SMA Solar releases 2012 guidance: 50% below expectations

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PV inverter market leader, SMA Solar Technology, has provided 2012 guidance that has sent shockwaves through the investment community as revenue and margins are expected to take a significant nosedive. Management said in a statement that 2012 sales would be between €1.2 billion and €1.5 billion, while EBIT margin would be between 5-10%. SMA Solar reported preliminary 2011, full-year financial results in January of €1.7 billion in sales and EBIT of more than €240 million. The mid-point of the guidance, which the company had previously declined to provide due to uncertainty in the market, will represent over a 20% decline in revenues and a 60% fall in EBIT.

The company claimed that: “the radical reduction in subsidies, particularly in Germany, will lead to lower demand for medium to large-scale PV plants. At the moment, it cannot be predicted whether Asian and American markets can fully compensate for the decline. SMA will continue to pursue its 2012 internationalization strategy and invest even more into technology development.”

However, SMA management have consistently said that they would not be entering the China market, which grew to around 2GW in 2011 and is projected to grow even faster in 2012. The market could even be as high as 5GW, according to market research firms and some Chinese PV manufacturers.

In a conference call last week, PV inverter rival Satcon said there is an estimated 14GW of utility-scale projects under development in China.

Management also cited the drastic fall in prices that has led to PV plants costing 60% less since 2008 as being a reason for the surprise figures. Margins have come under intense pressure as inverters take up a larger percentage of the installed cost following the steep decline in module prices. Also impacting SMA Solar is increasing competition across the residential, commercial and utility-scale sectors, resulting in market share losses.

“The success of the energy revolution depends on technologies for managing decentralized energy production and integrating energy storage solutions. By focusing on strategic areas such as energy management and grid integration at an early stage, SMA is currently able to offer solutions that can meet demands of the future,” commented Pierre-Pascal Urbon, speaker of the Managing Board and CFO. “Our expertise allows us to play an active role in ushering in the global energy revolution. It not only helps us stand apart from the competition, but also allows us to lower system costs.”  

SMA said that it would invest over €100 million in research and development to remain a technology and market leader and said that it would increase its sales in all business areas over the coming years; however, the drastic changes in different incentive programs and markets dynamics means it is difficult to accurately predict the future for the company.

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