united power technology 9 months report 2015united power technology ! interim report 9 months 2015 2...

United Power Technology ⏐ Interim report 9 months 2015 1

UNITED POWER TECHNOLOGY

9 MONTHS REPORT 2015


Key Financials 9 months 2015

(consolidated) 9 months 2014

(consolidated) +/–%

Revenues EUR million 91.30 77.08 +18.45

Gross profit EUR million 14.29 13.73 4.08

Gross profit margin % 15.65 17.81 -2.16 pp

EBIT EUR million 10.13 10.93 -7.32

EBIT margin % 11.10 14.18 -3.08pp

Profit for the period EUR million 6.72 8.08 -16.84

Profit for the period margin % 7.36 10.48 -3.12 pp

Earnings per share 1) EUR 0.55 0.66 -16.67

1) EPS for the first nine months 2014 and for the first nine months 2015 is based on the weighted average of shares (12.30 million shares)


Content 04 Letter to Shareholders 05 The Share 07 Interim Group Management Report 19 Interim Consolidated Financial Statements 29 Responsibility Statement 30 Financial Calendar, Imprint

UNITED POWER TECHNOLOGY GROUP

is a leading manufacturer of engine-driven power equipment in China. We design, develop, manufacture and sell an extensive range of generators, outdoor power equipment and components such as engines. Our major products comprise residential as well as commercial generators, which are currently delivered into more than 70 countries around the world.


Dear Fellow Shareholders,

In the third quarter our business environment continued to be a rather challenging one. Although we increased our Group revenues by 18.5%, from EUR 77.08 million in the prior year to EUR 91.3 million in the reporting period 2015, this was mainly attributable to strong currency effects. Nevertheless we achieved to strengthen our revenues in the third quarter compared to the first half of 2015: In terms of RMB, which is our functional currency, revenues in the nine-months period slightly decreased by 1.7% (6M: –4.5%). Our operating profit before taxes and interest (EBIT) for the first nine months of 2015 decreased from EUR 10.9 million by 7.3% to EUR 10.1 million compared to the same period last year. This was mainly due to the lower other income from government grants and higher administrative expenses. In the first nine months 2015 we achieved an EBIT margin of 11.1%. This represents a decrease of 3.1 percentage points compared to the first nine months of 2014. On segment level, revenues from the residential generators created the highest segment growth with an increase of 25.3% to EUR 39.0 million. The commercial generator segment rose by 19.7% to EUR 49.2 million, while the sales of our outdoor power equipment segment dropped by 24.1% to EUR 3.2 million in the first nine months of 2015. In the first nine months of 2015 we were able to add 11 new customers to our portfolio. Additionally, with Mongolia, Korea and Bolivia, we extended our portfolio by three new countries. With regards to our new factory building, which we built in order to strengthen our production in the future, we had to extend our plans. We are planning to complete the installation of new production lines in 2016. In Q4 we started the design phase for the new production lines. In the remaining quarter of 2015, our efforts will focus on laying the foundation for further profitable growth through general strengthening of our company, products and brand. We expect that the weakness in our industry environment, will not improve significantly throughout this remaining year. Therefore, we left our previous guidance unchanged. We still expect the overall financial results in the full year 2015 to be weaker than in 2014. Concerning the group revenues we expect to halt the downward trend in 2015, assuming a stable RMB:EUR exchange rate of 7:1. In terms of our profitability we predict gross profit and EBIT margins to decrease by 2 to 5 percentage points compared to 2014. Nevertheless, we will focus our activities to strengthen our revenues and get back on a profitable growth track. Kind regards, Xu Wu Chairman of the Management Board


The Share SDAX mainly driven by the China effect in the third quarter During the first half of the year, the market sentiment remained positive and experienced an ongoing upturn. During the third quarter this development came to an end. The SDAX, as a benchmark for United Power, reached its peak with 9,156 points on 6 August. Thereafter it reversed its course and showed strong volatile development as a result of the nervous financial markets in China. At the end of the nine-month period, the SDAX closed at 8,310 points. With respect to the beginning of the year, this represents an increase of 16%. Share price stabilizes at a lower valuation level After a deteriorating performance in the first two quarters of 2015, our share price remained relatively stable in the first half of the third quarter. The publication of our half-year report at the end of August was followed by a positive market reaction, which drove our share price up. Our share rose to its quarter high of EUR 1.00. At the end of the reporting period our share closed at EUR 0.86. Compared to the beginning of the year our price decreased significantly by 39%. However, on third-quarter basis our share price increased by 9 %. Our market capitalization was EUR 10.63 million by the end of the third quarter. This represents an increase of EUR 0.78 million from the previous quarter. The average trading volume during the first nine months amounted to 5.409 shares per day. Share Performance (January 1 to September 30, 2015)

United Power Technology AG SDAX Shareholder Structure (as of 30 September 2015)

50% 60% 70% 80% 90%

100% 110% 120% 130% 140% 150% 160%

01.01.15 21.02.15 13.04.15 03.06.15 24.07.15 13.09.15


KEY DATA ISIN/WKN/Ticker/Reuters DE000A1EMAK2/A1EMAK/UP7/UP7G.DE Market Segment/Stock exchange Regulated Market (Prime Standard)/Frankfurt Stock Exchange First Trading Day 10 June 2011 Shares issued (in shares) 12,300,000 Market capitalization (EUR million) 10.6 as at 30 September 2015


9 Months 2015

Interim ManagementReport


Interim Management Report GROUP PROFILE United Power Technology Group designs, develops, manufactures and sells an extensive range of engine-driven power equipment, including generators, outdoor power equipment and components such as engines. Our major products comprise residential as well as commercial generators, which are currently delivered to our customers in more than 70 countries around the world. Our main markets are Europe, North America and our domestic market China. Furthermore we sell our products to other overseas markets. In selected markets such as China, Canada, Africa (Nigeria, South Africa), Malaysia, Europe (Italy, Spain) and Russia we sell our own branded products. In the other markets our products are usually developed and manufactured by United Power and branded by third parties. United Power is a leading Original Design Manufacturer (ODM) which develops and produces its products for leading Original Equipment Manufacturers (OEMs), wholesalers and retailers such as Metro, Lower’s, B&Q, Home Depot, and Hornbach. ECONOMIC ENVIRONMENT According to the update of the World Economic Outlook (WEO) issued in October 2015 by the International Monetary Fund (IMF) the global growth projection for 2015 are 3.1%. The reason for the small downward revision to global growth for 2015 relative to the July 2015 WEO was a setback to activity in the first quarter of 2015, mostly in North America as well as in emerging markets. Growth in the euro area is expected to increase from 0.9% in 2014 to 1.5% this year. While overall growth prospects remain moderate due to demography and structural issues, growth in France, Italy and Spain is expected to slightly accelerate this year. Due to the unexpected weakness in North America the growth rate in the US was revised from 3.1% to 2.6% for this year, due to an unexpected weak first quarter 2015. However, the underlying drivers for acceleration in consumption and investment in the US – wage growth, labor market conditions, lower fuel prices, and a strengthening in housing market – remain intact. In China, growth is expected to further decelerate to 6.8% in 2015 below the Government’s growth target. The growth forecast has been revised downwards as it is expected that the Government will continue to reign into past year’s excesses in property, credit and investment growth. Other emerging economies as a group are also expected to further decelerate from 4.6% in 2014 to 4.0% in 2015. However, prospects vary widely ranging from a 3.8% contraction in Russia to an acceleration in India to 7.3%. The Middle East, North Africa, Afghanistan and Pakistan economies are expected to grow on average around 2.5% with Latin America at 0.5%, mainly due to expected 1,5% contraction in Brazil and growth of 4.4% in Sub-Saharan Africa.


INDUSTRY ENVIRONMENT AND TRENDS

According to a market study of TechNavio the portable generator market in China is expected to grow significantly at a CAGR of over 8% during the forecast period 2015 – 2019 due to increasing demand for portable generators from growing construction industry in China. Additionally, the growth in the industrial activities in China and rapid urbanization will elevate the demand for portable generators.

According to this study there has been an increasing demand from the Middle East and Africa, which is boosting the portable generator market in China. At present, the market in China is experiencing strong demand for portable generators with a capacity of 3 to 10 kW and majority of the demand has been from the construction and industrial segment. However, our industry is also closely correlated with overall global growth which has been weaker than expected in recent years. Our business is global and particularly depends on our largest markets namely Europe, China and the United States. During the first nine months of 2015 the on-going consolidation process in the Chinese generator market continued. We expect that during the consolidation process there will be periods of intense price competition as some of the less competitive players are fighting for survival. We expect that the rate that competitors – particularly smaller and financially weaker ones – will withdraw will accelerate. We believe that United Power will emerge from this as a stronger player with a reputation of quality and reliability. The Ukraine crisis and weaker rouble have also an impact on our business as Russia in particular is an important market for us in Europe. The weaker rouble and current economic situation is translating in reduced demand from our Russian customers. Also the crisis in Syria and Iraq will bring further uncertainties for our sales region Middle East.


REVENUES AND EARNINGS POSITION in EUR million 9 months 2015 9 months 2014 +/–% Revenue 91.30 77.08 +18.45 Cost of sales -77.01 -63.35 +21.57 Gross profit 14.29 13.73 +4.08 Other income 2.05 2.55 -19.61 Distribution and selling expenses -1.03 -0.96 +7.30 Administrative expenses -3.34 -3.08 +8.45 Research and development -1.18 -0.91 +29.67 Other expenses -0.66 -0.40 +65.00 Profit from operations (EBIT) 10.13 10.93 -7.32 Interest income 0.57 0.52 +9.62 Interest expense -1.04 -0.88 +18.19 Profit before tax 9.66 10.57 -8.61 Income taxes -2.94 -2.49 +18.08 Profit for the period 6.72 8.08 -16.84 Earnings per share* (EUR) 0.55 0.66 -16.67 * EPS for nine months 2014 and for nine months 2015 is based on the weighted average of 12.30 m shares.

Revenue United Power’s revenue increased by 18.45% to EUR 91.3 million in the first nine months of 2015 compared with EUR 77.08 million for the same period last year. The increase in revenue is due to the weaker Euro compared to the same period last year (our revenues are denominated in RMB and USD). In term of RMB which is our functional currency, our revenue declined by 1.65%, compared to previous quarters, decline continued but with less degree. In the first nine months of 2015 we saw revenue increase across all geographic regions based on our internal management analysis by end customer except our markets in Europe. Here we faced a decline in sales due to the weaker Euro and the weaker rouble in Russia. We saw particularly strong growth in the new growth markets in emerging market and China where revenues not only increased in Euro but also in RMB terms. We are encouraged by the growth in other new markets in the first nine months as we regard this as an important growth area going forward and our measures to strengthen sales and brand building in these regions start to bear fruit. In the reporting period our North American sales tend to be more volatile and lower compared to other regions as we have fewer customers but typically larger order sizes. Our home market China saw growth, despite the industry consolidation in China and the general macroeconomic deceleration.


Cost of sales Our cost of sales increased from EUR 63.35 million for the first nine months of 2014 by 21.57% to EUR 77.01 million for the comparable period of 2015. This was mainly due to higher sales, and as we adjusted down price for some products, it increased stronger than revenue. Cost of sales constitutes materials (e. g. copper, aluminium, steel), parts, factory level overheads and labour costs as well as fixed asset depreciation and is therefore affected by currency appreciation, investment as well as domestic wage inflation and commodities prices.

Gross profit Gross profit increased slightly from EUR 13.73 million for the first nine months of 2014 by 4.08% to EUR 14.29 million for the same period this year. Compared to the same period last year, United Power’s gross profit margin decreased by 2.16 percentage points to 15.65% in the first nine months of 2015. The gross profit margin decreased mainly due to the RMB price adjustment after extended past periods of industry consolidation. The gross margin is affected by a number of factors such as product mix, capacity utilization and exchange rates and fixed asset depreciation.

Other operating income Other operating income significantly decreased from EUR 2.55 million for the first nine months of 2014 by 19.61% to EUR 2.05 million for the same period this year. The decrease was mainly due to less government grant and foreign exchange gains. We believe that Government budgets for grants this year have been reduced due to on-going austerity measures. Other operating income mainly consists of exchange rate differences, government grants in respect of our achievements in new product developments and environmental protection as well as rental income.

Distribution and selling expenses Our distribution and selling expenses increased by 7.3% to EUR 1.03 million for the first nine months of 2015 compared to EUR 0.96 million for the reporting period of 2014. The increase is mainly due to higher total remuneration to our sales staff. As a percentage of revenues, distribution and selling expenses decreased to 1.13% in the first nine months of 2015 from 1.25% for the comparable period of 2014.

Administrative expenses United Power’s administrative expenses increased from EUR 3.08 million for the first nine months of 2014 by 8.45% to EUR 3.34 million for the comparable period of 2015. This was mainly due to an allocation of depreciation expenses in respect of new not yet utilized buildings to administrative expenses. As a percentage of revenues, administrative expenses decreased to 3.66% for the first nine months of 2015 compared with 4.00% for the same period last year due to the fact that some efficiency measures started to bear fruit.

Research and development expenses In the first nine months of 2015 research and development costs increased to EUR 1.18 million compared to EUR 0.91 million for the comparable period of 2014. This was mainly due to the fact that we increased research expenditure on new products. As percentage of revenues, research and development expenses have increased from 1.17% to 1.29% for the first nine months of 2014 to the first nine months of 2015.


Other expenses Other expenses increased from EUR 0.4 million in the first nine months of 2014 by 65% to EUR 0.66 million for the comparable period of 2015. This was mainly because of higher bank charge compared to the same period last year. As a percentage of revenues, other expenses increased from 0.52% to 0.72% for the first nine months of 2015. Other expenses typically include various government taxes and levies, bank charges and foreign currency losses. Profit from operations (EBIT) Our EBIT for the first nine months of 2015 decreased by 7.32% to EUR 10.13 million compared to EUR 10.93 million for the same period last year mainly due to the higher revenues as well as the exchange rate gains included in the Other Operating Income. Our EBIT margin decreased from 14.2% to 11.1% for the first nine months of 2015. Interest Income Interest income has increased from EUR 0.52 million in the first nine months of 2014 to EUR 0.57 million in the same period of 2015 mainly due to higher cash reserves and improved cash management. Interest Expense Interest expense of United Power Technology significantly increased from EUR 0.88 million for the first nine months of 2014 to EUR 1.04 million for the comparable period of 2015 due to increased borrowings. As a percentage of revenues, interest expenses remained stable at 1.14% (9M 2014: 1.15%) for the first nine months of 2015. Income taxes In the first nine months of 2015 income tax increased to EUR 2.94 million from EUR 2.49 million for the same period last year. Our group level tax rate typically exceeds our nominal corporate tax rate due to non-tax-deductible expenses incurred outside the PRC. Profit for the period and EPS The Group’s profit for the period decreased from EUR 8.08 million for the first nine months of 2014 by 16.84% to EUR 6.72 million in the comparable period of 2015. As a percentage of revenues, profit for the period decreased from 10.48% for the first nine months of 2014 to 7.36% for the comparable period of 2015. The earnings per share (EPS) in the first nine months of 2015 is EUR 0.55, decreased from EUR 0.66 for the same period of last year.


Segment information Residential generators Revenue for residential generators increased by 25.28% to EUR 38.96 million in the first nine months 2015. The segment growth exceeds overall revenue growth. This is mainly due to higher sales in North America which we believe is partly due to re-stocking activities of some of our key customers. Commercial generators Our largest segment commercial generators showed an increase of 19.71% from EUR 41.06 million for the first nine months of 2014 to EUR 49.16 million for the same period of 2015. Outdoor power equipment The outdoor power equipment segment decreased by 24.1% from EUR 4.14 million for the first nine months of 2014 to EUR 3.15 for the same period of 2015. Components The components segment is not a strategic sector for the Company but is rather taking advantage of opportunities in the market place. This segment represents a small part of the Company’s total revenue. The component segment had a decrease of 31.99% from EUR 2.83 million for the first nine months of 2014 to EUR 1.93 million for the same period of 2015.


ASSETS AND LIABILITIES POSITION

The following table shows the consolidated balance sheet as at 31 December 2014 compared to the consolidated balance sheet as at 30 September 2015:

in EUR million 30 Sep 2015 31 Dec 2014 Current assets 78.16 72.07 Non-current assets 89.32 89.27 Total assets 167.48 161.34 Current Liabilities 31.33 36.13 Non-current liabilities 1.79 1.82 Total liabilities 33.12 37.95 Total equity 134.36 123.39 Total liabilities and equity 167.48 161.34

Current Assets

Inventories Inventories include raw materials, work in progress and finished goods. Inventories decreased by 2.97% from EUR 6.13 million as at 31 December 2014 to EUR 5.95 million as at 30 September 2015 mainly due to exchange rate impact. Trade and other receivables Trade and other receivables increased by 48.86% from EUR 14.06 million at year-end 2014 to EUR 20.92 million for the end of the first nine months of 2015. This is mainly due to stronger sales in the third quarter. Cash and cash equivalents Cash and cash equivalents amounted to EUR 50.42 million at the end of the nine months of 2015. This represents an increase of 0.5% from the EUR 50.17 million at the end of fiscal year 2014.


Non-current assets

Property, plant and equipment Property, plant and equipment increased by 0.15% from EUR 79.13 million as of 31 December 2014 to EUR 79.25 million as of 30 September 2015 mainly due to currency effects of a weaker Euro compared to the RMB.

Liabilities

Trade and other payables Trade and other payables increased from EUR 12.20 million as of 31 December 2014 to EUR 13.48 million as of 30 September 2015. This is mainly due to increased sales in the second quarter. Borrowings and amount due to shareholders Borrowings at the end of September 2015 decreased to EUR 14.31 million from EUR 20.71 million as of 31 December 2014 representing a decrease of 30.88%. This was mainly due to partial repayment of borrowing. Equity to total assets ratio The total equity increased from EUR 123.39 million by 8.89% to EUR 134.36 million mainly due to the consolidated profit and currency effect for the period. The equity to total assets ratio changed from 76.48% as of 31 December 2014 to 80.22% as of 30 September 2015.


CASH FLOWS in EUR million 9 months 2015 9 months 2014 Operating cash flow before working capital changes 15.32 14.97 Cash generated from operations before interest and taxes 10.58 18.07 Cash generated from operating activities 6.99 14.87 Cash flow from investing activities -1.3 -19.55 Cash flow from financing activities -7.53 10.77 Net increase in cash and cash equivalents -1.85 6.10 Cash at beginning of year 50.17 38.80 Effect of exchange rate changes 2.1 2.14 Cash and bank balances at end of the period 50.42 47.05 Cash generated from operations before tax and interest During the first nine months of 2015, cash generated from operations before tax and interest decreased from EUR 18.07 million to EUR 10.58 million compared with the reporting period 2014. This was mainly due to working capital and pledged bank deposit changes. Cash flow from investing activities The investment of the Company in property, plant and equipment for capacity and production expansion is reflected in the cash flow from investing activities. For the first nine months of 2015, the Company’s cash flow from investing activities was EUR -1.3 million compared to EUR -19.55 million for the same period in 2014 which was mainly due to massive construction of phase 3 project. Cash flow from financing activities Cash from financing activities during the first nine months of 2015 was EUR -7.53 million mainly due to the fact that repayment of borrowings exceeded new borrowings. Cash at end of period Overall cash increased to EUR 50.42 million by the end of the first nine months 2015 compared with EUR 47.05 million for the same period last year. This is a year on year increase of 7.17%.


HUMAN RESOURCES United Power’s total number of employees increased from 589 at the end of December 2014 to 599 at 30 September 2015. Key areas such as R&D, sales and marketing and brand building have been stable since the end of 2014. After a prolonged period of rationalization and productivity enhancement in production through efficiency measures, streamlining, continued automation and increased usage of temporary labour for peak periods, we have in the first half again slightly increased our production employees in anticipation of increased production activities. We continue to recruit qualified mostly university-educated staff. The employee split by function as of 30 September 2015 and 31 December 2014 is shown in the table below: 30 September 2015 31 December 2014 Management 27 28 R&D 57 57 Sales & Marketing 38 38 Administration 87 87 Production 390 379 Total 599 589

RISK AND OPPORTUNITY MANAGEMENT There have been no significant changes in the opportunities or risks of United Power Technology AG compared with the period before. For detailed information, readers are therefore referred to the risk report included in the management report of the annual report for the fiscal year 2014.

REPORT ON POST-BALANCE SHEET EVENTS There were no transactions or other events of special significance after the balance sheet date of 30 September 2015.


Outlook

The outlook hasn’t changed compared to the outlook in the annual report 2014 except for slight changes in the Economic outlook. For detailed information we refer to the outlook in the annual report 2014.

Economic and industry outlook On a most fundamental level our industry is driven by the economic environment in the geographies we sell our products. While we sell on a global basis our key markets continue to be Europe, our domestic market in China and North America and hence the industry environment in these markets are of particular importance to us. Apart from the macroeconomic environment other key factors influencing each geography’s industry environment are geography specific factors. These include occurrence of natural disasters such as hurricanes particularly in North America, regulations particularly in markets such as Europe and industry consolidation, particularly in the China market. Some of these factors are further discussed in the section below.

Company outlook We believe that investments in our capacity expansion will start bearing fruit after the completion of our new production lines in 2016, which is one year later than initially planned because of delayed governmental approval. In Q4 we started the design phase for the new production lines. In the meantime, we will focus on laying the foundation for further profitable growth through general strengthening of our company in particular the sales, distribution and brand building as well as our research and development efforts. Our sales depend to some degree on factors such as the occurrence of hard to predict natural disasters, regulatory issues such as technical requirements as well as local industry consolidation. We assume that the weakness in our industry environment, which started to affect us in the second half of 2013, won’t significantly improve throughout this year.

However, given all the aforementioned factors we expect the financial results in full year 2015 to be weaker than in 2014. While in 2015 we expect to halt the downward trend of group revenues in 2015, we expect further gross margin and EBIT margin deterioration.

We expect similar or higher revenues from our commercial generator segment, residential generator segment compared to 2014. The components sector continues to be a less strategic sector, which will be driven by opportunities presenting themselves in the market place.

As far as our profitability is concerned we expect gross profit and EBIT margins to decrease by 2 to 5 percentage points compared to 2014 due to further price adjustments, higher fixed asset depreciation as well as a significantly step up in sales, brand building and distribution and research and development budget.

Our guidance assumes a stable RMB:EUR exchange rate of approximately 7:1 and generally stable or improving trading conditions. All in all, we remain confident about our continuing profitable growth prospects particularly over the medium to long term.

Eschborn, 17 November 2015 Management Board United Power Technology AG

Xu Wu

CO-CEO

Zhong Dong Huang

CO-CEO


9 Months 2015

Condensed Interim Consolidated Financial

Statements


Financial Statements United Power Technology AG CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION in EUR thousand 30 Sep. 2015 31 Dec. 2014

Non–current assets

Property, plant and equipment 79,248 79,125 Intangible assets 773 852 Other non-current assets 8,515 8,515

Deferred tax assets 787 779

89,323 89,271

Current assets Inventories 5,952 6,134 Trade and other receivables 20,924 14,056 Current recoverable income taxes 0 7 Other current financial assets 672 1,665 Other current assets 192 37 Cash and cash equivalents 50,420 50,170

78,160 72,069

Total assets 167,483 161,340 Capital and reserves

Share capital 12,300 12,300 Additional paid-in capital 55,883 55,883 Currency translation difference 21,075 16,822 Retained earnings including net earnings 45,103 38,381 Equity attributable to owners of the parent 134,361 123,386 Total equity 134,361 123,386

Non-current liabilities

Other liabilities 1,711 1,735 Deferred tax liabilities 83 90

1,794 1,825

Current liabilities

Borrowings

14,314 20,709 Trade and other payables 13,484 12,520 Other provisions 299 166 Current tax liabilities 3,231 2,734

31,328 36,129

Total liabilities 33,122 37,954 Total liabilities and equity 167,483 161,340


CONDENSED INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME for the periods from 1 January to 30 September 2015

in EUR thousand

Q3 2015 Q3 2014 9M 2015 9M 2014 Revenue 28,695 23,899

91,302 77,084

Cost of sales -24,651 -19,966

-77,010 -63,353

Gross profit 4,044 3,933

14,292 13,731 Other income 437 2,045

2,048 2,550

Distribution and selling expenses -246 -297

-1,027 -963 Administrative expenses -976 -1,444

-3,338 -3,082

Research and development expenses -591 -284

-1,181 -905 Other expenses -226 -194

-661 -401

Profit from operations (EBIT) 2,442 3,759

10,133 10,930

Interest income 146 178

569 522 Interest expense -183 -373

-1,037 -884

Financial result -37 -195

-468 -362 Profit before taxes 2,405 3,564

9,665 10,568

Income taxes -771 -565

-2,943 -2,485

Profit for the period 1,634 2,999

6,722 8,083 Attributable to:

Owners of the Company 1,634 2,999

6,722 8,083 Non-controlling interests 0 0

0 0

1,634 2,999

6,722 8,083

Earnings per share in EUR (diluted – basic)1 0.14 0.24

0.55 0.66 1 EPS for 9M 2014 and for 9M 2015 are based on 12.3 million shares.


OTHER COMPREHENSIVE INCOME (EXPENSES) for the period from 1 January to 30 September 2015

in EUR thousand Q3 2015 Q3 2014 9M 2015 9M 2014 Profit for the period 1,634 2,999 6,722 8,083

Exchange differences arising on translation -5,128 5,961 4,253 6,181

Other comprehensive income (expense) for the period 0 0 0 0

-5,128 5,961 4,253 6,181

Total comprehensive income for the period -3,494 8,960 10,975 14,264

Total comprehensive income (expense) attributable to:

Owners of the Company -3,494 8,960 10,975 14,264

Non-controlling interests 0 0 0 0

-3,494 8,960 10,975 14,264


CONDENSED INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY in EUR thousand Share

capital Capital

reserves Foreign currency

translation reserve Retained earnings Total equity

Balance as at 31 Dec 2014 12,300 55,883 16,822 38,381 123,386 Profit for the period - - - 6,722 6,722 Other comprehensive income (expense) for the year - - 4,253 - 4,253 Total comprehensive income for the period - - 4,253 6,722 10,975 Balance as at 30 Sep. 2015 12,300 55,883 21,075 45,103 134,361


CONSOLIDATED STATEMENT OF CASH FLOWS for the period from 1 January to 30 September 2015 in EUR thousand 9M 2015 9M 2014

Profit before tax 9,665 10,568

Adjustments for:

Depreciation on intangible assets and property, plants and equipment 5,285 4,129

Interest (income) expense, net 468 361

Other financial result 0 0

Other non-cash (income) expense -99 -88

(Increase)/decrease in current assets -5,841 113

Increase/(decrease) in current liabilities 1,098 2,986

Cash generated from operations 10,576 18,069

Interest paid -1,037 -884

Income taxes paid -2,553 -2,312

Cash generated from operating activities 6,986 14,873

Payments for acquisition of:

Property, plant and equipment -1,869 -16,502

Non-controlling interests 0 -3,566

Interest income 569 522

Cash flow from investing activities -1,300 -19,546

Repayment of borrowings -23,474 -17,115

New borrowings raised 15,940 27,889

Cash flow from financing activities -7,534 10,774

Net increase (decrease) in cash and bank balances -1,848 6,101

Cash and bank balances at beginning of year 50,170 38,802

Effect of exchange rate changes 2,098 2,143

Cash and bank balances at end of period 50,420 47,046


CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the period from 1 January to 30 September 2015

1. General information United Power Technology AG, Eschborn, Germany, (“United Power” or “the Company”) is registered under the firm United Power Technology AG with the commercial register of the local court of Frankfurt am Main (HRB 88245). The address of the Company’s registered office is: Mergenthalerallee 10–12, 65760 Eschborn, Germany. The Company and its subsidiaries (collectively “the Group”) produce and sell generators and related equipment globally. The shares of the Company have been admitted to trading on the regulated market of the Frankfurt Stock Exchange. The condensed interim financial statements of the Group as of 30 September 2015 have been prepared in accordance with the requirements of IAS 34 in condensed form and with the International Financial Reporting Standards (IFRS) of the International Accounting Standards Board, London, as adopted by the European Union (EU) and applicable at the reporting date, as well as with the additional requirements as set forth in section 315a paragraph 1 of the German Commercial Code (HGB). The condensed consolidated interim financial statements do not include all disclosures and explanations that are required in a complete set of financial statements and should therefore be read together with the consolidated financial statements as of 31 December 2014. The condensed interim consolidated financial statements of the Company for the period from 1 January 2015 through 30 September 2015 were authorised for issue by the Management Board on 17 November 2015. The consolidated financial statements are presented in Euros. Amounts are stated in thousands of Euros (kEUR) except where otherwise indicated. The currency of the primary economic environment in which the Company and its subsidiaries operate is Renminbi (“RMB”) (the functional currency of the Company and its subsidiaries). The figures mentioned in the consolidated financial statements were subject to rounding adjustments that were carried out according to established commercial standards. As a result, the figures stated in a table may not exactly add up to the total values that may also be stated in the table.

2. Basis of preparation The condensed interim consolidated financial statements have been prepared on the historical cost basis except for certain financial instruments that are measured at fair values (available-for-sale investments). Historical cost is generally based on the fair value of the consideration given in exchange for goods. The condensed interim consolidated financial statements incorporate the financial statements of the Company and all entities controlled by the Company. All intra-group transactions, balances, income and expenses are eliminated in full on consolidation. The accounting policies and methods of computation applied by the Group in these interim financial statements are principally the same as those applied in the Group consolidated financial statements as at and for the year ended 31 December 2014. For further information regarding the Group’s accounting principles and policies we refer to these consolidated financial statements at 31 December 2014. Preparation of interim financial statements requires management to make estimates and judgments related to the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the reporting date and the reported amounts of revenue and expenses for the reporting period. Actual amounts could differ from those estimates.


The number of consolidated Group companies has changed compared with the first nine months of 2014. The wholly owned subsidiary companies Hua Tong Zhong Chuang, Co. Ltd underneath Fujian United Power Equipment Co., Ltd. and United Power France SASU which had been dormant were both closed due to rationalisation. The percentage of equity interests in the previously existing subsidiaries attributable to the Group did not change during the Track Record Period, except the shares in DWC. In 2014 the Goup acquired 49% of shares from Mr. Wei Gao Xin and owns now 100% of shares in DWC.

The interim financial statements include, besides United Power Technology AG, six foreign subsidiaries that are all located in Hong Kong and the People’s Republic of China. IFRS accounting standards and interpretations to be applied in the financial year 2015 for the first time are of no relevance to the condensed interim consolidated financial statements of the Group. 3. Seasonality of Interim Operations In general, the revenue in the first quarter of the year is significantly less than in other quarters because of Chinese New Year holidays. 4. Segment Information The Company has adopted IFRS 8 to report segment information. The segment information was analysed on the basis of the types of the sold goods. These are prepared by the operative business unit on the basis of internal information, which is regularly reviewed by the management. The information is also used for internal assessment of performance. The revenue and results by segments are as follows: Revenue by segments in EUR thousand 9M 2015 9M 2014 Portable generators

Residential use unit 38,964 31,101 Commercial use unit 49,157 41,062 Outdoor power equipment1 3,146 4,145 Components Engines 88 264 Parts 1,549 2,182 Other 290 389 Total segment revenue 93,194 79,143 Inter-segment revenue elimination -1,549 -2,110 Other adjustments 2 -343 51

91,302 77,084

1 Industrial equipment and landscaping machines are reported together in one item “outdoor power equipment”. 2 Other adjustments are related to freight expenses and sales tax surcharge included in the revenue.


Segment result Results by segments

in EUR thousand 9M 2015 9M 2014 Portable generators

Residential use unit 5,364 3,736 Commercial use unit 8,878 9,146 Outdoor power equipment1 569 780 Components

Engines 14 41 Parts -253 25 Other 96 102 Total segment result 14,668 13,830 Other adjustments 2 -376 -99 Consolidated gross profit 14,292 13,731 Unallocated items:

Other operating income 2,048 2,550 Distribution and selling expenses -1,027 -963 Administrative expenses -3,338 -3,082 Research and development expenses -1,181 -905 Other expenses -661 -401 Interest income 569 522 Interest expenses -1,037 -884 Consolidated profit before tax 9,665 10,568 1 Industrial equipment and landscaping machines are reported together in one item “outdoor power equipment”. 2 Other adjustments are related to freight expenses included and sales tax surcharge in the revenue.

The accounting policies of the operating segments are based on the accounting requirements applicable to the PRC entities of the Group (“PRC GAAP”). Segment profit represents the gross profit earned by each segment prepared under PRC GAAP. Differences between accounting policies under PRC GAAP and IFRS are immaterial, insofar as it is not necessary to prepare reconciliations and explanations. Since information about assets and liabilities of different operating divisions is not regularly provided to the chief operating decision maker for the purpose of assessing performance and resource allocation, segment assets and segment liabilities are not presented. The basis of segmentation and the basis of measurement of segment results have not been changed for the first nine months 2015.


5. Cash and Cash Equivalents and Other Current Assets Cash and cash equivalents: in EUR thousand 30 Sep. 2015 31 Dec. 2014 Cash and cash equivalents 50,420 50,170

50,420 50,170

Other financial assets: in EUR thousand 30 Sep. 2015 31 Dec. 2014 Pledged bank deposits 672 1,665

672 1,665

In addition to cash and cash equivalents in the amount of kEUR 50,420, kEUR 672 of bank deposits were used to secure short-term lines of credit. They are shown under the other financial assets.

6. Equity The subscribed capital of the parent is 12,300,000 and is divided into no-par value bearer shares with a computed value of the participation in the share capital of EUR 1.00. The foreign currency translation reserve of foreign operations amounts to kEUR 21,075. Differences from the translation of functional currencies of foreign operations are recognised in other comprehensive income and accumulated in the foreign currency translation reserve. Translation differences from foreign currency translation are reclassified to profit or loss on the disposal of the foreign operation. The profit for the period allocated to the owners of the parent (kEUR 6,722) is recognised in retained earnings.

7. Events after the Reporting Period No material events between the end of the reporting period and the date of the approval and authorisation for issuance of the financial statements have occurred.

8. Auditor’s Review The condensed interim consolidated financial statements and the interim management report were neither reviewed nor audited by an external auditor (Section 37w Para. 5 of the German Securities Trading Act).

9. Approval of the Consolidated Financial Statements The financial statements were approved and authorised for issuance by the Management Board on 17 November 2015. Eschborn, 17 November 2015 Management Board United Power Technology AG

Xu Wu Zhong Dong Huang CO-CEO CO-CEO


Responsibility Statement Pursuant to section 37y of the German Securities Trading Act (WpHG) in conjunction with section 37w Para. 2 No. 3 WpHG To the best of our knowledge, and in accordance with the applicable financial reporting principles, the interim consolidated financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group, and the interim management report of the Group includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal opportunities and risks associated with the expected development of the Group. Eschborn, 17 November 2015 Management Board United Power Technology AG

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENT

This document contains forward-looking statements, which are based on the current estimates and assumptions by the corporate management of United Power Technology AG. Forward-looking statements are characterised by the use of words such as expect, intend, plan, predict, assume, believe, estimate, anticipate and similar formulations. Such statements are not to be understood as in any way guaranteeing that those expectations will turn out to be accurate. Future performance and the results actually achieved by United Power Technology AG and its affiliated companies depend on a number of risks and uncertainties and may therefore differ materially from the forward-looking statements. Many of these factors are outside United Power Technology AG’s control and cannot be accurately estimated in advance, such as the future economic environment or the actions of competitors and others involved in the marketplace. United Power Technology AG neither undertakes nor plans to update any forward-looking statements.

Xu Wu Zhong Dong Huang CO-CEO CO-CEO


Imprint Published by United Power Technology AG Mergenthalerallee 10–12 65760 Eschborn, Germany Phone: +49 6196 400804 Telefax: +49 6196 400910 Email: [email protected] Concept and design Kirchhoff Consult AG, Hamburg Investor Relations Phone: +49 40 6091 86 0 Fax: +49 40 6091 86 60 E-mail: [email protected] www.unitedpower.de.com/en


UNITED POWER AG United Power Technology AG Mergenthalerallee 10 –12 65760 Eschborn Germany

Phone: +49 61 96 40 08 04 Fax: +49 61 96 40 09 10 E-Mail: [email protected]

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