Principles and objectives of financial management
The structure of our financial management is geared to both our business strategy and the requirements of operations.
Our financial policy aims at having respective liquidity reserves available at any time in order to provide the group with the financial flexibility necessary for further international growth, at limiting financial risks, and at optimizing capital costs by way of an appropriate capital structure. For the most part, group funding is carried out centrally via SOLARWORLD AG. To ensure tax-optimized and more cost effective financing of the group’s growth, the funding structure of the holding is strengthened through profit pooling agreements concluded with the wholly owned German subsidiaries: this way, profit and loss of the subsidiaries goes right into SOLARWORLD AG. This includes, inter alia, the management of liquidity as well as borrowing for the funding of the business expansion. This provides a group-wide basis for our shareholder-oriented dividend policy regarding the profits of the AG (Aktiengesellschaft – public limited company). The SOLARWORLD Stock
In 2008, investments in intangible assets and property, plant and equipment amounted to € 271.6 million (previous year: € 115.2m). The investment activities mainly focused on the expansion of integrated cell and wafer manufacturing at the Hillsboro location where a total of € 143.1 million were used. SOLARWORLD invested € 87.5 million in the further expansion of wafer manufacturing by DEUTSCHE SOLAR AG in Freiberg in 2008. Investment expenditures at the module manufacturing locations, Freiberg and Camarillo, added up to a total of € 16 million. In addition, € 13 million were used for infrastructure upgrading for research and development activities of SOLARWORLD INNOVATIONS GmbH in Freiberg.
Investment development // in m€
The group-wide investment ratio, shown as the relation of investment expenses and amortization and depreciation, amounted to 492 (previous year: 274) per cent and underlines SOLARWORLD’s strategy aimed at internal growth along the value added chain.
In 2008, investments in the participating interests, JOINT SOLAR SILICON VERWALTUNGS GmbH, RGS DEVELOPMENT B.V., SCHEUTEN SOLARWORLD SOLICIUM GmbH and the newly founded SOLARWORLD KOREA LTD. – all of which are recognized at equity – added up to a total of € 16 million (previous year: € 4.3m).
Free funds – liquid funds and other financial assets – amounted to € 836.1 million (Dec 31, 2007: € 792.9m) as at the balance sheet date. Liquid funds in the amount of € 431.7 million (Dec 31, 2007: € 263.9m) include cash and cash equivalents that mainly consist of day-to-day money and fixed term deposits. In addition, capital market products in an amount of € 404.4 million (Dec 31, 2007: € 529.0m) are held per balance sheet date.
Cashflow from operating activities reached € 320.5 million (previous year: € 244.0m) and was particularly influenced by the increase in the operating result and, as compared to the prior year, lower corporate income tax payments in the amount of € 40.1 million (previous year: € 69.3m). A funds lockup due to the increase in inventories by € 42.5 million could be compensated for especially by way of a reduction of trade receivables in an amount of € 41.7 million and through increased trade liabilities which exceeded those of the prior year by € 38.1 million.
Cashflow from investment activities amounted to € -165.2 million (previous year: € -622.3 m) and was influenced by payments for fixed asset investments amounting to € -269.5 million (previous year: € -117.8m). Investment expenses were partially balanced by a cash inflow from investment grants of € 29 million (previous year: € 6.5m) and by the disposal of shares (65 per cent) in gällivare photovoltaic ab in the amount of € 13.0 million, and by the disposal of fixed assets amounting to € 8.6 million. Incoming payments from financial assets amounted to € 53.6 million (previous year: € -517.4m).
Cashflow from financing activities amounted to € 1.8 million (previous year: € 451.3m) and was primarily influenced by taking out a loan in the amount of € 75 million. In addition to the current interest payments of € 33.0 million and redemption payments for loans of € 28.2 million, this also includes the € 15.6 million dividend payment made in the 2nd quarter of 2008.
Cash flow-reconciliation // in m€
Multi-period overview of the financial situation // in k€
| 31.12.2004 | 31.12.2005 | 31.12.2006 | 31.12.2007 | 31.12.2008 | |
| Consolidated net income | 18,114 | 51,982 | 130,566 | 113,256 | 148,679 |
| Liabilities (current and noncurrent) | 151,801 | 229,523 | 407,089 | 1,012,920 | 1,279,547 |
| Equity | 124,488 | 217,056 | 597,321 | 691,546 | 841,075 |
| Total assets | 276,289 | 446,579 | 1,004,410 | 1,704,466 | 2,120,622 |
Indicators
| 31.12.2004 | 31.12.2005 | 31.12.2006 | 31.12.2007 | 31.12.2008 | |
| Return on equity (Consolidated net income/equity); in % | 14.6 | 23.9 | 21.9 | 16.4 | 17.7 |
| ROCE (cut-off date) (EBIT/capital employed)1 ; in % | 19.1 | 49.4 | 38.4 | 36.5 | 37.3 |
| Cash ratio (liquid funds plus other financial assets/current liabilities) | 0.5 | 1.4 | 2.3 | 7 | 4.5 |
| Quick ratio (liquid funds plus short term available funds/current liabilities) | 0.7 | 1.7 | 3 | 8.1 | 5 |
| Current ratio | 1.5 | 2.7 | 4.8 | 11.3 | 7.8 |
| (current assets/current liabilities) | |||||
| 1) Intangible assets and property, plant and equipment less accrued investment grants plus net current assets less short-term net liquiditySachanlagevermögen abzgl. Investitionszuwendungen zzgl. Nettoumlaufvermögen ohne Finanzmittel und Finanzverbindlichkeiten | |||||