SMA Solar posts 2013 loss on Europe

SMA Solar results turned to a net loss in 2013 for the first time, as the world’s biggest manufacturer of PV inverters was unable to penetrate up-and-coming Asian markets fast enough amid a collapse of its European home market.

Although global demand for solar power systems jumped 25% to more than 40GW last year, SMA’s inverter sales volume fell to 5.4GW from 7.2GW in 2012. Together with high price pressure, that translated into a 36% drop in sales to €932.5m ($1.28bn) in 2013, SMA said.

With that, SMA was still the global number-one PV inverter supplier, holding a market share of 17%, according to IHS. That is down from close to 40% in 2009, however.

The Niestetal, Germany, based company said its international sales share rose to 71% from 56% a year earlier, but that wasn’t enough to make up for a dramatic 50% drop in the European market.

“In the key growth markets China and Japan, countries with high market entry barriers, SMA is still in the early stages of the market development process,” SMA said.

Earnings before interest and taxes (Ebit) turned to a €89.1m loss from a profit of €102m in 2012. Ebit included one-time items of €41m for inventory and accounts receivables write-downs, €25.1m for severance payments, as well as start-up losses of €15m for the Chinese subsidiary Zeversolar.

That pushed consolidated earnings down to a net loss of €66.9m, from a profit of €75.1m a year earlier.

“For the first time in the company’s history, we had to post a high annual net loss due to the dramatic decline in the European market,” says chief executive Pierre-Pascal Urbon.

“Despite this difficult situation, the SMA Managing Board has not reduced investments in technology development. Expenditure on development of future products was again at more than €100m.”

Next to the acquisition of Zeversolar, SMA also is trying to improve its competitiveness by its recently-announced cooperation with Danish engineering group Danfoss, which isaid in February will buy 20% of SMA’s outstanding shares and sell its complete inverter business to SMA.

SMA’s board expects a slight improvement in sales this year to a range of €1bn to €1.3bn.

That won’t come without much effort, though.

“In order to remain the number-one supplier, it is critical for SMA that it delivers on its promises of cost reduction and expansion into China, Japan and other emerging markets that will offer growth opportunities in the future,” analyst IHS said in a research note, adding that is expects China and Japan to account for 44% of PV installations in 2014 and 35% of inverter revenues.

“SMA currently has a very minor position in both of these markets,” IHS points out.

The analysts also stress that SMA’s Chinese unit Zeversolar remains a loss-making asset, while its newly formed relationship with Danfoss will enable savings through greater component purchasing power, but is unlikely to significantly improve technological advances that would bring further cost reductions.

Note: Update adds IHS comments