent study Jefferies Bank predicts a growth rate for the worldwide solar market of 25 percent to 17.0 (2010e: 13.6) GW. In Germany due to the EEG fit-in tariff cuts in July and October of 2010 as well as at the beginning of 2011 solar market growth is expected to decline. Nonetheless, demand can be expected to remain at a high level: Currently market analysts are forecasting a newly installed capacity in the year 2011 of around 5.5 (2010e: 7.0) GW. This means that in the year 2011 Germany would again be the largest solar market worldwide. In the reporting period, the amendment of the law on renewable energy sources (Conto Energia III) was also approved in Italy. This will redesign the feed-in tariffs for solar power with effect from January The amendment provides for a step-by-step reduction of the feed-in compensation every four months. The entire funding volume was increased to three GW for a three-year period (previously: 1.4 GW). After reaching the market cap there is to be a 14-month transition period during which newly installed solar systems can still be connected to the grid under the old tariffs. On the whole, tariffs for small roof-top plants will be cut by around 15 percent and those for free-field plants by some 30 percent in For next year a newly installed solar power capacity of 2.0 (2010e: 1.4) GW is expected.

26 Solarworld 2010 interim group management Report Third quarter expected development 22 Since the introduction of the law on feed-in compensation in Great Britain in early April 2010 the number of solar systems installed in the British Isles has been going up significantly. Market analysts of Commerzbank and of isuppli project the newly installed output capacity of nine MW in the year 2009 to increase to between 40 and 90 MW in the year For 2011, they are forecasting a triple digit figure. In the Czech Republic, the government amended the feed-in tariffs on Sept. 15, With effect from March 1, 2011 the funding for free-field systems will be eliminated altogether. Roof-top systems and building-integrated systems will, however, continue to receive funding. In addition, a tax on solar power systems is to be introduced in The precise amount of the tax rate is not yet known but it is expected to be between ten and 30 percent of the earnings of a solar plant. The tax will be levied on all existing and newly built solar plants irrespective of system size. According to expert opinion, the U.S. market should continue to pick up speed. The 1,000 MW mark may already be broken in the year For 2011, Jefferies, for example, is predicting a newly installed output capacity of around 2.0 (2010e: 1.3) GW. The main growth driver will be above all the Californian market but also states like New Jersey, Arizona and Florida will be able to show a dynamic development. FUTURE BUSINESS DEVELOPMENT We want to use the expected growth of the international solar markets in the future to further expand our strong position as a fully integrated provider of high quality solar power products. This is why we will continue to implement our production capacities increase according to schedule. 08 Group-wide nominal capacities // Expansion (in MW) 750 1, PRODUCTION GERMANY PRODUCTION U.S JOINT VENTURE SOUTH KOREA 900 1, ,350 GROUP In the fourth quarter, the German market may be expected to stabilize at a healthy, high level. Also for 2011, we see good sales perspectives for SolarWorld.

27 Solarworld 2010 interim group management Report Third quarter expected development The U.S. market will continue to gain in importance for SolarWorld. Projects that were postponed due to the financial crisis are now gradually being implemented. Already at this point in time we have high levels of orders on our books for We renamed our U.S. sales subsidiary with effect from Oct. 1, 2010 with the goal to better reflect the expanded sales regions on the American continent as well as its changing market conditions. Supplementary Report p. 19 // 23 We expect the Italian market to continue to thrive even after the change in the law coming into force on Jan. 1, 2011 Expected Development of the Solar Power Market p. 21 // and predict it to be in the gigawatt range in SolarWorld will benefit from this development and will sustainably increase its shipments to this region. The development in the French market will probably be more moderate. There, the feed-in compensation was already reduced with effect from Sept. 1, Because of the typically long project run-up times in this country, repercussions will need a few weeks to take effect or even a few months. Regardless of this, SolarWorld considers itself to be particularly well positioned in this market due to its products, which are specifically tailored to regional market conditions and special customer wishes. What is more, we have concentrated on the business of smaller roof-top plants, which are not affected by the recent law changes. The Solar Power Market p. 09 //

28 Solarworld 2010 interim group management Report Third quarter expected development 09 New Group Structure as of October 1, SolarWorld AG Bonn, Germany 100 % Deutsche Solar AG Freiberg, Germany 100 % Go!Sun GmbH & Co. KG Bonn, Germany 35 % RGS Development BV Petten, The Netherlands* 100 % 100 % Deutsche Cell GmbH Freiberg, Germany Solar Factory GmbH Freiberg, Germany 100 % Sunicon AG Freiberg, Germany 100 % SolarWorld Innovations GmbH Freiberg, Germany 100 % SolarWorld Solicium GmbH Freiberg, Germany 100 % SolarWorld Industries America Inc. (former SolarWorld Properties Inc.) Hillsboro, U.S. 100 % SolarWorld Industries Deutschand GmbH Bonn, Germany 100 % SolarWorld Industries Schalke GmbH i. L. Bonn, Germany 100 % SPV Solar Projekte Verwaltungsgesellschaft mbh i. L. Munich, Germany 1 % 99 % SolarWorld Industries America LP Camarillo, U.S % % SolarWorld Industries Services LLC Camarillo, U.S. 100 % SolarWorld Americas LLC Camarillo, U.S. 100 % SolarWorld Power Projects Inc. Camarillo, U.S. 100 % SolarWorld Industries America LLC Camarillo, U.S. 100 % SolarWorld Asia Pacific PTE Ltd. Singapore, Singapore 100 % SolarWorld Ibérica S.L. Madrid, Spain 100 % SolarWorld France SAS Grenoble, France 100 % SolarWorld Africa (Pty.) Ltd. Cape Town, South Africa 49 % SolarWorld AG & SolarHolding GmbH in GbR Auermühle Bonn, Germany 49 % JSSi GmbH Freiberg, Germany* 29 % Solarparc AG Bonn, Germany* 50 % SolarWorld Korea Ltd. Seoul, South Korea* 50 % SolarPark M.E. Ltd. Seoul, South Korea* 29 % Qatar Solar Technologies Q.S.C. Doha, Qatar* * Consolidated at equity

29 Solarworld 2010 interim group management Report Third quarter expected development EXPECTED REVENUE AND EARNINGS DEVELOPMENT 25 In the course of 2010, we will increase our production quantity by more than 30 percent according to schedule thus maintaining our rate of growth. We will expand our production capacities as planned. In addition, we will again strengthen our investments in Research and Development and in our brand awareness. In this context, we benefit from our high equity ratio as well as our liquidity level. We are planning to significantly exceed the revenue level of the previous year which amounted to 1 billion. For the annual result it will be crucial which price reduction will and can be compensated for on the cost side. EXPECTED FINANCE SITUATION PLANNED FINANCING MEASURES From today s point of view we have the financial funds to implement our planned growth in the short and medium term thanks to our sustainable earnings power and our liquidity. Furthermore, we hold a strategic liquidity reserve that we can fall back on at any time. PLANNED INVESTMENTS We will continue the expansion of our production capacities as planned. The emphasis will be on our two main production locations in Freiberg/Germany and Hillsboro/U.S.. We should remain below our initially expected group-wide investment volume of up to 300 million. This is mostly due to project optimizations as well as improved purchase conditions. Currently we expect a group-wide investment volume of about 270 million. EXPECTED DEVELOPMENT OF LIQUIDITY We will continue to have a stable liquidity basis in the future that will secure our planned sustainable growth. As of the cut-off date (Sept. 30, 2010) the free liquidity (liquid funds) amounted to million (Dec. 31, 2009: 428.1m).