www.stockhouse.com/News/CanadianReleasesDetail.aspx?n=7009757
WATERLOO, ON, Aug. 11, 2008 (Canada NewsWire via COMTEX News Network) --
- Second-quarter highlights include first shipments of PV cells to
customers following start of production at plant in Germany
- Expects 2008 second-half shipments of PV cells to total 14-16MW for
revenues of $42-48 million, approximately a third of which will be in
third quarter
- Company in advanced discussions with additional customers for PV
cells
- Signs Offer to Lease agreement for a building in Kitchener-Waterloo
region to house 7N+ solar-grade polysilicon pilot plant
- Holding discussions with potential additional technology partners
- Conference call and webcast to be held Tuesday, 8:30am (EDT)
ARISE Technologies Corporation (TSX: APV and Frankfurt: A3T), which is dedicated to becoming a leader in high-performance, cost-effective solar technology, today reported its financial results for the 2008 second quarter and first half ended June 30, 2008. Financial results conform to Canadian generally accepted accounting principles (GAAP) and all currency amounts are in Canadian dollars.
"Among a great many highlights during the 2008 second quarter and in the weeks since, several particularly stand out," said Bart Tichelman, President and Chief Executive Officer.
"Foremost among our accomplishments was the opening of our PV (photovoltaic) cell manufacturing plant in Bischofswerda, Germany, the start-up of manufacturing, and the shipment of the first cells to our customers. In mid-July, the plant achieved on Line 1 the target level of 15 percent average efficiency for its PV cells (peak reached 15.7 percent), as well as our targets for manufacturing yield and throughput, and moved to 24/7 production to meet the demand of our customers.
"Our second-quarter results include our first sales of PV cells, amounting to $460,676. We expect this volume to increase dramatically in the second half of the year. Our current view is that second-half 2008 shipments of PV cells will total between 14 and 16 megawatts, amounting to $42-48 million of revenues, approximately a third of which will be in the third quarter. In addition, we expect Systems Division revenue to amount to $500,000 to $600,000 in the second half," Mr. Tichelman said.
Second-Quarter Highlights
- ARISE's new German plant began production on April 17, officially
opened on June 6, and began shipping to customers in June. The first
line is ramping up production on a 24/7 basis and is on track to
reach its annual capacity of 35-40MW within the planned six-month
period. As previously announced, the second line is planned for the
plant in the 2009 first quarter to add another 40MW of capacity.
- ARISE Germany signed its second major, long-term sales contract for
its PV cells. Under a five-year agreement, ARISE will supply aleo
solar AG with 90MW of PV cells.
- On May 21, the company completed a bought-deal offering under which
the underwriters purchased 20,500,000 common shares from ARISE for
gross proceeds to the company of $45.1 million.
- Also on May 21, the company announced that it had met the third major
milestone at its Silicon Feedstock Mini Pilot Plant Project in
Waterloo. This cleared the way for ARISE to proceed with its
previously announced plans to build a Pilot Plant with a target
capacity of 50 tonnes of silicon per year in 2009 and a target
production capacity of 400 tonnes annually in 2010. Meeting the third
milestone required achieving specific objectives at the Mini Pilot
Plant with respect to economics, scalability, and quality of the
process. The company met its first milestone of the project with the
August 2007 commissioning of the Silicon Refining Furnace version 3.1
(SiRF(TM) 3.1). ARISE met its second milestone when the Mini Pilot
Plant became operational in December 2007, successfully producing
polysilicon.
- On June 11, the company announced that ARISE Germany had signed a
six-year agreement with a wholly owned subsidiary of ReneSola Ltd to
supply ARISE with 203.5MW of silicon wafers. ReneSola Ltd is a
leading solar wafer manufacturer based in China. The agreement
extends through June 30, 2014. ARISE now has supply contracts for
100 percent of its solar wafers requirements in 2008 and
approximately 60 percent of its needs for its 2009 PV cell production
plans. ReneSola is the seventh, high-quality silicon wafer
manufacturer with which ARISE has developed a supply relationship
that the company believes will enable it to meet its longer-term
requirements.
- On June 12, ARISE announced that Sino-American Silicon Products Inc.
(SAS) has contracted with ARISE to purchase 120 tonnes of 7N+ solar-
grade polysilicon. SAS will purchase 40 tonnes in each of 2011, 2012,
and 2013. ARISE plans to manufacture the 7N+ high-purity (99.99999
percent purity) silicon at its new pilot plant in Kitchener-Waterloo.
The contract with SAS is consistent with ARISE's plan to use the
output from the planned silicon plant to meet the requirements of its
growing PV cell production at its plant in Germany as well as for
sale to other companies. Under a second three-year agreement signed
between the companies, ARISE will consign 7N+ polysilicon to SAS. SAS
will use the material to process silicon wafers for ARISE, which will
use them for its PV cell manufacturing operations. Under this
agreement, the processing will consist of 40 tonnes in 2010,
80 tonnes in 2011, and 160 tonnes in 2012.
Second-Quarter and First-Half Financial Highlights
ARISE Technologies second-quarter financial results reflect the manufacturing start-up and the first revenues recorded for shipping of its PV cells to its customers.
As the result of the first PV cell sales of $460,676, 2008 second-quarter sales more than doubled compared with the 2007 period, up 144.4 percent to $745,347. In the 2007 second quarter, sales were $305,014 and all revenues were generated by the company's Systems Division, which mainly is focused on building solar farms and rooftop installations in Ontario. For the first half of 2008, sales were $920,724, up 87.2 percent from $491,815 in the year-earlier period as the result of the start-up of PV cell sales in the second quarter.
Gross profit for the 2008 second quarter and first half was a negative $1.30 million and a negative $1.28 million, respectively, reflecting significant scrap costs and under-used capacity resulting from the start-up of PV cell production on Line 1. Scrap includes breakage as well as all off-spec production, which was expected for a start-up production situation. The company expects to increase gross margin in the second half of 2008 due to stable PV cell production processes and increased sale volumes for PV cells as well as for the Systems Division. In the 2007 quarter and first half, gross profit was $30,360 and $46,809, respectively. The company also expects to recover a portion of its scrap expense in the second half by selling the material for secondary applications or for silicon recycling.
Operating expenses were $5.71 million in the 2008 second quarter, up from $3.61 million in the 2007 period. The increase was mainly due to higher general and administrative (G&A) costs, including more than $1.01 million incurred by ARISE Germany for payroll, legal, and travel as it started up production, compared with less than $200,000 a year earlier. Other G&A increases included stock-based compensation expense (non-cash) of $1.44 million compared with $0.84 million in the 2007 quarter, and higher payroll and professional fees. Research and development expenses were down at $1.50 million, compared with $1.59 million in the 2007 quarter. Selling and marketing expenses increased to $0.49 million from $0.11 million a year earlier, and included feasibility costs for currently in-process solar farm projects. In the first half of 2008, operating expenses were $11.00 million, compared with $4.94 million in the first six months of 2007 with the increase mainly attributable to the same factors that affected the second quarter of 2008.
Interest expense (net) for the second-quarter 2008 was $320,346, compared with interest income in the 2007 period of $120,876 as the company increased its borrowing from Commerzbank AG Germany. This increased expense was more than offset by a foreign exchange gain of $863,666, compared with a gain of $40,854 in the 2007 quarter. In the first half of 2008, the company had interest expense of $44,787, compared with interest income of $116,158 a year earlier. The first-half foreign exchange gain was $475,733 in 2008 and $40,854 in 2007.
The net loss for the 2008 second quarter was $6.51 million (a loss of $0.05 per basic and diluted share), compared with a net loss $3.42 million (a loss of $0.06 per basic and diluted share) in the 2007 period. For the first half of 2008, ARISE's net loss was $11.88 million ($0.10 per basic and diluted share), compared with a loss of $4.73 million ($0.10 per basic and diluted share) in the six-month 2007 period.
As at the end of the 2008 second quarter, ARISE had positive working capital of $46.05 million. Cash and cash equivalents were $42.18 million at end of the second quarter, reflecting the completion of the equity bought-deal offering in May. Subsequently, in July, the company made two prepayments totaling $20.60 million for inventory purchases of silicon wafers for the German manufacturing plant. As at August 8, 2008, ARISE had cash and cash equivalents of approximately $21.75 million. The company expects to be able to offset some of the funds required for inventory prepayments with customer advance deposits, thereby limiting the impact of silicon wafer prepayments on its working capital.
Outlook - Advanced Negotiations with Additional Customers
"In addition to the significant increase in PV cell shipments and sales that we expect to record in the 2008 third and fourth quarters, we are working on a number of other major developments that will contribute to our growth and ability to create value for our shareholders," Mr. Tichelman said.
"We are in advanced discussions with additional customers for our PV cells. We have supplied these customers with cells for their testing and are negotiating agreements with each. There can be no guarantee, of course, that we will sign any or all of these, but we are optimistic of doing so.
"We have signed an Offer to Lease agreement for a building in the Kitchener-Waterloo area that will house our 7N+ solar-grade polysilicon pilot plant. Leasing this facility will result in a more flexible building with respect to adding capacity in stages and lower costs than we had previously expected.
"We will proceed in the third quarter with the new pilot plant, according to the previously announced schedule," Mr. Tichelman continued. "We expect the new-generation SiRF to be fabricated and running in September at our supplier and we expect delivery of the first SiRF 4 furnace in first-quarter 2009. The plant's target production capacity remains at 50 tonnes per year in 2009, increasing to a target capacity of 400 tonnes per year in 2010.
"Based on our cost objectives for the plant and design concepts, and discussions with the University of Waterloo," Mr. Tichelman continued, "we determined that the University's campus is not the best place to locate the pilot plant. We appreciate that the University and the City of Waterloo have certain design, appearance, and size and use ratio requirements for the campus. Unfortunately, meeting these requirements would require ARISE to incur additional costs that are unnecessary to construct a plant suitable for its needs. ARISE greatly values our relationship with the University of Waterloo. We expect to continue working closely with it and also will continue to consider its campus for future corporate and research facilities that likely will be more compatible with the University's requirements."
Regarding the company's technology progress, ARISE's Chief Technology Officer and Vice-Chairman, Ian MacLellan, reported that "we have made good progress on the quality of our silicon. We recently have been able to pull a mono-crystalline ingot with our material in a float-zone process. This is an important linkage with our high-efficiency PV cell program.
"We have been very pleased with the partnership forged with Ebner Gesellschaft M.B.H. in the development of our high-purity silicon process. We believe that other similar partnerships for our technology can be productive," Mr. MacLellan said.
"In addition to technology partnerships," Mr. Tichelman added, "we also are considering collaborations for our Systems Division business. All such partnerships would alleviate some of the financing that we would otherwise require in the future."
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