SMA posts considerable losses for 2014

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SMA Solar Technology, the world’s leading inverter manufacturer in terms of global revenue, suffered 13.6% losses in 2014 due to weak business in Europe, heavy price pressure in all other markets, and lower-than-expected growth in North America.

The Niestetal, Germany-headquartered firm posted sales of €805.4 million ($883.6 million) for the year, below 2013’s figures of €932.5 million ($1.02 billion). Operating earnings (EBIT) were negative €164.9 million (-$180.91 million) compared to -€89.1 million in 2013.

However, due to SMA’s high levels of net cash reserves (€225.4 million), financial stability remained sound, with a reasonably high equity ratio of 46.8% (2013: 57.5%). Nevertheless, the company is still set to carry through mass redundancies later this year, with around 1,600 members of staff set to be laid off by June as the board seeks to lower its costs for 2015.

SMA’s share of the global inverter market was approximately 20% in 2014, the company says, but in terms of investment worldwide, the market contracted by 10% year-on-year, with just 40 GW of new capacity added and price pressure impinging on bottom lines throughout the sector.

Weak demand in Germany saw SMA’s share of international sales increase, accounting for 76% of all sales (compared to 71% in 2013), with Japan, the U.K. and Australia important markets. North America remained SMA’s largest foreign market, but demand there was not of the level to offset falling domestic demand.

SMA’s EBIT margin came in at -20.5% – way down on 2013’s EBIT margin of -9.6%. The company claimed that this operating result includes the provisions for planned staff reduction (redundancy pay), further one-time items, and the €129.7 million losses incurred by its recently acquired subsidiary Zeversolar.

Pierre-Pascal Urbon, SMA’s CEO, said that the company is not satisfied with its business performance in 2014, blaming high fixed costs for its inability to respond to the significant decline in demand in Europe quickly enough.

"Demand in Germany almost halved in 2014 as a result of political decisions," said Urbon. "In addition, our result in 2014 was impacted by the losses of our Chinese subsidiary Zeversolar and considerable one-time items. We are planning extensive transformation measures to generate profits from sales of only €700 million. In this regard, SMA unfortunately needs to lay off approximately 1,600 full-time positions worldwide."

Urbon added that the fact SMA can realize the planned staff reduction without involuntary layoffs in a short period of time is a good result, stating that – while painful for SMA – such personnel adjustments are the only necessary step available on the path back toward profitability.

2015 guidance

Looking ahead to this year, SMA expects sales of between €210 million to €230 million in Q1 2015, up from €176.3 million in Q1 2014. Hence, the company anticipates business performance to be more robust, and Q2 to begin strongly thanks to an order backlog of more than €150 million already booked.

The board, therefore, predicts sales and earnings for the current fiscal year to reach between €730 million and €770 million, with a return to positive operating earnings (EBIT) on the cards for 2016.