SMA grows H1 inverter output to 3.9 GW but announces two fab closures, warns of tough price pressures in 2017

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SMA Solar Technology (SMA), the German inverter specialist ranked by IHS as the world’s market leader in terms of global revenue, today published first half (H1) 2016 financials revealing a 15.1% increase in sales year-on-year.

Over the first six months of the year SMA posted sales of €494.1 million ($550 million), up from €429.3 million for the same period in 2015. EBIT was also positive, at €39.3 million ($43.8 million), particularly when contrasted to last year’s figure, which limped in at €-14.9 million for the same period.

The firm ended H1 with high net cash of €294.1 million and an equity ratio of 49.2%, which was a slight improvement on H2 2015’s 49.1%, and further confirmation that the decision taken by the SMA board in 2015 to restructure its operations was a sound one.

Despite these across-the-board positives, the inverter leader is not content to rest on its laurels and identifies the persistent challenge to its dominance – particularly by China’s Huawei and Sungrow, as well as Israel’s SolarEdge – as likely to usher in further downward price pressures next year.

In preparation for more straitened times, SMA has announced it is to close its production locations in Denver, U.S., and Cape Town, South Africa, in an effort to "sustainably improve the cost structure by consolidating the global infrastructure". SMA told pv magazine that the closure of the Denver facility will mean the loss of around 280 full time positions, while a handful of roles will be lost in South Africa.

"Production will be transferred to Germany and China in order to increase the utilization of the existing plant," said Susanne Henkel of SMA’s corporate press department."Since our production plants are flexible, we do not assume additional capital expenditure in production or test equipment. Actually the opposite is true. Because we do not intend to produce the new Sunny Central product generation in Denver anymore, we can save the planned investments. SMA’s annual production capacity after the closures will be 10 GW, and we can adjust our production capacity up and down very quickly as we have an extremely flexible production concept including temporary workers."

"The acceleration of price pressure in the solar industry has been unexpectedly strong in recent weeks," said SMA CEO Pierre-Pascal Urbon. "We therefore immediately initiated measures to lower our break-even point even further. The closure of our production locations in Denver and Cape Town was extremely difficult for us. However, this step is unavoidable if we are to lastingly counteract the persistent price pressure and to achieve better production capacity utilization in China and Germany in the future."

The CEO added that the U.S. market remains "highly important" to the firm, and moved to confirm that its Rocklin, California presence will remain.

Internationalization has long been a calling card of SMA’s business strategy, as borne out by the fact the firm increased its international share of sales to 91.1% for H1 2016, up from 87.2% a year prior.

Globally, SMA added 3.9 GW of new inverter capacity in the first half of the year, an increase of 22% year-on-year, while its order backlog ticked upward to €644 million. Hence, an even stronger H2 is on the cards, prompting the management board to forecast annual 2016 sales somewhere in the region of €950 million to €1.05 billion ($1.05bn to $1.17bn), with EBIT coming in somewhere between €80-€120 million.

"The solar industry’s medium-term prospects are good for those companies emerging successfully from the consolidation phase," Urbon said in reference to SMA’s recent restructuring efforts. "The cost of solar power generated by PV systems will at last be at a similar level to that of onshore wind turbines before the end of the decade. This will mean entirely new growth prospects for highly flexible companies such as SMA."