Risk/Opportunities Report

The SINGULUS TECHNOLOGIES Group is exposed to numerous risks related to the entrepreneurial actions within the operating segments and resulting from internal and external influences. A risk is considered the danger that events, development or actions prevent the Group or one of the segments from reaching its objectives. At the same time, it is important for the SINGULUS TECHNOLOGIES Group to identify opportunities in order to leverage them in the course of conducting business and, in this way, to secure and improve the Company's competitiveness. Recognizing and managing business risks and opportunities at an early stage is the direct responsibility of the operating segments and departments. Effective management and control systems are used for this purpose to identify risks and opportunities at an early stage, to evaluate them and handle them in a consistent manner. Risks and opportunities are not offset against each other.

The purpose of the risk management system is to systematically and continually identify, assess, manage, monitor and document risks jeopardizing the Company's continued existenceand other material risks in order to help ensure that corporate targets are achieved and to increase risk awareness within the Group.

As part of the opportunity management system, the opportunities of SINGULUS TECHNOLOGIES for further entrepreneurial development are discussed during regularly-held strategy meetings, analyzed in Executive Board and Supervisory Board meetings, and, if possible, identified in the annually prepared operating budgets. The objective is to identify potential opportunities arising from positive developments in connection with operating activities at an early stage and to take appropriate measures to leverage them most effectively for the Company. The Executive Board and the operating areas are directly responsible for identifying and realizing opportunities at an early stage. Opportunities are therefore not part of the risk management at the SINGULUS TECHNOLOGIES Group.

The following disclosures apply to both SINGULUS TECHNOLOGIES AG as the parent company and to the SINGULUS TECHNOLOGIES Group. The parent company plays a key role in our risk and opportunity management.

OBJECTIVES AND PRINCIPLES OF RISK MANAGEMENT

For SINGULUS TECHNOLOGIES, efficient and forward-looking risk management is a crucial and value-creating task. Risk management is a core business function and has a decisive impact on the success of our business activities.

Specifically, risk management supports the achievement of our corporate objectives by providing transparency about the Company's risk situation as the basis for risk-conscious decisions, by identifying potential risks to the Company's net assets, financial position, and results of operations, and by prioritizing the risks and necessary actions. In addition, risk management ensures the targeted management of risks through implementing and monitoring the appropriate measures. Furthermore, it aims to limit risks to an acceptable level and to optimize risk costs.

Risk management helps increase enterprise value, is aligned with the interests of investors and stakeholders, and serves to ensure regulatory compliance.

Risk management at SINGULUS TECHNOLOGIES is based on the following principles:

  • Risk management is primarily ensured by the operating segments as part of their management tasks;
  • Risk management cannot be limited to financial risks, but must cover all risks associated with the Company's business activities;
  • Risk management must constitute an integral part of the business processes;
  • The prerequisite for effective risk management is the clear and coherent allocation of tasks and responsibilities, and a systematic risk management process;
  • Support and active involvement from management;
  • The efficiency and reliability of the risk management system must be monitored on an on going basis and adjusted where necessary;
  • The risk management system must be appropriately documented, and the risk management principles and guidelines must be determined in writing and communicated to the respective functions;
  • Opportunities are not part of risk management. In particular, risk management is aimed at making the following contributions:
  • To improve risk awareness and transparency;
  • To identify, appropriately manage, and monitor all material risks;
  • To highlight risk accumulations;
  • To provide reliable management information about the Company's risk situation.

    Risk management organisation

    Risk management is integrated into SINGULUS TECHNOLOGIES' existing organization. It does not constitute an independent structure. The risk management organization at SINGULUS TECHNOLOGIES is the responsibility of the heads of the respective departments, who are supported by the risk manager and the Chief Financial Officer. The Chief Financial Officer agrees all activities connected with risk management at SINGULUS TECHNOLOGIES with the Chief Executive Officer.

    In order to identify risks, risk development is reflected once per year in the corporate planning, and new risks arising from the Company's perspective for the business development of all SINGULUS TECHNOLOGIES production sites and sales subsidiaries are discussed. Risks are reported directly at parent company level due to the weak independence of the sales subsidiaries. The respective departmental heads are responsible for subsequently formulating and implementing risk management measures. The Finance and Controlling departments support the heads of the departments in carrying out the individual stages of the risk management process. The risk manager is responsible for the Company's methods and guidelines, and coordinates risk reporting within the SINGULUS TECHNOLOGIES Group.

    The Executive Board has overall responsibility for the implementation of a suitable and efficient risk management system to ensure the timely identification and management of situations capable of jeopardizing the continued existence of the Company.

    The risk management organization of SINGULUS TECHNOLOGIES AG: 


    The risk management process in the SINGULUS TECHNOLOGIES Group

    Overall, the risk management system is a continuous process in accordance with the business risk management process:

    STAGE1: ESTABLISHMENT OF GOALS, CONTENT AND INFRASTRUCTURE

    The alignment of the risk policy (including goals and thresholds), the risk management processes, and the definition of the relevant systems and instruments form the basis for the strategic risk management process. The original definitions must subsequently be expanded or modified as part of a long-term control cycle.

    STAGE 2: RISK ANALYSIS 

    In a second step, risks are initially identified and documented, after which they are analyzed from a wide variety of perspectives and finally assessed, if possible. A theoretical risk portfolio is used to ensure a complete risk inventory. Analysis and updates were performed as part of the annual planning. Risk reporting on the development of material risks is carried out on a quarterly basis.

    Risks are assessed using an ordinal scale. Gross loss is assessed. This assessment is repeated on a quarterly basis.

    Gross loss is defined as the negative earnings impact on EBIT for the Group. The probability of occurrence is the subjective estimate of the probability of occurrence for the fiscal year. Specifically, the probability is classified as low, medium, or high. The assessments are "gross" in each case, i.e., the existing controls and measures are not taken into consideration. The relevance indicators used to categorize gross risk are defined in the table below. The assumptions are derived from the specific maximum loss values (relative to Group equity) taken from long-term historical observations of financial key performance indicators. In addition, the short- and medium-term liquidity risk is monitored on an ongoing basis. Please refer to the report on expected developments for the current assessment.

    Maximum loss
    Relevance Characteristics from to
    1 Insignificant risks that do not have a material impact on EBIT or enterprise value. EUR 0 EUR 0.5 million
    2 Medium risks that have a noticeable impact on EBIT. EUR 0.5 million EUR 2.5 million
    3 Significant risks that have a considerable
    impact on EBIT or lead to a noticeable reduction in enterprise value.
    EUR 2.5 million EUR 10 million
    4 Serious risks that lead to negative EBIT
    and a substantial reduction in enterprise value.
    EUR 10 million EUR 20 million
    5 Risks jeopardizing the Company's continued existence, with a material likelihood of threatening the existence of the Company as a going concern. > EUR 20 million

    The probability of occurrence is subsequently estimated for each individual risk (classification as high, medium, or low).

    STAGE 3: FORMULATION OF THE RISK MANAGEMENT STRATEGY 

    Specific measures can be derived on the basis of risk management strategies. These strategies are defined with respect to the Company's overall strategy and risk preference. In principle, management has the following alternatives at its disposal to manage risk:

       

    • Avoid risks
      Risk avoidance leads to a complete elimination of the risk, e.g., through withdrawing from a risky or unprofitable business.
    •  

    • Reduce risks
      Risk reduction aims to limit the probability of occurrence and/or the impact on EBIT or corporate objectives to an acceptable level, e.g., through improving early risk identification and implementing countermeasures.
    •  

    • Transfer (insure) risks
      Coverage transfers a potential loss to a third party, e.g., via the corresponding insurance protection.
    •  

    • Assume (accept) risks
      When risks are accepted, the direct form of risk financing by SINGULUS TECHNOLOGIES is described, e.g., financial coverage through recognizing provisions. Risk development is monitored by the corresponding employees, without specific risk management measures being introduced.
    •  

    STAGE 4: DESIGN AND IMPLEMENTATION OF SUITABLE STRUCTURES AND MEASURES 

    The necessary structures and measures are subsequently derived and implemented on the basis of the risk management strategy previously formulated.

    STAGE 5: MONITORING OF EFFECTIVENESS 

    The measures implemented must be regularly monitored and reviewed for effectiveness. Compliance with statutory documentation requirements must also be ensured.

    STAGE 6: ADAPTATION OF MEASURES AND CONTINUOUS IMPROVEMENT PROCESS 

    The changing environment means that risk management must be understood as a continuous process. For this reason, it is inevitable that the risk management process is continuously adapted to external and internal developments. Intensive knowledge management remains necessary to enable this. The departure point in the SINGULUS TECHNOLOGIES risk management process is the corporate strategy, which provides the basis for defining and communicating business goals.

    The risk management system is reviewed by impartial individuals, i.e., by people who are not directly involved in managing risk. The following basic review requirements apply:

       

    • Supervisory Board
      The Supervisory Board is responsible for reviewing the effectiveness of risk management. The Executive Board reports to the Supervisory Board on the current status of risk management at least once per year.
    •  

    • Audit
      The audit of the annual financial statements in accordance with § 317 (4) HGB includes an assessment of whether the Executive Board has suitably implemented the measures for which it is responsible in accordance with § 91 (2) AktG, and whether the monitoring system that must subsequently be established is adequate for the early detection of developments posing a risk to the Company's continued existence. 

    Risk report

    In summary, the following relevance indicators and probabilities of occurrence in the reporting year result for the individual material risk groups identified, compared in each case to the previous year:

     

    20182017
    Relevance*Probability of occurrenceRelevance*Probability of occurrence
    Sales market risk in Solar segment•••••medium••••medium
    Project risks•••••medium•••••medium
    Technological risks•••medium•••medium
    Financial risks•••••medium•••••medium
    Procurement market risks•••medium•••medium

    * Measured using relevance indicators from 1 through 5

    The following sections provide an explanation of those risk areas or individual risks from among the overall risks identified for the Group that from today's perspective have a material impact on the net assets, financial position, and results of operations of SINGULUS TECHNOLOGIES AG and of the Group, and that can lead to negative deviations from targets.

    Furthermore, risks that are currently still unknown or considered immaterial can affect the net assets, financial position, and results of operations of the Company.

    SALES MARKET RISK

    Solar segment

    Risk description: SINGULUS TECHNOLOGIES is dependent on the willingness of its global customers to invest in new production facilities.

    The market for solar cell production facilities is of particular significance here. To a large extent, developments in the market for photovoltaic systems in recent years have relied on the regulatory environment and global subsidiaries for investments in photovoltaic systems. Although the profitability of photovoltaic systems is less and less reliant on government subsidies as the costs of photovoltaic systems decrease, the future global market for these systems will remain dependent on the continuation of state subsidies. This applies mainly in the principal markets of China and the United States. Particularly as a result of the enormous significance of China as a growth driver of the solar industry in recent years, the further development of the regulatory framework and subsidization in this country harbors a considerable risk with regard to the Company's primary business field. If the Chinese government realigns or changes its energy policy and in conjunction, refocuses its subsidy policy for solar power to support technologies other than CIGS, HJT or another new production method, or even if it simply does not expand its production capacities to the extent currently planned, this would have a considerable negative effect on the Company's sales.

    Furthermore, investments in photovoltaics could cease, reduce, or at least fall significantly short of the levels forecast by SINGULUS TECHNOLOGIES if other means of generating renewable energy become more attractive than photovoltaics going forward, or if those other technologies develop better than photovoltaics due to technical, economic, regulatory, or other reasons.

    In the Solar segment, the Company currently conducts its business with a small number of major customers. This particularly the case in view of the major orders and future business relationships with the state-owned company CNBM in China. There is a risk that major customers noticeably reduce or terminate the business relationship with the Company. In such a case, it is unlikely that the Customer will be able to compensate for the lost business volumes with new customers in the short or medium term.

    In addition, competition may continue to increase as a result of future business combinations or partnerships between individual competitors or the market entry of additional competitors. Growing competition may also lead to lower prices for the Company's production systems or even to a significant loss of market share.

    Impact: Due to the somewhat weaker order situation at the end of the fiscal year, the market risk in the Solar segment is classified as relevance indicator 5 (previous year: 4) with an unchanged medium probability of occurrence. Accordingly, this risk is classified as jeopardizing the Company's continued existence. Management expects sustained high revenue in the Solar segment in the years to come. Despite entering new business areas, the plan is still for this segment to make the greatest contribution by far to revenue and earnings. If the expansion of renewable energies were given a lower priority by the Chinese government and as a result, the expansion of solar parks in this country were to decline significantly over the coming years, this would have a material effect on the investment appetite of Chinese customers and thus on the Company's most important sales market. It is highly dependent on CNBM in particular and its continued demand for CIGS production equipment. Most of the order backlog is already currently destined for the Chinese market. If the order intake in this area remains below the assumed levels in the fiscal years to come, this would jeopardize the Company's continued existence as a going concern.

    Measures: The Company is keeping a close eye on market developments in China and collecting information from their sources in that country. In particular, these include discussions with our customers and institutions in China. Furthermore, efforts are being made to reduce dependence on the Chinese solar market through diversification in other markets and applications.

    Optical Disc segment 

    Risk description: Due ongoing hesitancy in the introduction of the new UHD standard, our customers will once again delay their planned capital investments in the Optical Disc segment.

    Impact: Due to the further decrease in significance for the Company's financial key performance indicators, as in the previous year, market risk in this segment is assigned a relevance indicator of 2 (previous year: 2) and medium probability of occurrence (previous year: medium).

    Semiconductor segment 

    The Semiconductor segment continues to be viewed as immaterial due to the low volumes with regard to possible revenue.

    Measures: External data such as the results of market research, as well as close contact with our customers and monthly comparisons of actual and planned figures, help to improve our estimates of future trends at an early stage.

    Project risk 

    Risk description: We define project risk as relating to orders for non-standardized systems with a purchase price generally exceeding EUR 3.0 million. This affects the Solar and Semiconductor segments as well as the activities in the medical technology business area that are reported within the Solar segment. Specifically, the risks relate to budget and project schedule overruns, non-compliance with acceptance criteria, as well as contract cancellations, the associated non-acceptance of systems, and the resulting contractual risks.

    Impact: If risks materialize in connection with project processing, these could have a considerable adverse impact on the Company's business activities, especially with regard to larger projects. The risk of not keeping to the project schedule, in particular, and not meeting the acceptance criteria are assessed as material. Particularly the planned processing of the project with the major customer CNBM for the delivery of production systems for manufacturing CIGS solar modules is of great importance to the continued existence of the Company. Following significant delays, the corresponding equipment for the first expansion stage at the plant in Bengbu, China, is currently in the process preceding final acceptance. However, we currently anticipate meeting the contractually stipulated acceptance criteria in the coming months. Please note, however, that materialization of project risks within these activities would lead to significant negative effects on the net assets, financial position, and results of operations of the Company. If these projects were to fail in whole or in part, or the planned profit not sufficiently realized, this could have significant negative effects even to the extent of jeopardizing the continued existence of the Company. Accordingly, we continue to classify the project risks as relevance indicator 5 (previous year: 5). As in the previous year, the probability of occurrence was classified as medium.

    Measures: Project calculations, project schedules, and project-specific risk assessments and liquidity planning are carried out at the proposal phase for the purposes of risk management. Changes in parameters are monitored on an ongoing basis in parallel to project progress with the aim of identifying potential project risks and implementing the necessary measures at an early stage. Prepayments and part-payments on completion of project milestones are routinely agreed to reduce the risk of cancellation.

    Financial risk 

    Risk description: The SINGULUS TECHNOLOGIES Group is exposed to financial risk, primarily with regard to liquidity risk. It is also exposed to credit risk in relation to receivables from customers. The Solar business may require additional financing arrangements depending on project-specific requirements. In particular, prepayments made by customers must frequently be secured by guarantees. For this purpose, the Company must deposit a large amount of cash with the guarantors as collateral. This collateral is not available to the Company to finance working capital and, depending on the progress of the project, could lead to liquidity squeezes.

    The payment history of customers, particularly that of the two largest customers CNBM and Hanergy, is of great significance for the ongoing liquidity position and the future improvement of the Company’s credit rating. Sufficient liquidity of the Company in the financial years 2019 and 2020 can only be maintained if the partial payments to be made as a result of the already contracted major contracts will actually take place or will be not materially delayed and additionally the orders taken into account in the liquidity planning are completed as planned. These events and circumstances point to the existence of material uncertainty that may raise significant doubts about the Company's ability to continue as a going concern and that poses a threat to its continued existence.

    Impact: As in the previous year, we currently classify liquidity risk as relevance indicator 5 (previous year: 5), and credit risk remains at relevance indicator 3 (previous year: 3). Despite payment delays within the major projects in the past fiscal year, we classify the probability of occurrence for liquidity risk as medium, as in the previous year. In particular, receipt of further partial payments from the significant major customers as contractually stipulated is necessary. Material delays in payment or non-payment within these projects could not be compensated for.

    Furthermore, the financing commitments from banks and insurers will need to be significantly increased to fund the required guarantee lines in the upcoming fiscal year 2019 or the required cash collateral will need to be reduced. The financing of major projects, in particular, requires a great deal more flexibility in the amount of cash and cash equivalents available. In addition, the Company plans revenue growth in the years to come. The liquidity risk of the Company can only be materially reduced given sufficient availability of cash and cash equivalents from customer prepayments.

    As in the prior year, we assess the probability of occurrence for credit risk as low.

    Measures: A liquidity reserve in the form of cash will be maintained to safeguard the SINGULUS TECHNOLOGIES Group's solvency and financial flexibility at all times. Liquidity plans will be regularly drafted and compared with actual developments to ensure the early detection of liquidity risks. The Company is currently negotiating new guarantees with significantly reduced collateral. In February 2019, the Company also extended a loan with a twelve-month term and a volume of EUR 4.0 million in order to further secure liquidity.

    The receivables portfolios of the individual SINGULUS TECHNOLOGIES Group companies are reviewed at short intervals to analyze credit risk. We use export credit insurance as the primary instrument to hedge against credit risk relating to foreign customers. Customers' creditworthiness and payment history are continually monitored and corresponding credit limits are set. Furthermore, risks in individual cases are limited wherever possible through credit insurance and bank guarantees.

    Technology risk 

    Risk description: The SINGULUS TECHNOLOGIES Group operates in highly competitive markets. If product refinements or new product developments produce undesirable results, this could lead to significant costs.

    Impact: As in the previous year, we currently classify the risk of undesirable or delayed development as relevance indicator 3 with a medium probability of occurrence.

    Measures: Analysis of market requirements is a key aspect in reviewing development risk.  We reduce the risk of undesirable or delayed development through cooperating with partners and research institutes, as well as via a continuous evaluation process in which the efficiency, chances of success, and general framework of development projects are continuously reviewed. Monitoring the planning of the various development projects is a key part of this process. The

    necessary impairment write-downs are recognized for capitalized development costs that are considered to be impaired. Analyzing, unlocking, and exploiting chances for success to safeguard and expand the Company's competitiveness also constitute key aspects of strategic planning.

    Procurement risk 

    Risk description: The availability, unplanned price increases, and inadequate quality of purchased components constitute a risk for SINGULUS TECHNOLOGIES. High inventory levels present a further risk.

    Impact: In light of the high inventory levels, we currently classify inventory risk as relevance indicator 3 (previous year: 3) as in the previous year, and continue to consider this to be a low probability of occurrence (previous year: low). From our current perspective, we assume sufficient coverage of the inventory risk by recognizing impairment losses on the balance sheet. At the end of the fiscal year, we classify the risk in regard to the availability, quality, and price increases of purchased components as relevance factor 3 (previous year: 3), and we consider this to be a medium probability of occurrence (previous year: medium). We do not expect any significant price increases in the short to medium term based on current contractual negotiations and analysis of market expectations. The average inventory backlog rate and the number of quality complaints were mostly within the target range throughout the entire fiscal year.

    Measures: Delivery capacity and compliance with our quality requirements for purchased components are subject to constant monitoring. Inventory management constitutes a further component of risk management. This includes regularly reviewing the marketability and days inventory held (DIH) for goods and purchased components. In order to avoid unplanned price increases, long-term contracts are entered into with suppliers in some cases.

    In addition, at the end of the reporting period, the Company assessed the impact of a disorderly Brexit scenario in the ongoing fiscal year 2019. Even in the event of a disorderly Brexit, however, there would be no material impact on the procurement process due to the low purchase volume and the availability of alternative suppliers.

    Compliance risks 

    Risk description: As a company operating internationally, the SINGULUS TECHNOLOGIES Group is exposed to a wide range of legal, tax, and regulatory risks in addition to the operational and financial risks. In particular, these include risks associated with product liability, patent law, and company law. The outcomes of legal disputes and litigation can cause considerable damage to the Company’s reputation and business or at least involve significant costs.

    In addition, disregard for laws, regulatory requirements, and the guidelines aligned with these requirements could have serious negative impacts on the Company such as reputational damage or monetary penalties. These include, for instance, risks related to corruption and violations of export conditions.

    Procurement risk

    Risk description: The availability, unplanned price increases, and inadequate quality of purchased components constitute a risk for SINGULUS TECHNOLOGIES. High inventory levels present a further risk.

    Impact: In light of the high inventory levels, we currently classify inventory risk as relevance indicator 3 (previous year: 3) as in the previous year, and continue to consider this to be a low probability of occurrence (previous year: low). From our current perspective, we assume sufficient coverage of the inventory risk by recognizing impairment losses on the balance sheet. At the end of the fiscal year, we classify the risk in regard to the availability, quality, and price increases of purchased components as relevance factor 3 (previous year: 3), and we consider this to be a medium probability of occurrence (previous year: medium). We do not expect any significant price increases in the short to medium term based on current contractual negotiations and analysis of market expectations. The average inventory backlog rate and the number of quality complaints were mostly within the target range throughout the entire fiscal year.

    Measures: Delivery capacity and compliance with our quality requirements for purchased components are subject to constant monitoring. Inventory management constitutes a further component of risk management. This includes regularly reviewing the marketability and days inventory held (DIH) for goods and purchased components. In order to avoid unplanned price increases, long-term contracts are entered into with suppliers in some cases.

    In addition, at the end of the reporting period, the Company assessed the impact of a disorderly Brexit scenario in the ongoing fiscal year 2019. Even in the event of a disorderly Brexit, however, there would be no material impact on the procurement process due to the low purchase volume and the availability of alternative suppliers.

    Compliance risks 

    Risk description: As a company operating internationally, the SINGULUS TECHNOLOGIES Group is exposed to a wide range of legal, tax, and regulatory risks in addition to the operational and financial risks. In particular, these include risks associated with product liability, patent law, and company law. The outcomes of legal disputes and litigation can cause considerable damage to the Company’s reputation and business or at least involve significant costs.

    In addition, disregard for laws, regulatory requirements, and the guidelines aligned with these requirements could have serious negative impacts on the Company such as reputational damage or monetary penalties. These include, for instance, risks related to corruption and violations of export conditions.

    Impact: Compliance violations can result in legal disputes. The outcome of legal disputes is subject to uncertainty and can have significant economic effects. These could potentially not be covered by insurance, or only partially, and could therefore impact our business and the corresponding financial key performance indicators.

    SINGULUS TECHNOLOGIES AG currently has no material ongoing legal disputes and no material compliance violations are known at this time. We therefore currently classify the effects of compliance violations as relevance indicator 3 (previous year: 5) with a low probability of occurrence (previous year: low).

    Measures: Legal risks are identified using a systematic approach and are managed with the assistance of external lawyers.

    To prevent potential violations of the law, the SINGULUS TECHNOLOGIES Group has established a Group-wide Code of Conduct. This is intended to provide employees with specific rules of behavior for various situations. Individual employee training on individual questions about a variety of legal provisions represents yet another measure aimed at preventing compliance violations.

    Key accounting features of the SINGULUS TECHNOLOGIES Group's internal control system and risk management system 

    The SINGULUS TECHNOLOGIES Group's internal control and risk management systems are integrated into one overall system. The internal control system comprises the principles, procedures and measures introduced throughout the Company by the management in order to implement the management's decisions throughout the organization. Specifically, this includes:

    • Ensuring the effectiveness and profitability of the business activities
    • Correctness and reliability of the internal and external accounting
    • Compliance with the requirements applicable to the Company

    The risk management system includes the entirety of all organizational regulations and measures developed to identify and manage risks arising out of operating activities. The following structures and processes relating to the (Group) accounting processes were implemented at the SINGULUS TECHNOLOGIES Group.

    The overall responsibility for the internal control system with regard to the (Group) accounting processes rests with the Executive Board. All companies included in the consolidated financial statements are integrated under a clearly defined management and reporting organization. Under the (Group) accounting processes, features of the internal control and risk management system are classified as important if they materially influence the Group's accounting and the overall presentation of the consolidated financial statements, including the Group management report. This includes the following elements in particular:

    • Identifying material risk areas and controls that influence the Group-wide accounting process
    • Monitoring the Group-wide accounting process and the corresponding findings at the Executive Board level
    • Preventative finance and accounting control measures at the Group and the subsidiaries included in the consolidated financial statements

    In addition, the findings from the ongoing reporting process are used to further develop the internal control system.

    Report on opportunities 

    SINGULUS TECHNOLOGIES further strategically aligned and expanded its product portfolio in the Solar segment over the past few fiscal years. SINGULUS TECHNOLOGIES addresses the global market for machinery and equipment for manufacturing the various different solar cell formats. In the CIGS field, we anticipate a longer investment cycle in China for CIGS thin-film solar cells. The market position it has achieved provides the Company with the opportunity for sustained growth in the years to come.

    The biggest customer in China, CNBM, has since started construction work on several production sites, each with a capacity of around 300 MW for CIGS thin-film solar modules in China. The first plant is currently being commissioned. The planned output volume for each site is planned to reach around 1,500 MW in the final phase. The contracts and agreements already in place present SINGULUS TECHNOLOGIES as a supplier of machinery with favorable growth opportunities over the coming years. SINGULUS TECHNOLOGIES anticipates that the agreements entered into under the LoI in November 2018 will be converted to legally binding delivery agreements. The Company sees good prospects for follow-up orders in this area as other companies are expanding production sites for CIGS modules in China.

    In the field of crystalline high-efficiency solar cells, SINGULUS TECHNOLOGIES aims to be a single-source provider of the main production steps, i.e. the various stages of vacuum coating technology in addition to the wet-chemical treatment.

    This opens up opportunities for SINGULUS TECHNOLOGIES in the current fiscal year for new major projects in the areas of crystalline HJT and thin-film solar technology.

    Demand for the new Ultra HD Blu-ray disc format has been weak to date, resulting in only minimal opportunities for using SINGULUS TECHNOLOGIES' production equipment. The Company believes that this market will remain a niche market with low sales figures.

    On the basis of numerous MRAM development projects, the Semiconductor segment offers sales opportunities for its vacuum coating machines if demand increases. We anticipate new fields of application for extremely precise layer systems such as in sensor systems to provide additional opportunities over the coming years.

    Furthermore, we see opportunities for generating revenue and earnings contributions from additional applications in surface technology going forward, such as decorative coatings for consumer goods in the cosmetics and automotive industries and in the application of wet-chemical processes in the field of medical technology.

    Summary of Risks and Opportunities

    At the present time, the project and sales market risk for the Solar segment and the liquidity risk are still viewed as the Group's most significant risks.

    If risks materialize in connection with order processing for current and future major projects, particularly after the delays in commissioning equipment for CNBM at its site in Bengbu, China, this could have a have a considerable adverse effect on the Company's business activities. The occurrence of the promised partial payments and awarding of further major orders for the delivery of equipment for manufacturing CIGS solar modules is of great importance to the success and the continued existence of SINGULUS TECHNOLOGIES.

    The Solar segment is expected to make the greatest contribution to revenue and earnings over the coming years. If the revenue in the years to come fails to materialize, this would materially affect the net assets, financial position, and results of operations of SINGULUS TECHNOLOGIES. Even in light of the establishment of new segments, the development of the solar market remains a decisive criterion for the Company's future performance. Receipt of payments as planned from the major projects is necessary to secure ongoing liquidity. These events and circumstances point to the existence of material uncertainty that may raise significant doubts about the Company's ability to continue as a going concern and that poses a threat to its continued existence.

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