SMA sees half-year sales drop 45% as losses grow

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German inverter manufacturer SMA Solar Technology AG on Thursday reported a 45% decline in half-year sales to €461.5 million as PV inverter shipments fell to 2.5 GW from 4 GW in the first six months of 2012 in a market environment the company said was "characterized by increasing competitive pressure and a considerable price slump."

The group posted an operating loss of €16.2 million in the period compared to a profit of €59.4 million in the first half of 2012.

Like other German solar companies, SMA has sought to expand operations in foreign markets in view of its dramatically shrinking domestic business. The international share of its total sales increased to 67.4% from 53.7% a year ago. SMA said its most important foreign markets in the first half of the year included the United States, Japan, Australia and Thailand.

In Europe, the company enjoyed positive business in Eastern European markets, Benelux and Britain, but added that overall demand continued to lag substantially in Europe due to dramatic changes to subsidy conditions, particularly in Germany and Italy, the unresolved financial crisis and the possible introduction of punitive duties on Chinese PV modules.

SMA managed to considerably narrow its loss before interest and tax to €23.3 million in the first half of 2013 from €83.7 million a year ago. The figure includes expenses for personnel adjustments of €15 million and corresponds to an operating margin of -5%, down from 10% in the first half of 2012.

The company saw a boost in the second quarter of the year after reducing costs and increasing productivity, resulting in a profit before interest and tax (adjusted for expenses for personnel adjustments) of some €200,000. It was not enough to compensate for the earning slump in the first quarter, however. The group’s operating loss reached €16.2 million between January and June, down from a €59.4 million profit in the first half of 2012.

"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,” the company said.

SMA CEO Pierre-Pascal Urbon said SMA would continue to invest in technology development to further lower manufacturing costs with entirely new product platforms. He added that the group would also pursue its globalization strategy to benefit from growing demand in photovoltaic markets outside Europe through a strong local presence.

Urbon said the slump in demand in Europe forced additional cost cutting measures and personnel cuts. "By implementing the different measures, we will sustainably improve our competitiveness," he said, adding that 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."

SMA’s managing board is adhering to its sales and earnings forecast for 2013 and expects revenue of €900 million to €1.3 billion and in terms of operating profit (adjusted for one-time items related to planned staff reductions), it predicts the company will break even at best, but cannot rule out making a loss.