SMA reduces 2014 guidance for second time, will increase layoffs

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The challenges facing German inverter giant SMA continue to mount with its latest announcement indicating that 2014 sales will come in well short of previous guidance. With the sales down between €75 million and €160 million on its most recently revised figures, it leaves SMA registering a loss of up to €115 million for the year – excluding provisions for staff reductions. Layoff provisions are estimated to cost the firm €45 million in 2014.

SMA had announced sales forecast downgrades in July from €1 billion to €1.3 billion, at which time it reported plans to cut jobs. It now says that it will layoff "significantly more than 600 employees worldwide by mid-2015."

SMA has indicated that the “accelerated decline” in its distribution business in Europe and delays in supplying U.K. projects for the significant downward revision of sales.

In an attempt to turn around losses, SMA reports that it will reduce development budgets by €80 million annually. Chinese subsidiary Zeversolar is also set for restructure.

“Our previous forecast was based on the assumption of a strong sales upturn toward the end of the year. Unfortunately, markets in Europe have not developed as well as expected,” said SMA CEO Pierre-Pascal Urbon.

The decision last month by the U.K. government to extend the deadline for grid connection for PV power plant projects, larger than 5 MW, was also cited for the decline in sales guidance. SMA reports this has pushed back delivery to a number of projects.

The U.K.’s Department of Climate Change (DECC) has pushed back the grace period for the grid connection of projects 5 MW and above to 31 March 2016. Projects qualifying for the extension will still receive renewable obligation (RO) payments. While this is intended only to apply projects for which grid connection was the only delay, SMA reports that it has pushed back sales.

“As a result of this [grace period change], a large number of projects will be delayed until 2015. In addition, distribution business has declined dramatically in Europe, particularly in Germany. This trend has not been reversed over the last months,” said SMA’s Urbon.

SMA says that “success already achieved in material cost reduction” cannot be registered in its 2014 financials. SMA reports that it expects to report liquidity in excess of €250 million at the end of the year with an equity ration of around 50%.

SMA has informed pv magazine that the job losses will occur on global basis, including at its German operations.

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