The Managing Board of SMA Solar Technology AG (SMA/FWB: S92) put on a very brave front in presenting their outlook for 2015 and outlining their cost reducing restructuring plan. SMA Solar, Germany’s largest solar company, expects to show a loss for the third year in a row. This announcement was the latest blow to the German PV industry, which seems to be struggling for its very survival.
“We expect to see high price pressure on the global photovoltaic market still in the coming years and a further decline in demand in Europe, particularly in Germany. By contrast, the non-European markets will develop positively. This means, that although the market measured in gigawatts will continue to grow in the medium term, we expect to see a global decline when measured in euros. To return to profitability in this environment, we want to make adjustments to SMA’s structures in line with the lower sales level. This is the only way that we can break even with reduced sales. In this context, global staff reductions are unfortunately unavoidable. We have already defined extensive measures that we will discuss with the Works Council over the next weeks,” said SMA Chief Executive Officer Pierre-Pascal Urbon. “However, the effects of these measures will not emerge until the second half of the year at the earliest, meaning that SMA will probably not yet return to profitability in the current fiscal year.”
The company said that it expects to return to a profit in 2016, helped by more than 160 million euros ($181 million) of cost reductions as a result of their restructuring plan which will result in the elimination of approximately 1,600 jobs by June 30, 2015.
Here are the highlights from their 2015 outlook and restructuring presentation:
- Germany has lost its pioneering role and accounts only for <5% of global demand (in 2010 this was 50%) in gigawatts. Since 2013, China has become the driving force of new installations with a global market share of roughly 25%.
- The relevance and share of the Chinese market will remain stable in future years. EMEA (Europe, Middle East & Africa), Americas and Asia/Pacific will each account for approximately 20-30% of global demand.
- restructuring measures that are intended to lower SMA’s break-even point to less than EUR700 million (U.S. $790 million) in the coming months.
- The decline in sales compared to the previous year is especially attributable to a further decline in demand in Europe and the high price pressure.
- SMA introduced a functional organization on January 1, 2015.
- SMA will implement flat hierarchies and lay-off of 50% of its managers world-wide.
- SMA will reorganize the R+D deparment to increase the efficiency and reduce cost.
- SMA will consolidate its global footprint and outsource non-core activities.
- Most of the restructuring measures are factored into the 2nd half of 2015.
- R+D expenditure will be limited to less than 10% of sales.
- Operating cash flow is expected to be negative.
Tracey is an accountant and entrepreneur with a passion for nature. This passion is what spurred her interest in renewable energy, and the rest is history as they say. Tracey is a principal in Energy Think Group, the publisher of Solar Thermal Magazine and Tek-Think. She is also the principal at Women's Financial Help Desk. She spends her free time in the outdoors with her horses and dogs. She loves to travel.