Meyer Burger announces 9 months results and provides further details in relation to the recapitalisation programme
Comprehensive recapitalisation programme to strengthen capital structure
Meyer Burger Technology Ltd (SIX Swiss Exchange: MBTN) today announced further details to the different measures of the recapitalisation programme. The programme consists of (i) adjustments of terms of the outstanding convertible bond, (ii) an ordinary capital increase and (iii) the extension of bank credit facilities.
In relation to the first pillar of the programme, the company plans an adjustment of the terms of the outstanding convertible bond due in 2020. Currently, the convertible bondholders have an option (investor put option), which entitles them under certain conditions, to require the company to redeem the bonds held by such bondholders at the principal amount (plus accrued interest) on 24 September 2018. As already announced on 8 November 2016, the Board of Directors proposes to the convertible bondholders to remove the investor put option in exchange for a higher coupon and a reduced conversion price. In this connection, the Board of Directors has convened a bondholders’ meeting, to be held on 25 November 2016. The coupon of the convertible bond shall be increased from 4.0% to 5.5% per annum (with retrospective effect as of 24 September 2016). The conversion price shall be reduced to reflect a premium of now 25.0% above the average of the daily volume-weighted average share prices of the Meyer Burger shares during a period of 20 trading days, expected to begin on 3 January 2017. The proposed conditions include a minimum conversion price which is 25.0% above the subscription price which the Board of Directors will determine for the newly issued shares in connection with the ordinary capital increase, and a maximum conversion price which is 25.0% above a maximum price to be determined dependent on the theoretical value of the Meyer Burger share ex subscription right as well as on the subscription price itself. The previous conversion price of CHF 11.39 per Meyer Burger share will therefore be significantly reduced, which increases the implicit option value of the convertible bond and as a result also the probability of conversion. Several large convertible bondholders, among them Veraison Capital AG, which together hold about half of the outstanding convertible bond amount, have already voiced in principle their support of the proposed amended terms of the convertible bond. For the implementation of the proposed amended terms of the convertible bond, a majority of two thirds of the outstanding capital of the convertible bond will be necessary.
The second pillar to strengthen the capital structure is the planned increase of share capital. The Board of Directors has decided to convene an Extraordinary Shareholders’ Meeting, to be held on 2 December 2016, and to propose to this Shareholders’ Meeting an ordinary capital increase for gross proceeds of CHF 160 million, in order to sustainably strengthen the capital base and secure the redemption of the CHF 130 million straight bond due on 24 May 2017. Assuming the approval of the proposed capital increase by the Extraordinary Shareholders’ Meeting, the new shares will be offered to the existing shareholders through tradable subscription rights (the new shares will be issued at a discount to the share price). The subscription price, the final number of shares to be issued and the subscription ratio will be determined prior to the Extraordinary Shareholders’ Meeting and be communicated in the morning of 2 December 2016, at the latest.
The subscription rights are expected to be tradable on SIX Swiss Exchange from 7 until 13 December 2016. The exercise period for the subscription rights is expected to be from 7 to 15 December 2016, 12:00 noon (CET). The first trading day of the new registered shares is expected to be 16 December 2016. Payment and settlement of the new shares is expected to be on 19 December 2016. The dates of the recapitalisation measures are further detailed in the following table “Expected timetable of the recapitalisation programme”.
In addition, the Extraordinary Shareholders’ Meeting is also being asked to approve an increase of the existing conditional capital in relation to conversion and/or option rights which are granted in connection with convertible bonds, option bonds or other financial market instruments, in order to secure future conversion of the convertible bond after the adjustment of the conversion price. As the new conversion price will depend on the company’s share price during the above mentioned reference period, the number of shares sourced from conditional capital that will be necessary for the conversion under the amended convertible bond terms is not known yet. The company will communicate the final amount proposed for the conditional capital on the day of the Extraordinary Shareholders’ Meeting, at the latest. Furthermore, the existing authorised capital shall also be increased to retain the ability to implement new strategic projects or for the participation of strategic partners.
The third element of the recapitalisation programme is an extension of existing bank credits. A bank consortium has already agreed on the extension of the maturity of the loan secured by mortgage certificates of CHF 30 million on the building in Thun, which is due in April 2017, as well as on the extension of the guarantee facility of now CHF 60 million by three years each. The extensions are also under the condition that the Extraordinary Shareholders’ Meeting has approved the ordinary capital increase and that the capital increase has been implemented.
Approval of convertible bondholders and shareholders is essential
The three pillars of the recapitalisation programme are inter-conditional, i.e. the change of terms of the convertible bond and the willingness of the banks to extend the maturities of the credit contracts will be conditional upon the increase of the company’s share capital. On the other hand, the company’s share capital increase will be conditional upon the approval by two thirds of the outstanding capital of the convertible bond due in 2020 to change the terms of the convertible bond.
This comprehensive recapitalisation programme can only be implemented if existing convertible bondholders and shareholders approve the necessary steps. If the recapitalisation programme cannot be executed as planned, the repayment of the CHF 130 million straight bond maturing on 24 May 2017 cannot be guaranteed. At the meeting of the convertible bondholders, an approval of a two third majority of the outstanding capital of the convertible bond will be necessary. At the Extraordinary Shareholders’ Meeting, a two third majority of the share votes represented at the Meeting is required for the approval of the capital increases of the conditional and of the authorised capital. It is therefore of utmost importance that as many bondholders and as many shareholders as possible will either directly participate or be represented at the respective meetings. The bondholders will receive the respective information on the bondholder meeting from their depositary banks. The company’s shareholders who are registered in the share register will receive the invitation to the Extraordinary Shareholders’ Meeting directly via the share register.
The invitations to the Extraordinary Shareholders’ Meeting and to the meeting of the convertible bondholders are published on the company website (see also the website links mentioned underneath the following table “Key results for 9 months 2016”).
The Board of Directors is convinced that this comprehensive recapitalisation programme represents a firm solution to provide the company with financial strength and flexibility and to profit from the growth opportunities in the solar industry on the basis of a competitive cost structure, which is in the best interest of all stakeholders.
Results for the first 9 months 2016
Incoming orders for the first 9 months 2016 rose by 15% to CHF 358.5 million (9M 2015: CHF 310.7 million). The growth mainly reflects the increased demand of wafer, solar cell and solar module manufacturers and the need to either renew existing production lines through updates or to assemble entirely new production capacities.
The order backlog increased to CHF 273.6 million as at 30 September 2016 (31 Dec 2015: CHF 257.5 million) and provides a good base for sales in the fourth quarter 2016 and the first half of 2017. The book-to-bill ratio for the first 9 months 2016 was 1.07 (9M 2015: 1.82).
Net sales increased by 97% to CHF 336.1 million for the first 9 months 2016 (9M 2015: CHF 170.3 million). Adjusted for some slightly positive currency translation effects and the divestment of the Roth & Rau Ortner companies in August 2015, the organic sales growth on a like-for-like basis was 108%.
Operating income after costs of products and services increased by 79% to CHF 164.0 million (9M 2015: CHF 91.6 million). The margin was 48.8% (9M 2015: 53.8%). The exceptionally high margin in 2015 was mainly due to positive one-time effects (net sales recorded in conjunction with GT Advanced Technologies and positive cost effects on materials).
Meyer Burger has confirmed the turnaround at the EBITDA level with a positive result of CHF 13.9 million (9M 2015: CHF -67.2 million). The various measures executed during previous years to reduce the operating costs have shown their effects as expected during the reporting period 2016. The structural programme announced on 29 September 2016 will reduce, at unchanged level of net sales, the company’s current annual operating cost base by about CHF 50 million.
EBITamounted to CHF -25.5 million (9M 2015: CHF -119.1 million). Depreciation and amortisation totalled CHF 39.4 million for the first 9 months 2016 (9M 2015: CHF 51.9 million).
The financial result, net, amounted to CHF -11.2 million (9M 2015: CHF -23.5 million). The change compared to the previous year period is mainly due to different effects regarding the valuation of intercompany loans to foreign subsidiaries at each balance sheet date (due to unrealised positive / negative currency translation effects).
Taxes for the first nine months 2016 amounted to a tax expense of CHF 3.6 million (9M 2015: tax income of CHF 3.8 million). The tax expense in the reporting period 2016 is mainly due to a deferred tax asset adjustment as a result of a reassessment of the usage of the tax loss carry forwards before forfeiture, and losses on the 9 month period 2016 were partially not recognised as a new tax asset.
Loss at net result level was reduced considerably and amounted to CHF -40.3 million (9M 2015: CHF -138.8 million).
Cash flow from operating activities amounted to CHF -9.1 million for the first 9 months 2016 and has improved considerably compared to the previous year period (9M 2015: CHF -42.7 million). After a positive cash flow from operating activities during the first 6 months of 2016, there were substantial cash-related investments into the net working capital in the amount of CHF 28 million during the third quarter of 2016.
Cash flow from investing activities was CHF -3.8 million (9M 2015: CHF -10.1 million) and included normal conservative investments in non-current assets during the reporting period 2016.
Cash flow from financing activities amounted to CHF -0.5 million (9M 2015: CHF -1.9 million) and included mainly the purchase of further shares in Meyer Burger (Germany) AG.
Balance sheet: Total assets decreased by about 4% compared to year-end 2015 and were at CHF 548.0 million as at 30 September 2016 (31 Dec 2015: CHF 572.3 million). Cash and cash equivalents were CHF 88.1 million (31 Dec 2015: CHF 101.5 million) and inventories at CHF 118.9 million. Non-current assets mainly include property, plant and equipment of CHF 110.7 million, intangible assets of CHF 52.5 million and deferred tax assets of CHF 88.8 million. Total liabilities amounted to CHF 412.5 million, of which trade payables were CHF 43.5 million, customer prepayments CHF 56.0 million, provisions CHF 10.7 million and financial liabilities CHF 252.6 million. Equity amounted to CHF 135.5 million; the equity ratio was 24.7%.
Outlook for full year 2016
As already announced on 8 November 2016, Meyer Burger expects to achieve net sales in a range of CHF 420-450 million and a positive EBITDA of about CHF 10-20 million for the fiscal year 2016. The comprehensive structural programme announced on 29 September 2016 is being carried out efficiently and shall reduce, at unchanged level of net sales, the company’s current annual operating cost base by about CHF 50 million (therefore the breakeven level at EBITDA will be reduced to a net sales volume of about CHF 300 million as of 2018). The extraordinary costs in conjunction with the structural programme will amount to about CHF 3-4 million and be charged as non-recurring expenses to the full-year financial statements 2016 in the fourth quarter of the year.