SMA Solar cuts 2021 earnings forecast in half following O&M contract issue

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SMA said the O&M contract issue would incur a one-time charge on the company’s earnings in 2021. Image: SMA Solar Technology.

SMA Solar has cut its earnings forecast for the year by more than half pending a contract issue affecting its operations and maintenance business.  

In a statement to the market issued earlier this week, SMA Solar said it had adjusted its earnings guidance for the 2021 financial year, revising it down from a previous forecast of €50-65 million (US$57 – 74 million) to €20-30 million.

The inverter manufacturer said the revision was down to ongoing negotiations between it and a third party in relation to an existing service agreement for its O&M services business, where defects in solar parks maintained by SMA were discovered after the contract was concluded.

Jürgen Reinert, chief executive at SMA, said the possible early dissolution of the agreement was a “unique case” which would have resulted in “unjustifiable expenses” for the company if it had gone on to fulfil its contractual obligations relating to asset performance.

“Accordingly, after thorough consideration, we have decided to aim for a cancellation agreement in order to shield SMA from greater damage. Our decision also expresses our responsible handling of long-term risks for the company as well as our high quality standards,” Reinert said.

Despite cuts to the 2021 earnings forecast, SMA’s managing board has reiterated its confidence in its long-term earnings potential. At the company’s Q3 2021 results in November 2021 SMA pointed towards a bulging order book for the forthcoming year after project delays and pushbacks dented its shipments earlier in 2021.

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