Meyer Burger produced more than 300 megawatts of high-performance solar modules in the first half of the year and increased sales by 70.8 percent to CHF 96.9 million. The company generated an operating loss at an EBITDA level of CHF -43.3 million due to a difficult market situation in the second quarter, depreciation, ramp-up of production in Germany, and the ongoing expansion in the USA. With cash and cash equivalents of CHF 370 million and an equity ratio of 45.9 percent, Meyer Burger remains solidly capitalized and well-financed for the next expansion steps. Strategic presence in the USA will be significantly expanded with its own solar cell and module production and should sustainably improve the profitability profile with expected EBITDA margins of more than 25 percent. For the time being, Meyer Burger is focusing on expansion in the USA; further expansion in Europe will be pursued as soon as local market conditions are fair and sustainable.
Meyer Burger consolidated its position as a leading premium manufacturer of solar cells and modules in the first half of 2023. The company further expanded its production capacities in Germany and produced high-performance solar modules totaling 302 megawatts (MW). This means that almost the entire output of the previous year has already been achieved in the first six months. Meyer Burger generated total sales of CHF 96.9 million in the reporting period, 70.8 percent more than in the same period of the previous year, of which CHF 93 million came from the sale of 207 MW of solar modules. Meyer Burger also made important progress in the area of research and development. The planned new ‘glass-glass’ module technology improves the performance and durability of the modules. In addition, the development of modules and solar roof tiles based on heterojunction IBC technology is progressing rapidly to achieve module efficiencies of over 24 percent.
Competitive distortions impact profitability
Like all European manufacturers, Meyer Burger was affected by the supply policy of Chinese suppliers in the first half of the year. Chinese suppliers flooded the European market with a total of 85 GW of solar modules in the first half of the year, which they offered at prices far below manufacturing costs. In the first quarter, Meyer Burger was able to keep sales prices nearly consistent at the previous year's level, but in the second quarter, due to the general decline in solar module prices, it was forced to reduce prices relative to the price level and grant its customers contractually agreed credits from inventory protection clauses. In addition, it was necessary to write down inventories of solar modules. This resulted in total special effects of approximately CHF -13.0 million.
With additional production lines coming on stream, personnel costs increased to CHF 47.2 million (H1 2022: CHF 33.2 million), while operating costs rose to CHF 31.2 million (H1 2022: CHF 16.7 million). Together, these effects resulted in an operating loss at an EBITDA level of CHF -43.3 million (H1 2022: CHF -24.4 million). Depreciation of property, plant, and equipment increased to CHF 12.8 million (H1 2022: CHF 8.2 million) due to the expansion, resulting in an EBIT of CHF -56.1 million (H1 2022: CHF -32.7 million). The financial result, mainly interest expenses, remained at the previous year's level of CHF -8.1 million. This resulted in a net loss of CHF -64.8 million compared to a loss of CHF -41.0 million in the previous year. As of 30 June 2023, Meyer Burger had cash and cash equivalents of around CHF 370 million and a solid equity ratio of 45.9 percent.
Strategic presence in the USA strengthened
With the establishment of full solar cell and module production in the US, announced on 24 July 2023, Meyer Burger is eligible for the Advanced Manufacturing Tax Credit 45X, which is part of the US Inflation Reduction Act (IRA). This corresponds to a cumulative eligible amount of up to CHF 1.4 billion from the start of production in mid-2024 until the end of 2032. Based on the already signed, binding offtake agreements in the USA for a cumulative volume of more than 5 GW until 2029, in which the wafer price risk is borne by the customers, the sales prices are fixed for the duration of the contract and the achievability of the cost structure has already been proven in the current production in Germany, Meyer Burger expects achievable EBITDA margins of 25 percent and more for the US business after completion of the production ramp-up (expected from 2025). Meyer Burger is therefore already working intensively in the USA to conclude further binding, multi-year purchase agreements with additional customers in the utility and rooftop segments before the end of 2023.
Current market failure in Europe
Demand for solar modules is growing worldwide, including in Europe. This positive trend contrasts with the lack of fair market conditions for European manufacturers in Europe, which is currently the biggest challenge for the local solar industry. Due to the lack of protection against manufacturers who offer modules significantly below their production costs, there is currently no incentive for suppliers such as Meyer Burger to build further capacity. The European market needs the rapid implementation of the industrial policy measures, already announced by the European Union, to remedy the current market failure and the resulting preferential treatment of Chinese suppliers and transform it into a fair competition. Meyer Burger is preparing for this by, among other things, participating in the German government's "PV Industry" call for interest process for gigawatt-scale projects and has submitted the "INTEGRA" project for the construction of a 5 GW solar cell and module production facility on time on August 15. Possible combinations of the "INTEGRA" project with the "HOPE" project, which has already been submitted via the EU Innovation Fund and approved for funding of €200 million, for the establishment of a 3.5 GW solar cell and module production facility are currently being examined.
Outlook
The implementation of the new solar cell production in the USA is being driven forward with the highest priority and further multi-gigawatt offtake agreements in the USA as well as the selection of another site for further production expansions are in progress. Meyer Burger is thus reacting consistently to the current market distortions in Europe and, until the market failure is cured, plans to further expand the company's capacity under the industrially attractive and sustainable conditions in the USA.
The second-semester result may be positively impacted by expected wafer price reductions as well as increased sales activities. However, the additional expenses for the ramp-up of production in Colorado and the continued limited visibility in the price development of solar modules due to the current oversupply by Chinese suppliers in Europe, make a forecast for the full year difficult. Meyer Burger is therefore refraining from providing an outlook at the EBITDA level.
Operationally, 800 MW of solar modules can be produced in fiscal year 2023, but Meyer Burger reserves the option to adjust this volume depending on the market conditions in Europe.
