SMA Solar details transformation plan as sales continue to decline

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Major PV inverter manufacturer SMA Solar said that its 2015 sales would continue to decline, guiding sales of between €730 million to €770 million. 

The company provided guidance at its Capital Markets Day in the same week it announced 1,000 new job cuts, a prediction that 2014 sales would be in the region of €790 million and a loss approaching €115 million. 

SMA Solar expects losses to continue through the year and guided EBITDA losses between €30 million to €60 million in 2015. 

However management noted that losses would be partially determined by the speed at which its planned transformation measures were implemented.

Transformation measures 

Key to the transformation measures would seem to be a swathe of cost-cutting measures, which include the 34% headcount reduction. Management said the cost-cutting measures would be implemented in the coming months and were planned to bring SMA’s financial breakeven point to €700 million by saving the company more than €160 million on an annual basis. 

Currently, SMA said that its fixed cost base was €407 million, with plans to reduce that to €245 million by the end of 2016. 

Measures are widespread and impact nearly all areas of its operations. 

Technology headcount reductions are severe. SMA said that around half (550) of the 1,050 full-time technology jobs would be slashed, resulting in the downsizing of its technology operations located in Kassel, Germany, Denver, US and Suzhou, China. 

In respect specifically to its important R&D activities, SMA noted that it would reorganise the R&D department with emphasis on improved efficiency and cost reduction. No further details were provided.

Within its operations segment, SMA expects to reduce headcount from around 2,030 to 1,480. The company plans to outsource what it described as non-core activities and streamline the management hierarchy with the phasing-out of ‘interim’ managers. 

The company expects to implement a ‘flat hierarchy’ with the loss of around 50% of existing management positions worldwide. 

The administration segment is to lose over half its positions. Headcount is planned to be reduced from 630 to 350, which includes the restructuring of the CFO and CEO functions, though details were not provided. The company said it would also centralise administration functions.

Within its sales and marketing segment the current headcount of 450 will be reduced to 260, mainly from the reduction in ‘back office staff’. However, costs will be curtailed on downsizing market and communications as well as the closure of some subsidiaries. The number of sales offices would be reduced from 19 to 16.

SMA also highlighted that its service segment would not be immune to the headcount reductions, but due to its overall importance to long-term revenue and the difficulty in downsizing such operations as SMA is a global provider, job losses will only amount to 80, with 430 remaining.

However, the number of service facilities would be reduced from 25 to 21, SMA added.

With respect to other facilities, SMA said that it would retain its three string inverter manufacturing facilities, while reducing central inverter manufacturing to one facility, down from three. 

Logistics centres would be reduce from 51 to 33. 

Overall, headcount reductions in Germany are expected to total 1,300 and be accompanied by 300 job losses from overseas operations. This would result in a workforce of 1,800 in Germany and 1,270 in overseas territories, highlighting the impact of the decline in the German PV market in the last couple of years.

The company said that the transformation measures outlined would be monitored by a special project management office and that 98% of the planned restructuring was already deemed to be ‘measurable tasks’.

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