SMA financial returns reflect changing industry
Despite an overall drop into the financial red zone German inverter manufacturer SMA was able to record a break even balance sheet before one off financial costs were taken into account. Whilst trying to pin the European fall in sales to EU driven uncertainty about China the fall of sales reflected the maturing European market. Despite increasing international market share the company is facing increasingly aggressive competition and the impact is being felt internally with the company having to shed 700 jobs leading to their extraneous costs.
In the first half of 2013, SMA Solar Technology sold PV inverters with an output of 2.5 gigawatts (Q1"“Q2 2012: 4.0 GW) in a market environment characterized by increasing competitive pressure and a considerable price slump. Sales decreased by 45% compared with the same period of the previous year to €461.5 million (Q1"“Q2 2012: €833.7 million). The international share of total sales, which increased to 67.4% from 53.7% (Q1"“Q2 2012). The most important foreign markets in the first half of the year included the U.S., Japan, Australia and Thailand. In Europe, the Eastern European markets, Benelux and Great Britain offered positive stimuli. However, overall demand continued to lag substantially in Europe due, according to the company, to changes to subsidy conditions, in particular in Germany and Italy, the unresolved financial crisis and the possible introduction of punitive duties on Chinese PV modules.
Despite the sharp decline in sales, SMA succeeded in generating positive earnings before interest, taxes, depreciation and amortization (EBITDA) of €14.2 million in the reporting period (Q1"“Q2 2012: €114.2 million). EBIT was at €-23.3 million in the first half of 2013 (Q1"“Q2 2012: €83.7 million). EBIT includes expenses for personnel adjustments of €15.0 million. This corresponds to an EBIT margin of -5% (Q1"“Q2 2012: 10%). The ongoing efforts to reduce costs and increase productivity made a positive impact in the second quarter of 2013. EBIT adjusted for expenses for personnel adjustments increased in comparison to the first three months of the fiscal year to €0.2 million. However, this was not sufficient to compensate for the earnings slump in the first quarter of 2013 and the one-time items of the planned personnel changes. The group earnings amounted to €-16.2 million in the reporting period (Q1"“Q2 2012: €59.4 million). The considerable decline in operating profit compared with the same reporting period of the previous year is attributable in particular to the sharp drop in sales, the decline in prices and one-time items of the planned personnel adjustments.
With net cash of €348.2 million (Dec. 31, 2012: €446.3 million) and an equity ratio of 58.3% (Dec. 31, 2012: 61.8%), SMA continues to have a solid financial position.
"SMA will continue to invest in technology development to further lower manufacturing costs with entirely new product platforms. We will also pursue our globalization strategy to benefit from demand stimuli in photovoltaic markets outside Europe through a strong local presence. The slump in demand in Europe forces additional cost cutting measures and an adjustment to the personnel structures. By implementing the different measures, we will sustainably improve our competitiveness. In the medium-term, as a specialist for system technology SMA is set to benefit from the trend toward energy management, construction of PV power plants and the supplementation of stationary diesel gensets with PV systems," explains SMA Chief Executive Officer Pierre-Pascal Urbon.
The SMA Managing Board is adhering to its sales and earnings forecast for 2013. This forecast calls for sales of €0.9 billion to €1.3 billion for the SMA Group. With regard to the operating result adjusted for one-time items of the planned staff reduction, the SMA Managing Board expects to break even, at best, but cannot rule out making a loss.
