PVA TePla AG — Interim / Quarterly Report 2005

Nov 14, 2005

INTERMEDIATE REPORT 1 January to 30 September 2005

PVA Tepla III/05_EN_4 11.11.2005 16:40 Uhr Seite 1

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Foreword by the Management Board

PVA Tepla III/05_EN_4 11.11.2005 16:40 Uhr Seite 2

Dear PVA TePla Shareholders,

With 2005 coming to an end, we can look back on another eventful and exciting business year. Further and solid progress has been made in reaching our mediumterm goals.

In the Vacuum Systems division, our largest, business is stable and profitable. In the Crystal Growing Systems division – as already announced – we have succeeded in winning major orders. Both our Crystal Growing Systems subsidiary and our joint venture in Xi'an (China) have shown good success in the dynamic photovoltaics market. There has been no change regarding the major order obtained from the solar industry in China. So far, the approaches adopted here to solve the problem of raw material supplies have not been implemented by the customer with the speed expected.

Because orders were received later than anticipated by the Crystal Growing Systems division, the latter will again have a dampening effect on Group earnings in the current year. However, due to healthy order books, this situation will improve significantly in the course of next year. As was announced, the volume of business in the Plasma Systems division suffered a setback in the first half of the year due to slow demand. The third quarter in contrast has seen an encouraging revival in this market.

Our performance on the whole is in line with our most recent expectations and guidance. The improved result we achieved in the third quarter means that we are back in the profitability zone, on a cumulative basis. It looks today as if we will reach our revenue target for 2005 as well as our targeted EBIT margin of between 1% and 3% of revenue. For the year ahead, we expect continued growth and improved earnings power, and this trend will further intensify once our major order enters production. These expectations are based in large measure on continuing increases in the volume of incoming orders and order backlog as well as the growing demand for crystal growing systems.

Our attention is already focusing on the future, and on establishing the foundations for additional growth. Construction of the new production hall at our Jena site is progressing on schedule. From early 2006 onwards, we will have the capacity needed to execute our greater volume of orders. The facilities will also generate a number of cost-cutting benefits. In addition to these advances, we have pushed ahead the development of our products and acquired the first orders for new products.

You, our honoured shareholders, will be especially interested in how PVA TePla shares have been performing. We interpret the retreating share price of recent weeks, relative to the rapid appreciation and highs of mid-year, as a consolidation phase. As I have already mentioned, we consider our company to be progressing well and assume that this progress will be reflected in the value of our shares.

Foreword by the Management Board

PVA Tepla III/05_EN_4 11.11.2005 16:40 Uhr Seite 4

At the start of the new year, we will also have a 'leaner' Management Board. Martin Gier, who headed the Crystal Growing and Plasma Systems divisions, has left the Board on reaching retirement age. The Supervisory Board and his fellow managers would like to express their sincerest thanks for his dedication, commitment and achievements. The divisional structure of the Group will become more consolidated. Volker Lang will be retiring from the Management Board at the end of the year as planned, and will head the largest division, Vacuum Systems. Dr. Andreas Mühe will manage the Crystal Growing Systems division. I for my part will head the Plasma Systems division until a new manager is appointed to that position.

On behalf of my fellow Management Board members and the employees, I wish to thank our shareholders and business partners for the confidence they have shown and the work they performed with us, and I wish us all a successful final quarter, followed by a promising start to the new business year in 2006.

Peter Abel

Chairman of the Management Board

Key facts and figures

f S be As te r 3 0 , 2 00 5 o ep m	/2 I-I II 00 5 EU R '0 00	/2 I-I II 00 4 EU R '0 00	Ch an ge
Sa les R ev en ue s	36 ,3 05	30 ,7 42	+1 8. 5
of Gr it os s pr	8 ,6 23	8 ,7 97	-1 74
In % f s al o es r ev en ue s	23 .8	28 .6	-4 .8
O tin lt (E BI T ) pe g re ra su	38 7	-6 91	+1 ,0 78
% f s al In o es r ev en ue s	1. 1	-2 .2	+3 .3
Ne ult fo he iod t r r t es p er	50 3	-1 49	65 2
f s al In % o es r ev en ue s	1. 4	-0 .5	1. 9 +
Ea in ha (€ ) rn gs p er s re	0. 02	-0 .0 1	+0 .0 3
pl (n be r) Em oy ee s um	27 0	24 5	+2 5
In in de co m g or rs	43 ,9 14	41 ,7 00	+2 ,2 14
Or de r b klo ac g	27 ,7 47	21 ,9 67	+5 ,7 80
ok b ill io Bo to R at	21 1.	36 1.	-0 .1 5
Ca sh F low fr tin om o pe ra g tiv iti ac es	1 ,6 37	3 ,0 51	-1 ,4 14
h Flo Fr C ee as w	43 9	2 ,2 00	-1 ,7 61

Report on Business Development

PVA Tepla III/05_EN_4 11.11.2005 16:40 Uhr Seite 6

Continued growth

Re th ve nu e gr ow b di vi sio ns y	I-I II /2 00 5 '0 00 EU R	I-I II /2 00 4 '0 00 EU R	Ch an ge %
Va S te cu um ys m s	24 ,3 18	,0 86 17	2. 3 +4
Cr l G in S ta te ys ro w g ys m s	3 ,7 05	1 ,9 02	+9 4. 8
Pla S te sm a ys m s	8 ,2 82	11 ,7 54	-2 9. 5
To l r ta ev en ue	36 ,3 05	30 ,7 42	18 .1

Re th ve nu e gr ow b gi y re on s	I-I II /2 00 5 '0 00 EU R	I-I II /2 00 4 '0 00 EU R	Ch an ge %
Ge rm an y	16 ,1 75	12 ,5 73	28 .6
Eu (e lud in Ge y) ro pe xc g rm an	9 ,0 52	4 ,4 10	10 5. 3
rth No A ica m er	3 ,6 54	6 ,1 02	-4 0. 1
As ia	12 ,4 00	10 ,4 60	18 .5
Ot he r	80 4	56 4	42 .6
Co ol id at io ns n	80 -5 ,7	-3 ,3 67	71 .7
To l r ta ev en ue	36 ,3 05	30 ,7 42	18 .1

The third quarter saw the PVA TePla Group again achieving a high volume of sales at the same level as the previous quarter, namely € 12.7 million compared to € 11.0 million a year before, and increased cumulative revenue for the first nine months by more than 18% year-on-year to € 36.3 million (€ 30.7 million). The Vacuum Systems division generated 67% of Group sales, so it continues to be the principal source of revenue. By the end of the third quarter, its sales volume reached € 24.3 million (Q1-3/2004: € 17.1 million). Sales by the Plasma Systems division were significantly lower year-on-year, reaching € 8.3 million (Q1-3/2004: € 11.8 million). The general stagnation in the semiconductor industry during the first half of the year had noticeable impacts here. The Crystal Growing Systems division substantially improved its sales revenue to € 3.7 million compared to the € 1.9 million in year on year comparison, but the figure remains low. We expect a substantial increase in the fourth quarter due to current orders being invoiced. In terms of regional distribution, the growth in sales was primarily achieved in Germany and Europe.

Improved quarterly result in Q3/2005

Following a muted start to the year, the PVA TePla Group attained its best quarterly result hitherto in the third quarter. Gross profit rose again relative to the previous quarters to € 3.6 million (Q3/2004: € 3.6 million). The cumulative gross profit for the year to date, at € 8.6 million, was slightly lower than the figure a year ago (€ 8.8 million). This shortfall is mainly due to the sluggish revenues in the high-margin Plasma Systems division. Despite higher revenues, the cost of sales were reduced from € 4.5 million in Q1-3/2004 to € 4.0 million in Q1-3/2005. The year-on-year increase in administrative expenses, from € 3.1 million to € 3.4 million, resulted first and foremost from our strategically planned business expansion and our presence in China. R&D expenses were cut to € 0.9 million (Q1-3/2004: € 1.2 million). The operating result in Q1-3/2004, at € –0.7 million, included restructuring expenses of € 0.3 million; these are no longer incurred.

Report on Business Development/ Workforce

PVA Tepla III/05_EN_4 11.11.2005 16:40 Uhr Seite 8

After nine months of the new business year, the Group now registers a positive operating result of € 0.4 million. The third quarter returned the best quarterly result of the 2005 business year to date, at € 0.5 million (Q3/2004: € 0.5 million), with an EBIT margin of 3.6%.

Following capitalisation of € –0.1 million in deferred taxes according to IFRS and income taxes, and € 0.2 million in minority interests (prior year: € 0.2 million), the result for the period has turned positive, at € 0.5 million (prior year: € –0.1 million).

The operative cash flow improved significantly compared to the end of Q2 (€ –2.2 million), and after nine months is now at € 1.6 million, well back in positive territory (prior year: € 3.1 million).

The free cash flow (operative cash flow minus payments for investments) is again positive, at € 0.4 million (prior year: € 2.2 million). This increase in investment volume is mainly accounted for by the takeover of the remaining shares in Crystal Growing Systems GmbH as part of a share capital increase against contributions in kind, the installation of a new vacuum soldering furnace to expand the capacities of Löt- und Werkstofftechnik GmbH in Jena, and the start of construction work on a new production hall at the Jena site.

Further increase in workforce size

The number of employees in the Group has continued to increase as a result of the good order situation. As at 30 September, PVA TePla had a total of 270 employees on its payroll worldwide, an increase of 13 employees on the previous quarter and a full 25 compared to the same time last year (due also to the new activities in China). As far as regional concentration is concerned, Germany accounts for 222 employees and is therefore the dominant location. At the end of the third quarter, 29 were employed in the USA, 13 in China and 6 in Denmark.

Consolidated Income Statement* (IAS/IFRS)

PVA Tepla III/05_EN_4 11.11.2005 16:40 Uhr Seite 10

Co ol id ed St at I at t ns nc om e em en	3 hs Mo nt		9 hs Mo nt
	01 .0 7. 05 - 30 .0 9. 05 '0 00 EU R	01 .0 7. 04 - 30 .0 9. 04 '0 00 EU R	01 .0 1. 05 - 30 .0 9. 05 '0 00 EU R	01 .0 1. 04 - 30 .0 9. 04 '0 00 EU R
Re ve nu es	12 ,6 69	11 ,0 25	36 ,3 05	30 ,7 42
f od ld Co st o go s so	-9 ,0 28	-7 ,4 71	-2 7 ,6 82	-2 1 ,9 45
Gr of it os s pr	3 ,6 41	3 ,5 54	8 ,6 23	8 97 ,7
Se llin g ex pe ns es	-1 ,4 08	-1 ,4 65	-3 ,9 80	-4 ,5 06
Ge l a dm in ist tiv ne ra ra e ex pe ns es	,2 87 -1	-9 93	-3 35 ,4	-3 ,0 69
Re ch nd d el t e se ar a ev op m en xp en se s	-4 71	-3 89	-9 39	-1 ,1 59
d he Re st ct in ot g an ru ur r rri no n- re cu ng e xp en se s	0	-4 6	0	-3 36
of dw ill Am tiz at io or n g oo	0	0	0	0
Ot he tin nd in r o pe ra g ex pe ns es a co m e	-1 3	-1 88	11 8	-4 18
ti ul (E ) O t BI T pe ra ng r es	46 2	47 3	38 7	-6 91
In in / te st re co m e ex pe ns es	-2 6	-5 3	-6 8	-1 68
/ los of ed E it in in E it in iat ni qu ea rn gs qu se s a ss oc c om pa es y y	-3	15	10 4	19
t i t i d t i Ne nt er es nc om e an ne nc om e fr ia d ni te om a ss oc co m pa es	-2 9	-3 8	36	49 -1
Re lt fr rd in tiv iti su om o ar y ac es	43 2	43 5	42 3	-8 40
In ta co m e x	-3 0	-4 6	-1 21	-4 6
De fe d ta rre x	-1 40	10 6	12	54 8
fro In t he ha in tin et ho ds co m e m ng e co un g m c ac	0	0	0	0
ult fo he iod Ne t r r t es p er	26 3	49 5	31 4	-3 38
Mi rit int t no y er es	73	32	18 9	18 9
ul t f he io d af Ne t r t te es or p er r in it in te st m or re y	33 6	52 8	50 3	-1 49
ha ( ba ) Ea in sic rn gs p er s re	0. 02	0. 02	0. 02	-0 .0 1
Ea in ha ( di lut ed ) rn gs p er s re	0. 02	0. 02	0. 02	-0 .0 1
gh d sh di W ei te ut st av er ag e ar es o an ng (b ) ic as	21 ,4 63 ,3 21	21 ,4 49 ,9 88	21 ,4 54 ,4 32	21 ,4 49 ,9 88
ei gh d sh di W te ut st av er ag e ar es o an ng (d ilu d ) te	21 ,4 63 ,3 21	88 21 ,4 49 ,9	21 ,4 54 ,4 32	88 21 ,4 49 ,9

* unaudited

Research and development

PVA Tepla III/05_EN_4 11.11.2005 16:40 Uhr Seite 12

The PVA TePla Group spent € 0.9 million on R&D in the first nine months (Q1-3/2004: € 1.2 million), reducing costs while maintaining the same level of innovation.

In the Vacuum Systems division, development work is usually carried out in the context of customer orders and is not separately posted as R&D expense.

As part of a customer-specific order, a 'Soft-SPS Control System' was developed for a vacuum soldering plant.

The new VGF system for polycrystalline silicon, developed in the previous quarters of this year, entered the construction phase in the third quarter, and is scheduled for completion in the course of the next quarter, prior to testing and process optimisation.

The system visualisation software developed by the Vacuum Systems division was upgraded to include the functions of batch storage and simple exchange of recipes between identical systems.

In the Crystal Growing Systems division, we continue to work with our project partner to develop a technically enhanced concept in connection with further expansion of the partner's 300 mm capacities.

The new EFG multigeneration system for 125 mm and 150 mm solar wafers was completed in September 2005. This particular system is currently in the process of starting up. The Crystal Growing Systems division considers this to be an important key project for further consolidation of our position in the rapidly expanding solar market.

In September 2005, the division also received an order from a leading company to develop an innovative systems technology for growing high-quality compound semiconductors. Big interest is shown in sapphire crystals and substrates, and in the respective plant technology, due to their applications in the field of optoelectronics and for high-performance LEDs.

A new system for growing oxide crystals was delivered in September 2005.

In collaboration with a research partner, work is currently in progress to develop a new sapphire crystal production process for a key European customer.

Research and development in the Plasma Systems division is mainly concentrated on improving products and details in order to optimise the series readiness of such systems, and for use in new markets of the future. For example, even greater precision and longterm stability has been achieved for the TWIN metrology system.

The Plasma 400 system can now be used to develop new display technologies that require a special chemical engineering process. This was achieved by modifying the gas supply and the microwave coupling.

Consolidated Balance Sheet* (IAS/IFRS)

PVA Tepla III/05_EN_4 11.11.2005 16:40 Uhr Seite 14

As ts se in EU R '0 00	30 .0 9. 20 05	31 .1 2. 20 04
Lo -t et ng er m a ss s
In ta ib le ts ng se as	8 ,0 45	8 ,1 96
ib le Ta ts ng as se	,8 90 7	78 7 ,4
Fin cia l a et an ss s	29 2	17 0
l l To ta te et on g- rm a ss s	16 .2 27	,8 15 44
Sh t- te et or rm a ss s
In nt ies ve or	10 ,2 12	10 ,5 93
Ra ia ls d lie at w m er an su pp s	3 ,2 55	3 ,0 29
W k in or pr oc es s	2 ,7 23	2 ,2 15
Co of ple d st te nt ct s u nc om co ra s f r el ed b illi in at ex ce ss o ng s	3 ,6 72	4 ,2 60
Fin ish ed du / od ct p ro s go s	56 1	1 ,0 89
ad ble Tr ts iva e ac co un re ce d he eiv ab les ot an r r ec	6 ,9 27	5 ,9 03
ad ble Tr ts iva e ac co un re ce	5 ,7 27	4 ,9 96
Am du iat ed ni nt to ou s e a ss oc c om pa es	0	23 7
he ab les Ot eiv ec r r	1 ,2 00	67 0
Re iva ble fro fu nd ta ce s m x re s	4	12
Li id ts qu as se	3 ,6 86	3 ,4 56
d nd ed Pr ai in ep ex pe ns es a a cc ru co m e	23 0	49
To l s ho ta rt -t et er m a ss s	21 ,0 60	20 ,0 13
De fe ed t et rr ax a ss s	6 ,4 73	6 ,1 80
To ta l a et ss s	43 ,7 59	42 ,0 37

Li ab ili tie s in EU R '0 00	30 .0 9. 20 05	31 .1 2. 20 04
Sh eh ol de ' e it ar rs qu y
Sh pit al ar e ca	21 ,7 50	21 ,4 50
ed Re ta in ni e ar ng s	23 6	35
Ot he eh siv in r c om pr en e co m e	-2 77	-5 04
Mi rit int t no er es y	15 3	34 1
To l s ha ho ld s' it ta re er e qu y	21 ,8 62	21 ,3 22
S ci al it el in at to pe em r g in st t ts ve m en gr an	99 6	,0 96 1
li ab ili tie Lo -t ng er m s
No ble te s pa ya	1 ,8 84	1 ,7 84
he r l bi lit Ot ia ies	12	11
Pe io isi ns n pr ov on s	5 ,9 93	5 ,6 35
he Ot vi sio r p ro ns	26 2	31 9
l l li ab ili tie To ta te on g- rm s	8 ,1 52	49 7 ,7
Sh li ab ili tie t- te or rm s
Ba nk ot ab le (c nt ) n es p ay ur re	46 5	87 0
ad ab le Tr ts e ac co un p ay	2 ,0 67	2 ,0 64
Lia bi lit ies d ffi lia d ni to te ue a co m pa es	0	0
bi lit d ed Lia ies to iat ni ue a ss oc c om pa es	0	14 7
Ad ive d rd ts va nc e pa ym en re ce on o er s	4 ,1 88	3 ,5 77
he r l bi lit Ot ia ies	68 7	1 ,0 54
isi Ta x pr ov on	10 2	0
De fe d ta lia bi lit ies rre x	1 ,0 40	87 5
Ot he vi sio r p ro ns	97 4 ,1	3 ,2 79
De fe d in rre co m e	4	4
l s ho li ab ili tie To ta rt -t er m s	12 ,7 49	11 ,8 70
l e it d lia bi lit ie To ta qu y an s	43 ,7 59	42 ,0 37

* unaudited * unaudited

Consolidated Cash Flow Statement* (IAS/IFRS)

PVA Tepla III/05_EN_4 11.11.2005 16:40 Uhr Seite 16

Co ol id ed C h Fl at ns as ow St at t em en	01 .0 1. 20 05 - 30 .0 9. 20 05 in EU R '0 00	01 .0 1. 20 04 - 30 .0 9. 20 04 in EU R '0 00
ult fo he iod Ne t r r t es p er	31 4	-3 38
+/ De iat io / rit pr ec n w e- up s on - fix ed et a ss s	94 3	1 ,2 70
+/ / de f In isi cr ea se cr ea se o pr ov on s -	1 ,3 20	77 7
+/ / in in d ef d De cr ea se cr ea se er re - ta xe s	28 -1	-5 49
+/ In / de f t he cia l cr ea se cr ea se o s pe - ite el in in at to st t ts m r g ve m en gr an	-1 00	-1 00
+/ Ot he r i / ot nc om e ex pe ns es n - im in sh fl ct pa g ca ow	-1 78	-1 60
-/ s / lo fr d ls of Ga in is + ss es om po sa fix ed et a ss s	0	8
-/ / de f i In to rie + cr ea se cr ea se o nv en s, de ab les nd th tra eiv et ec a o er a ss s r	-6 35	33 0
+/ In / de f t de cr ea se cr ea se o ra - bl nd th li ab ilit ies pa ya es a o er	10 1	,8 13 1
Ca sh F lo f ti = w ro m o pe ra ng tiv iti ac es	1 ,6 37	3 ,0 51

	* u ud ite d na
--	-----------------------------	--

		01 .0 20 05 1. - 30 .0 9. 20 05	01 .0 20 04 1. - 30 .0 9. 20 04
		in EU R '0 00	in EU R '0 00
+	ds fr d is ls of Pr oc ee om po sa fin l a cia et an ss s	10	12 3
-	Pu ha of in in st ts rc se s ve m en fin cia l a et an ss s	0	-1 47
-	Pu ha of ta ib le d rc se s ng an in ib le ta ts ng as se	-1 ,1 98	-7 04
=	sh lo f in Ca F st t ro m ve m en w tiv it ac y	-1 ,1 88	-7 28
-	l r f b ds nd Pr in ci ts pa ep ay m en o on a he r f l l ot in cia an oa ns	-2 47	-2 11
+/ -	Ch f s ho fi ia l rt- te an ge o rm na nc lia bi lit ies	05 -4	-2 ,8 71
=	Ca sh F lo f f in ci w ro m an ng tiv it ac y	-3 09	-3 ,0 82
	Ch f l id i ts an ge o qu as se	14 0	-7 59
+/ -	Cu lat io ef fe tra ct rre nc y ns n d he al ha f ot an r v ue c ng es o li id ts	89	3
	qu as se
+	Li id he of iod ts t t ta rt qu as se a s p er	3 ,4 56	2 ,2 68
=	Li id he nd f et at t qu a ss s e o rio d pe	3 ,6 85	1 ,5 12

* unaudited

Development of Shareholders' Equity* (IAS/IFRS)

PVA Tepla III/05_EN_4 11.11.2005 16:40 Uhr Seite 18

of ha in St at t em en c ng es sh eh ol de ' e it ar rs qu y	Sh ed is ar su es		Ad di l tio na id -in pa pit al ca	ed Re ta in / in ea rn gs Ac ul at ed cu m de fic it	he Ot r c om - eh siv pr en e in co m e	Mi rit no y int t er es	l To ta Sh eh old s' ar er uit eq y
	be Nu m r	'0 EU R 00	'0 EU R 00	'0 EU R 00	'0 EU R 00	'0 EU R 00	'0 EU R 00
St 3 12 .2 00 3 at 1. us	21 49 ,9 88 ,4	21 50 ,4	0	-4 41	-3 56	30 1	20 ,9 54
St 0 1. 01 .2 00 4 at us	21 ,4 49 ,9 88	21 ,4 50	0	-4 41	-3 56	30 1	20 ,9 54
di ffe Fo i re gn c ur re nc y re nc e					49 -1		49 -1
Ch du it inv to te an ge s e e qu y es e						19 2	19 2
of fo he Ne t it r t pr ea y r				47 8		-1 51	32 7
St 3 1. 12 .2 00 4 at us	21 ,4 49 ,9 88	21 ,4 50	0	37	-5 05	34 2	21 ,3 24
St at 0 1. 01 .2 00 5 us	21 ,4 49 ,9 88	21 ,4 50	0	37	-5 05	34 2	21 ,3 24
Ca al pit in cr ea se	30 0 ,0 00	30 0	46 1 ,1				46 1 ,4
Fo i di ffe re gn c ur re nc y re nc e					22 7		22 7
Ac isi tio in it st at qu n m or y us			-1 ,1 46	-3 05			-1 ,4 51
Ne of it fo he iod t r t pr p er				50 3		-1 89	31 4
St at 3 0. 09 .2 00 5 us	21 ,7 49 ,9 88	21 ,7 50	0	23 5	-2 78	15 3	21 ,8 60

* unaudited

** The share capital increase against contributions in kind (300,000 shares) carried out in order to take over the remaining shares in Crystal Growing Systems GmbH was entered in the Commercial Register on 26.09.2005.

Outlook

PVA Tepla III/05_EN_4 11.11.2005 16:40 Uhr Seite 20

The incoming order volume was further and substantially increased in the third quarter. As at 30 September 2005, orders valued at € 43.9 million (30.09.04: € 41.7 million) were booked. The combined book-tobill ratio, at 1.2, was well over the threshold of one.

The largest share of orders received, namely € 17.3 million, were for the Vacuum Systems division (Q1-3/ 2004: € 22.2 million), although its third quarter figure was at € 4.2 million and therefore lower year-on-year. However, at the beginning of the fourth quarter we are now seeing a renewed upturn in this area. The upward development of the Crystal Growing Systems division is encouraging. The cumulative figure for the year in this division, at € 16.3 million, is triple the previous year's figure of € 5.1 million. This progress is primarily driven by dynamic growth of the solar market, and provides us with a strong foundation for revenues in 2006. In the third quarter alone, incoming orders totalled € 11.3 million in this division. The Plasma Systems division now has a cumulative order volume of € 10.3 million, which is still well behind the € 14.4 million figure in Q1-3/2004. However, the thirdquarter volume of € 4.5 million shows that demand is recovering relative to the first half of the year.

The order backlog as at 30 September 2005 had increased to € 27.7 million (30.9.04: € 22.0 million), a level that had been unattained hitherto.

In the Vacuum Systems division – the main source of revenue so far in 2005 – capacities are still being utilised to a high level. In view of the current and renewed upswing in incoming order volume, we expect sales to remain at a high level until well into 2006.

In the Crystal Growing Systems division, we will achieve the projected revenue target for 2005, given the volume of orders on hand and their scheduled execution. Due to the significantly improved order situation and the strong demand we are witnessing, we expect 2006 to be a year of strong revenue growth. The situation with the major order we previously announced is unchanged. The supervisory body at the customer enterprise has not yet given its consent to the order presented.

In the Plasma Systems division, business has been gathering pace since mid-year. However, the good volume levels of the previous year have not yet been reached.

On the whole, the Management Board remains optimistic as regards business development in the fourth quarter of 2005. It would seem today that we will achieve our revenue target, increasing sales by around 15% relative to 2004. Earnings are also expected to be higher than last year's figure. We confirm our previous forecast of an EBIT margin in a range between 1% and 3% of revenue.

Transition to IFRS / Executive bodies

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Effects of the transition to International Financial Reporting Standards (IFRS)

Until 31.12.2004, the PVA TePla Group conducted its accounting and reporting in accordance with US GAAP (United States Generally Accepted Accounting Principles). Since the beginning of 2005, accounting and reporting by the PVA TePla Group has been conducted in compliance with the International Financial Reporting Standards (IFRS). For details pursuant to IFRS 1.39 regarding reconciliation of shareholder equity and the net profit or loss for the relevant reporting dates (as at 1 January 2004 and at the end of each quarter in 2004), we refer to the remarks on pages 21-24 of our interim report on the first quarter of 2005.

The prior-year figures disclosed in the present report were converted where relevant from US GAAP to IFRS.

Executive bodies

Shareholdings and stock options

	be f Nu m r o sh ar es he ld f as o 30 .0 9. 20 05	be f Nu m r o sh ar es he ld f as o 30 .0 6. 20 05	O pt io ns he ld f as o 30 .0 9. 20 05	O pt io ns he ld f as o 30 .0 6. 20 05
M t Bo d an ag em en ar
be l Pe te r A	5 ,9 91 ,2 75	6 ,1 41 ,2 75	0	0
Ar nd B oh le	0	0	0	0
lke Vo r L an g	49 ,6 82	0	0	0
Su is Bo d pe rv or y ar
Al de ex an r W itz le be vo n n	0	0	0	0
of Pr . D r. Gü nt B rä er ue r	0	0	0	0
Dr . P et er ied Fr em an n	30 0	0	0	0

Notes

Additional notes pursuant to Section 63 of the Stock Exchange Regulations for the Frankfurt Stock Exchange (Section 63 (3) 5 BörsO)

PVA Tepla III/05_EN_4 11.11.2005 16:40 Uhr Seite 24

Changes to accounting and valuation methods

This quarterly report was prepared in accordance with the International Financial Reporting Standards (IFRS).

Orders

Group incoming orders in the third quarter amounted to € 20.0 million (Q3/2004: € 15.6 million), and totalled € 43.9 million in the first nine months of 2005 (Q1-3/2004: € 41.7 million).

After deduction of realised sales, calculated using the percentage-of-completion method (POC), the order backlog of the Group companies was at € 32.8 million as at 30.09.2005 (2004: € 23.0 million); after Group consolidation, the total was € 27.7 million (2004: € 22.0 million).

Development of costs and prices

Costs increases for procurements have been largely avoided so far. However, selling prices are facing severe competitive pressures due to persistent weakness in the economy.

Investments

Group investments in the first nine months of 2005 totalled € 1.501 million (Q1-3/2004: € 851 thousand).

R&D activities

Total group expenditure on research and development was € 939 thousand in the first nine months of 2005 (Q1-3/2004: € 1.159 million).

Revenue breakdown

The Company operates in one segment only. For a breakdown of revenues by division and region, see page 6. Distributed profits, or proposed profit distribution No dividend was paid out; a distribution of profits was not proposed.

Interim dividends

No interim dividends were paid out.

Changes in Management and Supervisory boards On reaching the age of 65, Mr. Martin Gier left the Management Board of PVA TePla AG on 24 August 2005 in accordance with the company statutes.

Material events since the end of the reporting period

None.

This unaudited Interim Report was prepared in accordance with IFRS (International Financial Reporting Standards). The Management Board is convinced that the consolidated accounts provide a fair view of the net worth, financial position and results of the PVA TePla Group.

Disclaimer:

This Interim Report contains forecasts based on assumptions and estimates by the management of PVA TePla AG. Although we assume that the expectations in these statements are realistic, we cannot guarantee that these expectations will prove correct. The assumptions may harbour risks and uncertainties that can lead to actual results deviating substantially from the forecasts being made. Factors that can cause such deviations include: changes in the macroeconomic and business environment; exchange rate and interest rate variability; launching of competing products; lack of acceptance of new products or services, and modifications to the corporate strategy. PVA TePla does not plan to revise these forecasts, nor does PVA TePla accept any obligation to do so.

Financial calendar

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Financial calendar for 2005 / 2006 (provisional)

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INTERMEDIATE REPORT

PVA Tepla III/05_EN_4 11.11.2005 16:40 Uhr Seite 28

PVA TePla AG Emmeliusstr. 33 D-35614 Asslar Phone ++49 (0)6441 / 5692-0 Fax ++49 (0)6441 / 5692-111 E-Mail: info@pvatepla.com

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