April 4, 2008

St Peter, MO, USA: MEMC Provides Update on Polysilicon Production

The company reported that during the first quarter it experienced accelerated buildup of chemical deposits inside the new Polysilicon expansion unit ("Unit 3") at its Pasadena, Texas facility. These buildups occurred multiple times, and each instance required downtime of several days for premature maintenance to clean and re-stabilize the unit. The company also delayed the remaining maintenance (from the prior quarter) on the existing units ("Unit 1" and "Unit 2") waiting for Unit 3 to stabilize, but eventually had to perform the maintenance on Unit 2.

The combination of these items caused the utilization of the Pasadena facility to be approximately 20% lower than the fourth quarter, resulted in much lower than anticipated output, and caused the company to not achieve the financial targets for the first quarter as disclosed on January 24, 2008.

The company now anticipates revenue for the first quarter will be approximately $500 million with gross margin of approximately 52% and operating expenses of approximately $42 million. This compares to the company's previously announced targets of $560 million in revenue with gross margin of approximately 54.8% and operating expenses of approximately $42 million.

"It is unfortunate that issues with our new unit prevented us from taking advantage of available market opportunities; however we were able to limit the impact to approximately 10% of our targeted revenue in spite of the utilization being 20% lower than fourth quarter levels," stated Nabeel Gareeb, MEMC's President and Chief Executive Officer. "Although our anticipated revenue is between the levels of the 2007 third and fourth quarters, we are pleased that our cost reductions and product mix enabled us to keep margins between the third and fourth quarter levels as well, in spite of sequential price reductions in the mid-to-high single digit percentage range and a significant reduction in spot polysilicon sales volume compared to the fourth quarter. The reduction in spot polysilicon sales was intended to minimize disruptions to our wafer customers."

"As of today, we believe we have implemented actions to prevent a recurrence of the accelerated buildup, the new unit is ramping and the overdue maintenance on the existing unit is underway and on track to be completed in the coming week. We look forward to recovering our production rates and utilization in the second quarter, which should enable our revenues and margins to improve significantly during the second quarter. In addition, our next phase of expansion (to 8,000MT) is proceeding better than previously communicated. This should allow us the opportunity to recover most of this revenue in the second half of the year, but we will have greater visibility and be in a position to provide more specific guidance at our semi-annual update in July 2008," concluded Gareeb.

Further details about: MEMC