Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- SMA Solar Technology AG (SMTGF, Financial) reported strong performance in the Large Scale segment, with sales more than doubling to EUR536 million compared to the first six months of 2023.
- The company's order backlog remains robust at EUR1.35 billion, with a significant portion attributed to the Large Scale segment.
- SMA Solar Technology AG (SMTGF) has successfully launched new products and innovations, including the SMA eCharger and Sunny Central FLEX, which have been well-received in the market.
- The company has maintained a strong market presence in key regions, with the Americas' revenue share increasing significantly from 20% to 41%.
- SMA Solar Technology AG (SMTGF) is focusing on reducing inventories and improving cash flow, with a target to reduce inventories by EUR80 million to EUR100 million by the end of the year.
Negative Points
- Group sales for the first half of 2024 were slightly below the previous year, at EUR759 million compared to EUR779 million.
- EBITDA decreased significantly from EUR125 million in the first half of 2023 to EUR81 million in 2024, with a reduced EBITDA margin of 11%.
- The Home and C&I segments faced challenges, with Home Solutions EBIT at minus EUR22 million and C&I Solutions EBIT declining to minus EUR45 million.
- Free cash flow was negative at minus EUR203 million, driven by increased net working capital and reduced sales in Home and C&I.
- The company faces ongoing challenges with high inventory levels at distributors and installers, impacting sales in the Home and C&I segments.
Q & A Highlights
Q: Can you comment on the development of demand or order intake within the quarter, particularly in Home and C&I? Are there early signs of recovery?
A: Juergen Reinert, CEO: The Large Scale segment continues to see a good and constant high-level order intake. Home and C&I have improved from a negative to a positive point of view, with a change of nearly EUR100 million in order intake from Q1 to Q2. However, the market is still soft, and we expect this to continue for some products.
Q: Is there any update on your US manufacturing facility?
A: Juergen Reinert, CEO: We are currently evaluating the situation and are in the phase of deciding between contract manufacturing or own production. The US market is very important to us, but no final decision has been made yet.
Q: Can you comment on the procurement commitments and working capital management? Are you continuing production in Home Solutions and C&I?
A: Barbara Gregor, CFO: We are actively managing working capital and negotiating with suppliers. We aim to reduce inventories by EUR80 million to EUR100 million by year-end. Production is being adjusted to sell from inventory, focusing on maintaining strategic supplier relationships.
Q: What cost measures are being applied to address the pressure on operating earnings in Home Solutions and C&I?
A: Juergen Reinert, CEO: We are implementing stringent cost measures, including shifting resources to the Large Scale segment and reducing external resources and travel expenses. We are also reducing CapEx and R&D spending to stabilize the financial situation.
Q: What are the main drivers for the continued strong demand in the Large Scale segment?
A: Juergen Reinert, CEO: Our strategic focus on systems and solutions for grid stability and functionality is paying off. We have positioned ourselves well in the market, offering comprehensive solutions beyond just PV systems, which is driving demand.
Q: Can you provide an update on pricing and competition, particularly from China?
A: Juergen Reinert, CEO: The market is still saturated, and competition, especially from the Far East, is inclined to reduce prices to clear inventory. We are not heavily reducing prices but are focusing on sales strategies like cashback vouchers to enhance sales.
Q: Could you provide a free cash flow bridge for the remainder of the year?
A: Barbara Gregor, CFO: We expect to achieve EUR100 million in net cash by year-end, driven by a reduction in net working capital, positive EBITDA contributions, and reduced CapEx and R&D spending.
Q: Is the EBITDA guidance for the second half of the year overly cautious?
A: Barbara Gregor, CFO: There are uncertainties in the market, including potential inventory allowances and write-offs. We are taking a cautious approach to ensure our guidance is protected against external risks.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
