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Edited Transcript of MBTN.S earnings conference call or presentation 15-Aug-19 7:30am GMT

Half Year 2019 Meyer Burger Technology AG Earnings Call

Thun Aug 15, 2019 (Thomson StreetEvents) -- Edited Transcript of Meyer Burger Technology AG earnings conference call or presentation Thursday, August 15, 2019 at 7:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Hans Brändle

Meyer Burger Technology AG - CEO & Member of Executive Board

* Ingrid Carstensen

Meyer Burger Technology AG - Head of Corporate Communications

* Manfred Häner

Meyer Burger Technology AG - CFO & Member of Executive Board

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Conference Call Participants

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* Felix Remmers

zCapital AG - Research Analyst

* Patrick Laager

Crédit Suisse AG, Research Division - Research Analyst

* Richard Frei

Zürcher Kantonalbank, Research Division - Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, welcome to the Meyer Burger Technology Ltd. Press and Analyst Half-Year Results 2019 Conference Call and Live Webcast. I'm Sandra, the Chorus Call operator. (Operator Instructions) And the conference is being recorded. (Operator Instructions) The conference must not be recorded for publication or broadcast.

At this time, it's my pleasure to hand over to Ingrid Carstensen, Head of Corporate Communications at Meyer Burger.

Please go ahead, Madam.

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Ingrid Carstensen, Meyer Burger Technology AG - Head of Corporate Communications [2]

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Thank you. Good morning, everyone, and welcome to our webcast this morning. Before we begin, I would like to take the opportunity to set the framework for today's call. We're focusing on our midyear results, which were published earlier today, as well as technology and market-related topics. We will not be discussing nor taking any questions on Meyer Burger's shareholder structure, the recent shareholder request for an extraordinary shareholders' meeting nor the ongoing strategy review by our Board of Directors. We'd like to thank you in advance for your understanding.

Now it is my pleasure to hand over this meeting to Hans Brändle, CEO; and Manfred Häner, CFO of Meyer Burger Technology.

Gentlemen?

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Hans Brändle, Meyer Burger Technology AG - CEO & Member of Executive Board [3]

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Good morning, and welcome also from my side. Thank you for joining our earnings call this morning. I start with this morning's breaking news: Meyer Burger is about to rewrite the dynamics of the PV industry with our plan to participate in the commercial success of our heterojunction/SmartWire technologies. I'll discuss the details of our plan in a moment.

As I've already stated earlier, the first half year 2019 was disappointing. The biggest disappointment was the delay of heterojunction orders. We booked no orders in -- no new order intake for heterojunction in the first 6 months, and order intake for the rest of our business was at low level even if it was comparable to the order intake in the same period 1 year ago in a like-for-like comparison. The overall heterojunction order pipeline was stable with prospects mainly coming from outside China. Thanks to the sale of the wafering business end of April and the significant cost reductions as part of our ongoing transformation program, we achieved a small net profit of CHF 2 million.

Next page, please. The key metric for solar is a levelized cost of electricity. Governments are quickly decreasing subsidies for solar power around the world. This means that technology has to rapidly mature to stand on its own and be able to compete with other power generation technologies. The good news is it is happening. Solar is indeed ready to play the main role in the energy transition. In the last decade, the LCOE for crystalline-based, utility-scale solar power fell by 88%. Last year alone, it was 14%, reaching the same LCOE level as wind power and leaving fossil fuels and nuclear behind. By 2020, solar electricity is expected to cost less than least-cost fossil fuel alternatives without taking any government subsidies into account.

Unlike for other power generation technology, solar's cost learning curve is still steep, which means its cost will continue to go down for quite some time. Investors are increasingly sensing the advantages of solar. Last year, solar already accounted for more than half of all renewable energy capacity additions and about twice as much as wind's. As solar global electricity share was only 2% last year, there is huge potential for this versatile and low-cost technology.

The rapidly growing global solar market, with China both installing and producing, by far, the largest shares today, has resulted in the establishment of many local equipment manufacturers and material suppliers. As the number of Chinese companies in this field grows, so does the very fierce competition that we know from other industries. This obviously also means Chinese success stories in standard PV technology is all across the value chain. This is affecting all of our product for the standard the PV technologies: diamond wire saws and wafer inspection systems from our subsidiary, Hennecke; our PERC deposition equipment and module inspection systems from PASAN. Our diamond wire saws, which were Meyer Burger's first solar product, and for years, our very course, were successfully sold to a U.S. nonsolar company. Closing was in Q2 this year.

What we are seeing at Meyer Burger is nothing new in the solar sector. Over the years, Chinese suppliers succeeded step-by-step in taking over business from western suppliers for standard PV equipment. There was a time when even module laminators were coming from western companies as well as module encapsulation material or standard cells stringing equipment. That's over. These products are now made in China, for China, from Chinese companies. Fact is Chinese customers focus on the lowest CapEx, and if possible, on local suppliers. As soon as the technology approaches commoditization which, is now taking place in standard cell technology, there will be enough local Chinese suppliers offering good enough solutions at low prices.

After the PERC commoditization effect, we have now also experienced this for wafer inspection systems and module testing technology. Precise metrology systems have been the last domains of western companies in the wafering and module production equipment fields. That are now being taken over by Chinese competitors. That means Meyer Burger's market share for standard PV technology is eroding product-by-product to local Chinese suppliers. In the last 12 months, sales volumes for our standard solar products decreased by 70%. Our margin was compressed by 30%. The order intake remained stable over the last 3 semesters, however, with shrinking margins.

Let's just briefly take a closer look at the PERC segment, which Meyer Burger pioneered with our [PEC] in-line tools. And there, we had the largest market share until 2017. In early 2018, a local manufacturer with the alternative ALD technology won major biddings, especially at 1 large Chinese cell manufacturer. As an example how fast the market changes in China, the just-mentioned large Chinese cell manufacturer recently completed another bidding round for a major expansion. The just-mentioned ALD equipment manufacturer was no longer considered. Together with another local Chinese competitor offering reengineered, rather simple tube-type furnaces, Meyer Burger was again in the last bidding round. We didn't stand a chance because we were not willing to further reduce our prices, which had dropped already by 45% since end of 2017.

While hard to understand, cost of ownership is not the key buying criteria for Chinese customers. It is still CapEx. And here, it doesn't make economic sense to compete with local suppliers of equipment for standard PV. We have to come to the conclusion that the projected available profit pool for standard PV equipment is no longer attractive for Meyer Burger. The consequence is Meyer Burger has reversed its decision to move operations to China, and our sales and R&D approach regarding PERC and also TOPCon will be opportunistic for customers who value premium quality products and total cost of ownership more than lowest prices.

Finally, we will adjust our global sales team, and we will focus our valuable R&D resources on high-efficiency technology solutions, such as heterojunction, SmartWire and perovskite technologies. Our full focus is on high-end PV technology. This is where we are leaders, offering a distinctive efficiency advantage through our heterojunction and proprietary SmartWire solution.

When comparing the REC module, which is based on Meyer Burger's technology, with the best commercially available modules of leading PERC and also comparing with standard heterojunction suppliers, REC's new Alpha series module shows, by far, the highest efficiency at 21.7%, while the bulk of PERC is still short of 20%. For example, the long-established technology leader in PERC, which is Q CELLS, currently achieved just 19.8%. Interesting to note, however, is the fact that commercially offered standard heterojunction modules are not higher in efficiency than PERC. REC's quantum leap in module efficiency impressively demonstrates how advanced Meyer Burger's combination of heterojunction with proprietary SmartWire technology is. With this leap, REC is now in the same leading efficiency league as SunPower and LG with their alternative IBC technology.

Thanks to Meyer Burger's heterojunction in combination with SmartWire technology, REC is now able to ask for similar premium average sales prices as SunPower and LG. However, IBC, but also standard heterojunction have much higher manufacturing costs than our optimized heterojunction/SmartWire solution. It is well known that PERC has the lowest manufacturing costs per watt peak. By design, and that is the really remarkable achievement, Meyer Burger's heterojunction/SmartWire solution is cost-wise competitive with PERC but with much higher module efficiency, and therefore, higher possible average sales prices than PERC. Therefore, Meyer Burger's unique heterojunction combined with SmartWire is the technology of choice for customers aiming for high-margin products. It is the most cost-efficient solution, while at the same time, leading in sale and module performance. And it's well-known that our heterojunction technology offers not only highest module efficiencies but also more power at operating temperature, higher bifaciality, higher energy yields and better long-term stability than PERC modules. These advantages all offer an advantageous LCOE at attractive average sales prices for the modules, a typical win-win.

With REC, we have now the first Tier 1 company who proves our strong business case with heterojunction in combination with our proprietary SmartWire. It is therefore not surprising that REC goes for fast expansion and price to keep this unique technology as exclusive as possible. As both Meyer Burger and REC announced this morning, REC plans to go for a multi-gigawatt expansion and offers us a profit-sharing on a per-watt level in exchange for an adequate exclusivity. Yesterday, both companies signed a respective memorandum of understanding. This finally offers us a unique opportunity to adapt our business model from selling only equipment, which has always been exposed to price pressure and copycats, to a technology provider that participates via our profit-sharing model in the success and value creation of its leading-edge technology.

This approach leads to two: revenue and profit streams. First, revenue comes from equipment sales; and the second, from a share in the margin of each module sold. You will understand that I will not go into details before we sign the contract. However, I expect that the second stream is a multiple of the first one as you can sense from the simple example. Equipment sales, in this case for 600-megawatt that was announced in December '18, leads exactly once to a cash flow. Any profit share of the modules sold by REC on a per-watt level, let's say, CHF 0.01 per watt peak for illustration purposes only, will lead to an additional substantial cash flow to Meyer Burger of CHF 6 million based on an already ordered 600 megawatts and not taking into account any further expansion. This additional cash flow stream would come per year as long as our equipment produces modules and the profit-sharing applies. This perspective, in combination with the planned aggressive expansion, will make an exciting business case for Meyer Burger and its shareholders.

We expect the closing of the contract between 4 to 6 months. The bottleneck is the final demonstration of the average module performance produced at production level at REC facility in Singapore. Ramp-up of production of the line starts in a few weeks. Of course, aside from this exciting opportunity, we'll continue to evaluate additional strategic options and opportunities.

The basis for this disruptive business model partnership is the very positive development in the first project with REC with our premium heterojunction/SmartWire Technology solution. REC was selected as the industrial partner, with whom we optimized our newly developed second-generation SmartWire in the second half of 2017. The first important hurdle was taken in 2018, ahead of the current project, when REC finally decided to evaluate the potential and the readiness level of our proprietary SmartWire technology. We announced this key decision by REC on February 12, 2018. The convincing results from the comprehensive evaluation of the second-generation SmartWire technology formed the basis for REC to invest into the first 600-megawatt heterojunction/SmartWire production capacity, which we announced in December last year.

REC is the first customer opting for the full potential Meyer Burger solution, which is the combination of leading-edge Meyer Burger heterojunction and our proprietary SmartWire cell connection technology. It's this combination which makes a difference. The whole project was a success story by itself. The ramp-up of the first 200 megawatts out of the 600-megawatt order will be completed by end of September, clearly ahead of schedule and meeting -- or even exceeding all ambitious milestones so far. The overwhelming market response on the launch of the REC Alpha series as well as the fantastic performance of the whole Meyer Burger team is the foundation for REC to swiftly expand the heterojunction capacity together with a downstream partner to multiple gigawatts.

We are a high-tech company. Driving innovation is key for Meyer Burger's success, and we will continue to heavily invest into R&D to maintain our technology leadership. The breakthrough with REC in late 2018 also unleashed additional potential in our R&D team. The team shows progress on many fronts. While the 21.7% REC module already leaves other commercial heterojunction and PERC products behind, we have now exceeded a 22% level in R&D. A 22.1% R&D module was produced together with the Solar Energy Research Institute Hamelin (sic) [Institute for Solar Energy Research Hamelin] in Germany using commercial-type Meyer Burger heterojunction cells.

On the cell level, we have improved our champion cell efficiency within 6 months by absolute 0.5% to more than 24.7%, and this, by using our production equipment. This fast progress within such a short time is just mind-boggling and deserves the highest respect for our Meyer Burger team. Substantial progress can also be reported in other areas such as TOPCon. The champion cell efficiency using our CAiA tool is now at 23.5%.

Last but not least, we are also very glad to report that the first heterojunction-perovskite-SmartWire tandem module was built as part of Meyer Burger's collaboration with Oxford PV, which is very important now that we have sold the first 100-megawatt line to Oxford this month as part of a larger package.

Looking over the next 1.5 years, our priorities are clear, showing that our transformation program and the implementation of our cost measures are on track. We decide to further streamline our product range and focus our REC road map on heterojunction, SmartWire and tandem cell technology and only choose an opportunistic approach for PERC and TOPCon for customers who value our leading-edge technology more than focusing just on lowest possible prices. We decided to concentrate our organization in Hohenstein, Germany and streamline our salesforce in China to the new reality. We continue to also streamline our assets and review and sell noncore businesses. The planned sale of our building in Thun is ongoing and already communicated.

And finally, driving the heterojunction capacity expansion and profit-sharing model with REC and creating strategic options with the goal to create shareholder value. We reconfirm that our strategic focus is ongoing for full potential of heterojunction, SmartWire and next-generation cell technologies as well as a game-changing adaptation of our business model.

Before I hand over to our CFO, Manfred Häner, let me summarize. While the current trading was disappointing with delayed heterojunction orders, the order pipeline is stable. We validated our technology leadership with REC's trailblazing Alpha series based on Meyer Burger's heterojunction/SmartWire technology, and we can expect first gigawatt-scale orders in the next months. We are continuing to drive the technology road map also beyond heterojunction with our strategic partnership with Oxford PV. We are making fast progress in the adaptation of our business model by getting an additional cash flow stream from profit-sharing on a per-watt level besides just simple sale of equipment. And finally, our transformation program is fully on track. I'm proud to state that all the hard and dedicated work of the whole Meyer Burger team to completely reshape this company starts to show tangible results. The best proof of our achievements is a customer like REC willing to enter into a game-changing, long-term cooperation.

Having said that, let me now hand over to Manfred Häner for the financial part.

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Manfred Häner, Meyer Burger Technology AG - CFO & Member of Executive Board [4]

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Good morning, everyone. This is Manfred speaking. I'm pleased to guide you through the financials of the first half year 2019. The reporting currency is in Swiss francs.

New orders of CHF 94 million came in at the lower level of our expectations as only 2 larger orders were recognized in the period January through June. We have experienced a lackluster market, which we did not expect as pronounced at the beginning of the year. On a comparable basis, the order entry was only down by 0.6% compared to the previous year. On the back of the lower order entry and the deconsolidation of the wafering business, order backlog decreased by CHF 75 million to CHF 166 million.

The income statement was mainly affected by low sales resulting in a disappointing operating income and the extraordinary gain of CHF 27 million for the sale of the wafering business, which led to a group result of CHF 2 million. Net sales dropped to CHF 123 million. Adjusted for currency effects and the sale of the wafering business, the organic decline in sales for the continuing business was 36.8%.

Asia, mainly China accounted for 73% of net sales, followed by Europe with 21%. 67% of net sales were generated by PV equipment, 19% by specialized technologies and 14% by service and spare parts. The euro was, with 78% of net sales, the dominant currency, followed by the Swiss franc and the U.S. dollar of 10% each.

Operating income decreased due to lower net sales to CHF 63 million, a decline of 48% compared to the previous year. Personnel expenses dropped by CHF 7 million or almost 11% compared to the previous year. Other operating expenses decreased by 29% from CHF 27 million to CHF 19 million. Both are clear sign of the willingness of the management to adapt the organization toward more flexibility and to lower EBIT breakeven levels.

The EBITDA came in at minus CHF 13 million. The decrease is the result of the lower operating income, but we also achieved substantial savings on tax and OpEx. Based on the comments given on the previous P&L lines, we unfortunately have to report a negative EBIT of CHF 21 million. Lower depreciation and amortization of CHF 6 million compared to the previous year helps to a certain extent to dampen the negative EBITDA impact.

Net result came in at CHF 2 million and was heavily impacted by the net proceeds of CHF 27 million from the sale of the wafering business and CHF 3 million lower taxes compared to the previous year.

Total assets are almost unchanged compared to December 31, 2018. Cash as a result of low income in new down payments from new orders and lower operating income decreased from CHF 90 million to CHF 32 million.

Other major balance sheet changes are: CHF 30 million increase in other long-term receivables, representing a cash collateral for the bank's guarantee currency facility. As we speak, CHF 10 million of it will be released due to low utilization of the facility; CHF 37 million increase in investments in associates, representing our investment in Oxford PV.

On the liability side, the following major changes took place: Increase of trade payables by CHF 10 million; decrease of customer prepayments by CHF 20 million; decrease of financial liabilities due to CHF 18 million amortization of the mortgage flow; last but not least, an increase in equity of CHF 38 million, mainly from the participation in Oxford PV, which was paid in shares, lifted the equity ratio to 63%.

The operating cash flow of minus CHF 58 million was heavily influenced by the negative operating income and the change in net working capital. On the other hand, cash flow from investing activities was strongly positive by CHF 18 million, driven by the sales of the wafering business for CHF 50 million on the one side and the bank deposit of CHF 30 million on the other side. Cash from financing activities was mainly driven by the amortization of the mortgage loan by CHF 18 million. Overall, the cash position decreased by CHF 58 million to CHF 32 million.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question comes from Frei Richard, ZKB.

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Richard Frei, Zürcher Kantonalbank, Research Division - Analyst [2]

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Two questions on REC. I know that you can't give any details. It's more about the potential impact. If you assign some exclusivity to REC, what could be potential impacts on other customers? So isn't there the risk that -- let's see, some big Chinese accounts need to find other suppliers? So that you missed out this potential. And secondly, does this collaboration also include perovskite in the future?

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Hans Brändle, Meyer Burger Technology AG - CEO & Member of Executive Board [3]

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Thank you for this question. Well, of course, we clearly stated adequate exclusivity, and that means it needs to be balanced. At the end of the day, what counts for Meyer Burger is the shareholder value creation. So if the share -- value creation is bigger with some exclusivity with REC compared to other possibilities, then, of course, we go for it. With a profit-sharing model where we participate on a per-watt level, of course, it's in our interest to keep the margin high for the module sales, meaning also that restriction of the absolute deployed heterojunction capacity is a possibility.

Perovskite is not included. But of course, anybody who is embarking on heterojunction technology has the technology road map in mind, which is, of course, tandem technology, perovskite technology, which comes beyond heterojunction. That's the reason why we invested into Oxford PV and then entered into a collaboration agreement with Oxford PV. Because they are most advanced in this tandem technology based on heterojunction -- on our heterojunction-based technology.

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Richard Frei, Zürcher Kantonalbank, Research Division - Analyst [4]

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May I ask a follow-up? Could we also read this collaboration with REC in terms of -- that the Chinese equipment supplier, as you had showed with standard PV equipment, is closing the gap on heterojunction? So that you try to secure at least one part of the market going together with REC because the Chinese will sooner or later anyhow buy the equipment at home.

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Hans Brändle, Meyer Burger Technology AG - CEO & Member of Executive Board [5]

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PERC indeed closed the gap to standard heterojunction. That's one of the remarkable findings if I may refer to, I think that was Page 9 -- 8 or 9 on my -- on Page 9. So there is actually no difference in performance, at least on an efficiency level per module -- on a module efficiency level compared to standard heterojunction. However, there is a huge difference to what REC is able to show. Just to make the -- to comment at this point, almost 2 percentage points difference. That's a different galaxy. That's absolutely different. PERC will not be in a position to get to that level of module efficiency. And it also shows this leading position. The indication I gave is that with such an efficiency -- module efficiency, those players having such high efficiencies, they are able to achieve high average sales prices or premium -- a substantial premium over other technologies.

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Richard Frei, Zürcher Kantonalbank, Research Division - Analyst [6]

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Yes. That I have completely understood. I thought of equipment manufacturers coming from China and entering the heterojunction space. So that you try to secure at least part of the cake with REC because the Chinese will, in the future, buy heterojunction equipment build at home in China as it happened with PERC.

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Hans Brändle, Meyer Burger Technology AG - CEO & Member of Executive Board [7]

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Well, that goes without saying. That protecting our IP, that's the main focus. We know that we have a unique position, technology-wise, and I hope I was clear in pointing out how important in this context. SmartWire technology is. So we do everything to protect our technology. And I was asked many times, why entering a collaboration agreement with this company? With our long-established good relationship with REC, we have full trust that our IP is fully secured.

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Operator [8]

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The next question comes from Patrick Laager, Crédit Suisse.

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Patrick Laager, Crédit Suisse AG, Research Division - Research Analyst [9]

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Quick question regarding your free cash generation, which has dropped in the, let's say, deep red zone in H1. I know it is very difficult to predict how much sales you will have in H2. How much -- but how much cash flow outflow -- cash outflow, excuse me, are you expecting by end of this year? I mean, just a rough indication would be extremely helpful here. This would be question one.

Question two is, have you seen any customers? I mean, if you look at the PV industry, it looks much brighter. The outlook is okay. However, I'm seeing some customers canceling order placement for any kind of reasons. Have you seen any customers canceling order placement in the last few months? This would be question number two.

Question number three is about your financial guidance. Basically, you have not provided any financial guidance for this year, which obviously makes our life even tougher to make any, let's say, reasonable forecast. Can you at least give us a very, very rough indication where sales and EBIT could stand at the end of this year? A bit similar to the free cash flow generation I asked before.

And the last question, coming back to REC. This still remains unclear to me. Assuming that Meyer Burger and REC will definitely agree on the final collaboration, how would Oxford PV react to this deal? I mean, it remains unclear to me how this collaboration with REC fits actually within the Oxford PV cooperation, let's say, framework. Oxford PV could say they are simply stopping the collaboration with you. Or I am wrong here? Three -- 4 questions.

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Hans Brändle, Meyer Burger Technology AG - CEO & Member of Executive Board [10]

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Let me start -- thank you for the questions. Let me start with question 4 and 2. First, with question 2, did we see any cancellation? No, we didn't. As a fact, we didn't go for all orders, as I tried to point out, because of, let's say, requirements with respect to pricing with very unattractive margins left. So no cancellations.

The fourth question was around how this REC collaboration impacts Oxford PV. There is no link between the 2. They are completely independent. However, it's no secret that, of course, REC was very glad to hear that we also think beyond the today's heterojunction technology and drive the technology road map with the leader when it comes to tandem technology, who, by the way, opted also for our base technology. Now there might be an indirect link with -- for the 2 companies as both work with our heterojunction technology, which is, to some extent, different from what others do. I hope that answer these 2 questions.

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Manfred Häner, Meyer Burger Technology AG - CFO & Member of Executive Board [11]

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Okay. To the cash flow situation, for the second half of 2019, we do not expect that we will have a further drop in cash. Taking into account that we are on the market with the building, we hope to close such a contract rather soonest than later. And of course, we also expect now new orders in the second half, especially on the heterojunction side, which will lead to additional down payments coming back in, which leaves the margin of the down payment with us. So overall, no further drop in cash based on our current planning.

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Patrick Laager, Crédit Suisse AG, Research Division - Research Analyst [12]

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Okay. And regarding the financial guidance, rough indication regarding sales and EBIT?

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Manfred Häner, Meyer Burger Technology AG - CFO & Member of Executive Board [13]

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We have decided not to give any guidance.

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Operator [14]

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The next question comes from Felix Remmers, zCapital.

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Felix Remmers, zCapital AG - Research Analyst [15]

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Three questions from my side. Can you shed a bit more light on the cash burn you experienced in H1? I mean, I was very surprised to see that being so high. I mean, you've received some orders. You made some sales. The final acceptance that you normally see is 12% of the value of the machine. So can you share some color here why that was so high? I mean, did something change in the payment terms? Did REC pay something? And with that regard, what's the -- a more detailed question on the cost of the prepayments. In total, combined with what is netted in the inventory, how high remained the cost of prepayment in the balance sheet? So that will be the first topic.

The second one, on the value of the exclusivity. I mean, I completely understand why players like REC wants to enter with you such exclusivity deal and why it still works. How do you make sure for shareholders that you maximize that value? I mean, have you offered the exclusivity to other players? Or are other players asking for that exclusivity? And how much would they be able or interested to pay for that exclusivity in terms of heterojunction?

And the third question is the -- about REC. I mean, you signed a contract with them, memorandum of understanding. I mean, how does that impact now you to sell heterojunction to other players like -- I mean, you were talking about CHF 1 billion in the order pipeline. I mean, you announced U.S. customers potentially. You announced a couple of years ago potential customers with EkoRE in Turkey. So can you sell now to them? I mean, you just said that you expect some new orders in H2. But I mean, if that discussion with REC or negotiations are still ongoing, I mean, how are you able to obtain orders then?

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Hans Brändle, Meyer Burger Technology AG - CEO & Member of Executive Board [16]

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Okay. So let me start with the last question. Of course, our orders are not impacted as long as we didn't come to finally sign the agreement. And I mean, let's see how the final exclusivity will look like.

Now let me make a comment on the order pipeline. Now an order pipeline is an order pipeline. And in March, I made it very clear -- just to give the market an indication, that we are not just talking about 1 potential heterojunction customer. But I've always made clear that this is a pipeline, and of course, by far, not all of these orders will materialize. You asked me a specific example about Turkey. This is a perfect example where a customer obviously prematurely went out to the market making a big announcement, and then again has had to postpone. This is, by the way, one of the postponed orders. Now of course, whatever we have in our current pipeline as already, let's say, offerings out in the market, of course, will not be impacted of any exclusivity. I hope that answers this question.

Then you had another question, how we make sure that we create -- or how -- that we make sure that we maximize shareholder value creation. Now I tried to make an indication how long it takes to evaluate a technology. REC started in late '17 to evaluate SmartWire. As a matter of fact, back in that year, we had our other very intense discussions going into the same direction to finally make the breakthrough on heterojunction. I'm not sure if you might remember, that we changed our approach to the market, no longer selling only lines -- heterojunction lines but core equipment. And we were in discussion with many accounts. And finally, it was REC who was the first mover and is far progressed in the evaluation of our technology. Having said that -- to say that it takes, at least for the first move, 2 years to figure out the potential of our technology. I think that's a fair statement but also for others. It has not only to do with Meyer Burger's technology. As you can imagine, it will also take for others quite a while to figure out the full potential of what we can offer to the market.

Now REC is the first mover, and I'm really glad that we came to this point faster than we ever expected.

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Manfred Häner, Meyer Burger Technology AG - CFO & Member of Executive Board [17]

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Now to the cash situation again, Mr. Remmers. As I stated before, we do not see, at this point of time, that we will burn additional cash. We should stay at this level we are now or even higher. This very much depends, as you know, on new orders, taking into account with each new order, we get roughly 30% to 40% down payment. And then the second payment at shipment, and the last payment usually is a 10% after final acceptance. So I don't -- at this point of time, can give more guidance on that. Of course, if absolutely no orders would come in, then, of course, we would have seen -- we will see some cash burn. But that's an unbelievable story. I think we are now so very close in discussion with customers for heterojunction/SmartWire projects that no orders to be expected is almost a scenario we cannot see at the moment.

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Felix Remmers, zCapital AG - Research Analyst [18]

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Okay. And for the customer prepayments remaining on the balance sheet?

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Manfred Häner, Meyer Burger Technology AG - CFO & Member of Executive Board [19]

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At this very moment, we have CHF 20 million, which are not yet allocated to a work in progress. And that's something we still have to work down, of course. But even taking that into account, with new orders and the sale of the building and so on, no change in the cash position.

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Felix Remmers, zCapital AG - Research Analyst [20]

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Okay. So to make it clear, is that -- I mean, if a [Korean] now wants to place the order, it can do it for the price you have probably already agreed to. Is that like just the -- agree as a potential customer?

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Hans Brändle, Meyer Burger Technology AG - CEO & Member of Executive Board [21]

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Sorry, I didn't fully capture what you said. Did you say...

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Felix Remmers, zCapital AG - Research Analyst [22]

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The question was, to make it clear, if another customer than REC was interested in heterojunction can now place an order at competitive prices with you?

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Hans Brändle, Meyer Burger Technology AG - CEO & Member of Executive Board [23]

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Of course. Of course. Of course.

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Ingrid Carstensen, Meyer Burger Technology AG - Head of Corporate Communications [24]

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We're now going on to several questions, which have come from our platform. The first question is from [Rachel] of (inaudible). This one's a newspaper in Switzerland. She asked whether or not the concentration of Meyer Burger's organization in Hohenstein-Ernstthal in Germany means that we are leaving Switzerland. Or how will it impact our location in Switzerland?

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Hans Brändle, Meyer Burger Technology AG - CEO & Member of Executive Board [25]

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Answer is no. We are not leaving Switzerland. Maybe to just put it in a larger context, we had 2 major sites in the past: the headquarters with major operations here in Thun, and one in Hohenstein, close to Chemnitz. As everybody noticed, we basically have given up our activities here in Thun besides our very important SmartWire Connection Technology business, which is an R&D activity. This will be left here in Thun. And of course, we have our research center in Hauterive, in the neighborhood of Neuchâtel, and our PASAN subsidiary, which is in Neuchâtel itself. So we are not leaving Switzerland. But we concentrate the organization in Hohenstein as we are getting smaller and a much simpler organization.

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Ingrid Carstensen, Meyer Burger Technology AG - Head of Corporate Communications [26]

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Thank you. The next question is from our webcast call comes [Ult Sandreich] from [Elysium Capital]. He asked how Meyer Burger can accept heterojunction orders from competitors of REC as long as potential exclusivity is on the table and no final contract is signed. He also asked further if our previously announced CHF 100 million heterojunction order pipeline is affected by the potential exclusivity?

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Hans Brändle, Meyer Burger Technology AG - CEO & Member of Executive Board [27]

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No, it's not affected. Again, we didn't sign any exclusivity at this point. And what was the question? Of course, every quotation, or let's say, a potential order, we can fulfill, of course.

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Ingrid Carstensen, Meyer Burger Technology AG - Head of Corporate Communications [28]

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Thank you. We will now return to calls coming from the telephone. Operator?

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Operator [29]

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The next question comes from [Kristoff Reuder], [Modern Capital].

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Unidentified Analyst, [30]

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One comment and one question. Comment is, typically, when a capital goods company report order book, they do that on the basis of a down payment. Now my (inaudible) comment, well, that CHF 1 billion pipeline has been communicated. And that's not all orders. Orders, of course, would come through. It's true this company don't much do that. It's true this company reports orders only when a down payment is made. So that is only a comment.

And a question -- related question, how Meyer Burger is dealing with its order book. Now the question is very simple. And that is, every time when Meyer Burger makes an announcement, their stock price is going down. Now I understand from [Dr. Franz] that you're working on behalf of the shareholders, but every time you seem to announce something or you announced something, the share price is coming down, especially after your announcement today.

Can you explain, does market not understand how brilliant the management do this and the strategy is? Or what is wrong? What does the market doesn't understand that you understand much better than the market and investors? And appreciate your answer with this question.

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Manfred Häner, Meyer Burger Technology AG - CFO & Member of Executive Board [31]

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I trust that you understand we do not speculate on stock prices and how we come to the stock price.

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Operator [32]

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The next question comes from [Martin Beck], Private Investor.

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Unidentified Participant, [33]

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Just one quick question for me. Can you confirm your current liquidity as of today or this week? And how much longer you have until you run out of cash given the cash burn rate in the first quarter and the very limited cash on the balance sheet as of the end of Q2 -- in Q2.

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Manfred Häner, Meyer Burger Technology AG - CFO & Member of Executive Board [34]

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Once again, I do not believe that we will see a further cash burn. However, as I mentioned already, this statement is based that we will sell the building here in Thun, and we will get, of course, some new orders. The cash situation since end of June has improved. We have received several larger payments. One of it is the down payment from Oxford for the order placed last week and some other payments from larger customers, where we have already orders in working progress.

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Unidentified Participant, [35]

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But those are just down payments. I assume you will need to use those funds in order to pay for your suppliers and obviously to build the machine. So given your margin is negative, I would assume that this is just a temporary effect. And then looking into next year, I think both your bond and your syndicated credit facility comes due. So how do you think you can address those facilities given that you keep burning cash? But even if you don't burn cash, even if you stay cash neutral, you only have CHF 30 million cash on balance sheet. So how are you going to address those maturities next year?

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Manfred Häner, Meyer Burger Technology AG - CFO & Member of Executive Board [36]

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A good and fair question. I mean, we have to face that. There are different options how to tackle that. Again, we are on the way of selling our building here in Thun. We have -- our (inaudible) asset, but we're also looking into possible divestments of no more needed companies within the group, which we believe will also bring some cash to the table. That's all I can say at this very moment. We have not yet really looked into the end of next year how the whole financing or refinancing of the bond, for example, how this we will tackle. That's still an open issue. But I'm pretty much confident that we can manage that.

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Unidentified Participant, [37]

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Okay. And then last question for me is would you also look into potentially raising more equity in order to refinance those bonds and the credit facility?

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Manfred Häner, Meyer Burger Technology AG - CFO & Member of Executive Board [38]

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This is not on the table at this point of time.

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Ingrid Carstensen, Meyer Burger Technology AG - Head of Corporate Communications [39]

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Okay. I think we're coming slowly to the end of our call. We have several more questions on our platform which continue to ask about the exclusivity of the REC contract and what it means for other customers, but our management has already spoken to that topic several times.

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Hans Brändle, Meyer Burger Technology AG - CEO & Member of Executive Board [40]

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Yes. Maybe let me just make a last remark to this exclusivity. As long as we didn't sign the contract, which is in favor of us and the shareholder value created, of course, it will have no impact on our pipeline whatsoever with heterojunction because there is no such exclusivity. So I hope that all -- answers all questions, and as soon as we have more to say about -- and finally signed contracts, we, of course, will come back to you.

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Ingrid Carstensen, Meyer Burger Technology AG - Head of Corporate Communications [41]

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Good. Operator, I'll hand back to you now. I think we're finished with our questions on the platform. And also, please queue any further questions in our phone queue?

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Operator [42]

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So far, there are no more questions.

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Ingrid Carstensen, Meyer Burger Technology AG - Head of Corporate Communications [43]

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Okay. Then I think we can finish up this morning. And we would like to thank everybody for joining us on the call. And if you have any further questions, you can send them to us by email. Thank you.

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Operator [44]

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Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.