SMA: Net loss grows in first nine months amidst declining orders

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German inverter maker SMA Solar Technology AG more than doubled its net loss in the first nine months of 2014 compared to the same period a year ago due in part to declining orders and high price pressure in the first half of the year, the company said on Thursday.

SMA’s consolidated net loss rose from €22 million in the first three quarters of 2013 to €54.1 million this year, while its operating loss (before interest and tax) grew from €30 million to €72.7 million.

The company’s sales dropped more than 22% to €549.3 million in the period. SMA attributed the revenue decline to "project delays in important foreign markets and a sharp reduction in demand in Europe as a result of a significant deterioration of subsidy conditions."

SMA said declining government support for PV affected Germany, Spain, Italy and Greece in particular. SMA also saw demand in Thailand decrease as a result of subsidy cuts and political unrest. While the company reported stronger demand in North and South America, it was not enough to offset weakening demand in other parts of the world. Nevertheless, SMA’s international share of sales increased from 69.3% last year to 72.1%.

SMA’s sales in the third quarter reached €208.1 million, a 16% drop compared to the same period last year, while net loss grew from €5.8 million to €9.16 million. With 1.3 GW of inverter output sold, the company was nearly on par with the third quarter of 2013.

From January to September 2014 as a whole, however, SMA could not reach the sales volume of the same period in 2013 due to the weak first half of the year. SMA sold 3.3 GW of PV inverters in the nine-month period compared to 4 GW a year ago – a decrease of 16.4%.

"The increase in demand in the third quarter was not as sharp as expected,” said SMA CEO Pierre-Pascal Urbon. He added that projects were postponed until the fourth quarter of 2014 and the next fiscal year. Furthermore, Urbon said commercial business in Europe deteriorated again compared to the first half of the year. “For the fourth quarter of 2014, we expect a better sales situation, which we can already discern in SMA’s high order backlog. Overall, the market for PV inverters will remain volatile and dominated by high price pressure.”

Urbon said SMA was following a strategy aimed at returning SMA to profitability in this market environment. With an equity ratio of almost 55% and net cash of around €225 million, SMA will be able to implement the required measures with its own resources, he added. The acquisition of Phoenix Solar’s European service portfolio, which was concluded last week, is an important component of that strategy, the chief exec said.

SMA’s management board confirmed its sales and earnings forecast for the whole year, predicting sales of between €850 and €950 million and, in “the best-case scenario,” break even in terms of operating earnings. At the lower end of the sales forecast, SMA execs anticipate a loss of some €45 million. The management board also expects commercial business to pick up as usual toward the end of the year.

Commenting on SMA’s figures, Cormac Gilligan, senior solar analyst at IHS Technology, noted that while SMA reported a third-quarter drop in PV inverter revenue of 16% compared to the same period in 2013.

Gilligan said, in contrast, IHS data — collected from all leading suppliers — indicated that the global solar PV inverter market grew by 10% in the third quarter of 2014 year on year.

“Global solar inverter industry growth has now exceeded SMA’s own performance in four out of the last five quarters, marking a considerable fall in market share for SMA,” Gilligan noted, adding the company nevertheless remained the industry’s largest supplier in the quarter.

Gilligan said IHS data showed that global industry revenues reached $1.9 billion in the third quarter of the year, an increase of nearly 10% year-on-year. Major growth drivers for the quarter were the United Kingdom, the Americas, China and Japan, which combined recorded an increase of $270 million compared to one year previously.