SMA losses grow as sales continue to fall

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Beleaguered German inverter manufacturer, SMA Solar, has ended the fiscal year with sales slightly higher than expected but still down 13.6% on 2013 and with an operating loss almost twice as large as last year’s.

In full-year results published today SMA said it had ended 2014 with sales of €805.4 million (US$885 million), marginally higher than the €790 million it had previously forecast, but down from €932.5 million in 2015.

SMA’s decline in sales continues a slide that has been ongoing since 2010, when the company’s sales peaked at €1.9 billion.

The company also suffered a hit to its operating earnings (EBIT), which saw a €89.1 million loss in 2013 grow to €164.9 million in 2014.

Now as on previous occasions, SMA blamed shifting market conditions for its demise, noting in particular the impact of waning demand in Europe and China.

In a note to investors, SMA chief executive Pierre-Pascal Urbon said in Europe a “market slump” brought about by “political decisions” had hit it particularly hard, while in China he said a decline in the installation of PV power plants due to changes in subsidies had taken its toll.

Although it had seen growth in other markets such as North America, Japan and the UK, SMA said it was insufficient to offset declines in Europe and China.

SMA said its ballooning operating loss was a consequence of planned staff reduction, which the company has been forced to make because of its declining sales, and other factors such as losses from its Chinese subsidiary Zeversolar of €129.7 million.

“We are not satisfied with our business performance in 2014,” said Urbon. “Due to our high fixed costs, we were not able to respond to the significant decline in demand in Europe fast enough. Demand in Germany almost halved last year as a result of political decisions.

“For the current fiscal year, we are expecting a further decline in the installation of new PV systems in Germany. In addition, our result in 2014 was impacted by the losses of our Chinese subsidiary Zeversolar and considerable one-time items. We are planning extensive transformation measures to generate profits from sales of only €700 million.”

This transformation includes the loss of 1,600 staff, as previously announced by the company.

“While the personnel adjustments are extremely painful for SMA, they are unfortunately necessary to return to profitability,” Urbon said.

The one consolation for SMA is that as Urbon said it had sufficient cash, €225.4 million, and an equity ratio of 47% to be able to finance the planned restructuring from its own reserves.

2015 guidance

Looking into 2015, SMA guided sales of €210million-230 million in the first quarter, up from €176.3 million in the first quarter of 2014, and an EBIT of between €-5 million to €-10 million. However, it said overall sales for the year would fall still further on 2014's, to between €730 million and €770 million owing to an ongoing decline in demand, particularly in Germany.

The company expects to cut its operating loss in the 2015 fiscal year to between €-30 million and €-60 million before returning to positive operating earnings in 2016.

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