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SMA Solar Technology AG
Quarterly Report • May 8, 2024
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Quarterly Report
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Quarterly Statement
January to March 2024 | SMA Solar Technology AG
SMA Solar Technology AG at a glance
| SMA Group | Q1 2024 | Q1 2023 | Change | Full year 2023 |
|
|---|---|---|---|---|---|
| Sales | € million | 361.8 | 367.2 | –1.5% | 1,904.1 |
| Export ratio | % | 67.9 | 59.3 | 63.4 | |
| Inverter output sold | MW | 4,253 | 3,236 | 31.4% | 20,454 |
| Capital expenditure 1 | € million | 21.9 | 17.1 | 28.1% | 95.1 |
| Depreciation | € million | 11.7 | 9.6 | 21.9% | 41.5 |
| EBITDA | € million | 49.9 | 60.0 | –16.8% | 311.0 |
| EBITDA margin | % | 13.8 | 16.3 | 16.3 | |
| Net income | € million | 28.5 | 51.7 | 225.7 | |
| Earnings per share 2 | € | 0.82 | 1.49 | 6.50 | |
| Employees 3 | 4,518 | 3,786 | 19.3% | 4,377 | |
| in Germany | 3,144 | 2,665 | 18.0% | 3,039 | |
| abroad | 1,374 | 1,121 | 22.6% | 1,338 |
| SMA Group | 2024/03/31 | 2023/12/31 | Change | |
|---|---|---|---|---|
| Total assets | € million | 1,656.3 | 1,621.9 | 2.1% |
| Equity | € million | 715.3 | 686.2 | 4.2% |
| Equity ratio | % | 43.2 | 42.3 | |
| Net working capital 4 | € million | 463.7 | 392.1 | 18.3% |
| Net working capital ratio 5 | % | 24.4 | 20.6 | |
| Net cash 6 | € million | 241.6 | 283.3 | –14.7% |
1 Investments including additions of rights of use in accordance with IFRS 16
2 Converted to 34,700,000 shares
3 Reporting date; including trainees and learners; excluding temporary employees
4 Inventories and trade receivables minus trade payables and liabilities from advanced payments received for orders
5 Relating to the last twelve months (LTM)
6 Total cash minus interest-bearing financial liabilities to banks
CONTENT
ECONOMIC REPORT
FORECAST REPORT
- Preamble
- The general economic situation
- Future general economic conditions in the photovoltaics sector
- 9 Overall statement from the Managing Board of SMA Solar Technology AG on expected development of the SMA Group
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
- Income statement SMA Group
- Statement of comprehensive income SMA Group
- Balance sheet SMA Group
- 13 Statement of cash flows SMA Group
- Statement of changes in equity SMA Group
- Financial ratios by segments and region
ECONOMIC REPORT
Results of operations
Sales and earnings
SALES AND PROFITABILITY REMAIN AT A GOOD LEVEL
The SMA Group's sales from January to March 2024 amounted to €361.8 million and were thus roughly at the previous year's level (Q1 2023: €367.2 million). In the reporting period, inverter output sold amounted to 4,253 MW (Q1 2023: 3,236 MW). In the Large Scale & Project Solutions segment, sales almost doubled compared with the previous year, resulting in a correspondingly strong improvement in the segment's EBIT.
The SMA Group is well positioned internationally and generates sales in all relevant regions. In the reporting period, the company generated 56.0% of external sales in European countries, the Middle East and Africa (EMEA), 30.3% in the North and South American (Americas) and 13.7% in the Asia-Pacific (APAC) region calculated before sales deductions (Q1 2023: 72.9% EMEA, 22.4% Americas, 4.7% APAC). The main markets for SMA in the reporting period were Germany, the U.S., the UK and Italy.
The Large Scale & Project Solutions segment made the largest contribution to sales in the first quarter of 2024, accounting for 63.2% (Q1 2023: 33.7%). The Commercial & Industrial Solutions segment generated 19.5% of the SMA Group's sales, while the Home Solutions segment generated 17.3% (Q1 2023: 21.8% Commercial & Industrial Solutions, 44.5% Home Solutions).
As of March 31, 2024, the SMA Group had a solid order backlog of €1,467.8 million (March 31, 2023: €2,468.2 million). At €1,102.3 million, three-quarters of this is attributable to product business (March 31, 2023: €2,097.2 million). The order backlog in the service business amounts to €365.5 million (March 31, 2023: €371.0 million). The order backlog in the service business will come in particular from extended warranties against payment over a period of five to ten years.
In the reporting period, earnings before interest, taxes, depreciation and amortization (EBITDA) fell to €49.9 million (EBITDA margin: 13.8%; Q1 2023: €60.0 million; 16.3%), partly due to the product mix and planned cost increases. Earnings before interest and taxes (EBIT) decreased to €38.2 million (Q1 2023: €50.4 million). This equates to an EBIT margin of 10.6% (Q1 2023: 13.7%). Net income amounted to €28.5 million (Q1 2023: €51.7 million) and includes the income from the sale of the shares in elexon GmbH of €19.1 million. Earnings per share thus amounted to €0.82 (Q1 2023: €1.49).
Sales and earnings per segment
SALES AND EARNINGS IN THE HOME SOLUTIONS SEGMENT DOWN DUE TO NORMALIZATION OF THE SUPPLY CHAIN
In the Home Solutions segment, SMA serves the key photovoltaic markets worldwide (excluding China) and offers integrated solar energy solutions for private users. The new SMA Home Energy Solution comprises systems for the generation, storage and management of solar energy as well as for heating or charging purposes. The system is supplemented by various components such as hybrid inverters, battery storage systems, heat pump connections, wallboxes and an AI-based intelligent energy management system. The ennexOS energy management platform interconnects the various energy sectors and provides the basis for linking the sectors, thus enabling maximum efficiency and functionality. Taking comprehensive data protection standards into account, the system can be adapted to individual customer needs thanks to its modular design. In addition to the single-phase Sunny Boy Smart Energy hybrid inverter, the modular SMA Home Storage battery and the Sunny Home Manager 2.0 for intelligent energy management, the Home Solutions segment is delivering the next generation of the Wallbox Home EV Charger with the eCharger. Communication products, accessories, warranties, spare parts and modernization services (repowering) to increase system performance and service life as well as digital energy services complete the extensive offering.
In the first quarter of 2024, external sales in the Home Solutions segment fell by 61.7% to €62.6 million (Q1 2023: €163.3 million) due to the normalized supply situation combined with high inventories at distributors. Its share of the SMA Group's total sales was 17.3% (Q1 2023: 44.5%). The EMEA region made up 92.4% (Q1 2023: 94.5%) of gross sales, the Americas region 6.3% (Q1 2023: 3.9%) and the APAC region 1.3% (Q1 2023: 1.6%).
Earnings before interest and taxes (EBIT) deteriorated year on year to –€3.6 million (Q1 2023: €50.3 million) due to the decline in sales. In relation to external sales, the EBIT margin was –5.8% (Q1 2023: 30.8%). This is currently only a temporary effect because end-customer demand for Home Solutions products remains particularly high and earnings will stabilize accordingly over the course of the year.
COMMERCIAL & INDUSTRIAL SOLUTIONS SEGMENT DOWN SLIGHTLY DUE TO NORMALIZATION OF THE SUPPLY CHAIN
In the Commercial & Industrial Solutions segment, the focus is on global markets for commercial PV systems with and without energy management, battery storage and electric vehicle charging solutions. The SMA Commercial Energy Solution, featuring ideally matched hardware, software, tools and services, gives commercial enterprises and the real estate industry the option of producing, storing and selling solar power themselves, organizing their companies' energy flows in a transparent and cost-efficient way as well as charging and managing electric vehicle fleets efficiently and sustainably. The solutions comprise the three-phase string inverters of the Sunny Tripower product family with outputs of 12 kW and up to 110 kW, storage solutions for commercial and island applications in the Sunny Tripower Storage and Sunny Island product families as well as holistic energy management solutions for commercial integrated energy. Solutions for charging management and billing of electric vehicle fleets on the basis of the ennexOS platform are implemented together with the subsidiary company coneva. As a SaaS provider for intelligent energy management, coneva connects all energy-related sectors, optimizing energy flows and making them transparent. The product offering is rounded off by integrated services and digital services along the product life cycle, starting with the planning of a custom energy solution and including the commissioning of the systems and operational system management right through to system repowering and expansion.
SMA Solar Technology AG // Quarterly Statement January to March 2024
External sales in the Commercial & Industrial Solutions segment fell to €70.5 million in the first quarter of 2024 (Q1 2023: €80.2 million) due to the normalized supply situation combined with high inventories at distributors. Its share of the SMA Group's total sales was 19.5% (Q1 2023: 21.8%). 80.8% of gross sales were attributable to the EMEA region, 11.7% to the Americas region and 7.5% to the APAC region (Q1 2023: 77.4% EMEA, 14.6% Americas, 8.0% APAC).
Operating earnings before interest and taxes (EBIT) amounted to –€18.2 million in the first quarter of 2024 (Q1 2023: –€1.2 million) and were below the previous year's level, driven by the decline in sales, reduced utilization and corresponding lack of fixed cost degression. In relation to external sales, the EBIT margin was –25.8% (Q1 2023: –1.5%). As in our Home Solutions segment, this is currently only a temporary effect because end-customer demand for Commercial & Industrial Solutions products remains high, and earnings will stabilize accordingly over the course of the year.
LARGE SCALE & PROJECT SOLUTIONS SEGMENT SIGNIFICANTLY INCREASES SALES AND EARNINGS
The Large Scale & Project Solutions segment offers products, systems and solutions for industrial solar, storage and hydrogen projects as well as for the conversion of utility grids to a higher proportion of renewable energy. These are complete solutions, including turnkey medium-voltage stations, for international markets that perform optimal grid service and monitoring functions on the basis of central and string inverters and system controllers. The offering is complemented by services such as repowering, engineering services, operation and maintenance as well as customized solutions for individual customer requirements. Grid stability and grid reliability are becoming increasingly important as the energy mix is transitioned from conventional to renewable energies. The Large Scale & Project Solutions segment is addressing these challenges with grid-forming solutions in combination with large-scale storage systems. These systems enable numerous additional services, such as energy arbitrage, black starts, frequency control, inertia, stability services and system restoration.
External sales in the Large Scale & Project Solutions segment increased by 84.9% to €228.7 million in the first quarter of 2024 (Q1 2023: €123.7 million). All regions recorded double-digit growth, with the Large Scale & Project Solutions segment accounting for 63.2% of the SMA Group's total sales (Q1 2023: 33.7%). The Americas region made up 42.8% (Q1 2023: 53.0%) of gross sales, the EMEA region 38.1% (Q1 2023: 40.3%) and the APAC region 19.1% (Q1 2023: 6.7%).
Operating earnings before interest and taxes (EBIT) improved to €41.3 million (Q1 2023: €2.3 million) in line with the high level of sales and fixed cost degression. The increase in sales and the profitable product mix contributed to this. In relation to external sales, the EBIT margin was 18.1% (Q1 2023: 1.9%).
Development of significant income statement items
SALES AND PROFITABILITY REMAIN AT A GOOD LEVEL
Cost of sales increased by 5.5% year on year to €266.9 million (Q1 2023: €252.9 million). The main reasons for the increase are a change in the product mix, this year's pay rise and last year's increase in personnel in all functional areas. In the reporting period, the gross margin was 26.2% (Q1 2023: 31.1%). SMA is continuously working on cost optimization of existing products and the introduction of new, more cost-effective products in all segments.
Personnel expenses included in cost of sales increased by 19.6% to €47.6 million in the reporting period (Q1 2023: €39.8 million). This was due to an increase in personnel driven by greater production volumes and cost increases in remuneration, among others. Material costs amounted to €194.3 million (Q1 2023: €190.5 million).
From January to March 2024, depreciation and amortization included in cost of sales amounted to €10.2 million (Q1 2023: €8.3 million). This comprises scheduled depreciation on capitalized development costs of €3.9 million (Q1 2023: €2.0 million). Other costs increased to €14.8 million (Q1 2023: €14.3 million).
Selling expenses rose to €34.1 million (Q1 2023: €29.4 million), primarily due to the increase in personnel as a result of the expansion of business and the pay rise. The cost of sales ratio was 9.4% in the reporting period (Q1 2023: 8.0%).
Research and development expenses, excluding capitalized development costs, amounted to €23.4 million in the first quarter of 2024 (Q1 2023: €12.7 million). The ratio of the research and development expenses amounted to 6.5% (Q1 2023: 3.5%). Total research and development expenses, including capitalized development costs, were above the previous year's level at €33.5 million (Q1 2023: €22.2 million). Development costs were capitalized amounting to €10.1 million in the reporting period (Q1 2023: €9.5 million).
General administrative expenses totaled €20.9 million in the first quarter of 2024 (Q1 2023: €14.1 million). The ratio of administrative expenses amounted to 5.8% in the reporting period (Q1 2023: 4.7%).
The balance of other operating income and expenses resulted in a positive effect on earnings of €21.7 million in the reporting period (Q1 2023: –€4.7 million). The positive result is mainly due to the sale of the shares in elexon GmbH in January 2024 amounting to €19.1 million. This balance also comprises expenses and revenue from the rental of own buildings, for financial assets measured at fair value through profit or loss, as well as expenses from the recognition and income from the reversal of specific valuation allowances on receivables. Furthermore, it includes effects from exchange rate differences, foreign currency valuation and foreign currency hedging.
Financial position
Gross cash flow reflects operating income prior to commitment of funds. Compared with the previous year, it decreased in the first quarter of 2024 to €51.1 million (Q1 2023: €75.6 million).
In the first three months of the reporting year, net cash flow from operating activities amounted to –€43.6 million (Q1 2023: €65.1 million). The main driver here was the further increase in inventories to ensure delivery capability for expected and already agreed customer projects. This development was offset by a reduction in accounts payable due to the currently more restrictive purchasing policy.
At €685.5 million, inventories were significantly higher than at the end of the previous year (December 31, 2023: €559.1 million) due to strategic stockpiling. The balance of accounts receivable decreased by –€53.4 million compared with the end of the previous year. Together with the decrease in the balance of accounts payable by –€14.3 million and an increase in liabilities from advance payments received by €16.0 million, this led to a significant increase in net working capital compared with the end of the previous year (March 31, 2024: €463.7 million, December 31, 2023: €392.1 million). At 24.4%, the net working capital ratio in relation to sales over the past 12 months was higher than the figure at the end of the previous year (December 31, 2023: 20.6%) and was thus above the range of 19% to 23% targeted by management.
In the first quarter of 2024, cash flow from investing activities amounted to €38.5 million after –€15.1 million in the previous year. This was significantly influenced by the sale of long-term securities amounting to €41.2 million. In addition, the sale of the shares in elexon GmbH in January 2024 made a positive contribution with a cash inflow of €18.2 million. The outflows of funds for investments in property, plant and equipment and intangible assets amounted to €20.4 million in the reporting period (Q1 2023: €15.2 million). At €10.1 million (Q1 2023: €9.5 million), capitalized development costs accounted for a large part of these investments.
As of March 31, 2024, cash and cash equivalents totaling €211.7 million (December 31, 2023: €219.4 million) included cash on hand, bank balances and short-term deposits with an original term to maturity of less than three months. Net cash is made up of cash and cash equivalents as well as of time deposits that have a term to maturity of more than three months, fixedinterest-bearing securities and liquid assets pledged as collateral minus interest-bearing financial liabilities to banks. This decreased to €241.6 million as of March 31, 2024 (December 31, 2023: €283.3 million).
Investment analysis
SMA Solar Technology AG // Quarterly Statement January to March 2024
In the first quarter of 2024, investments in property, plant and equipment (including additions from rights of use under IFRS 16) and intangible assets amounted to €21.9 million and were thus above the previous year's figure of €17.1 million. The investment ratio increased to 6.1% (Q1 2023: 4.7%) due to the almost unchanged sales level compared with the first quarter of the previous year.
€10.0 million was invested in property, plant and equipment (Q1 2023: €4.6 million). The investment ratio for property, plant and equipment was 2.8% in the first quarter of the fiscal year (Q1 2023: 1.3%). Additions of rights of use under leases amounted to €1.5 million (Q1 2023: €1.9 million). Depreciation of property, plant and equipment, including depreciation of rights of use under leases, totaled €7.4 million (Q1 2023: €7.1 million).
Investments in intangible assets totaled €10.3 million (Q1 2023: €10.5 million). These largely related to capitalized development costs. Amortization of intangible assets amounted to €4.3 million and was thus slightly above the previous year's figure of €2.5 million.
Net assets
Total assets went up by 2.1% to €1,656.3 million as of March 31, 2024 (December 31, 2023: €1,621.9 million). At €437.7 million, non-current assets were also above the value observed at the end of 2023 (December 31, 2023: €428.2 million).
Compared to the end of 2023, net working capital significantly increased to €463.7 million (December 31, 2023: €392.1 million). This put the net working capital ratio in relation to sales over the past twelve months at 24.4%. Trade receivables decreased by 13.3% compared to December 31, 2023, to €224.3 million as of the end of the first quarter of 2024 (December 31, 2023: €277.4 million). Days sales outstanding came to 48.2 days and were above the value at the end of the previous year (December 31, 2023: 41.3 days). Inventories grew to €685.5 million (December 31, 2023: €559.1 million) as a result of strategic stockpiling to ensure delivery capacity. Trade payables decreased by €14.3 million to €289.5 million (December 31, 2023: €303.8 million). At 17.5%, the share of trade credit in total assets was slightly lower than at the end of the previous year (December 31, 2023: 18.7%).
As a result of the positive quarterly results, the SMA Group's equity capital base increased to €715.3 million (December 31, 2023: €686.2 million). With an equity ratio of 43.6% (December 31, 2023: 42.3%), SMA continues to have a solid equity capital base.
FORECAST REPORT
Preamble
The Managing Board's forecasts include all factors with a likelihood of impacting business performance that were known at the time this report was prepared. Not only general market indicators but also industry- and company-specific circumstances are factored into the forecasts. All assessments cover a period of one year.
The general economic situation
Slow recovery of the global economy – Pace varies greatly from country to country
The International Monetary Fund (IMF) has revised its guidance for global economic growth upward slightly. Compared with the forecast in January (3.1%), the IMF now expects in its World Economic Outlook from April that global growth this year will be on a par with the previous year at 3.2% (2023: 3.2%). The reasons for this are the continued high resilience of the global economy, stable growth and the further decline in inflation.
One of the main drivers of global economic growth is the U.S., which is performing significantly better than expected. The growth forecast for this year was revised upward by 0.6 percentage points compared with January to 2.7% (2023: 2.5%). Private consumption remains high here, and the situation on the labor markets is good. Germany remains at the bottom of the G7 industrialized nations. For the current year, the IMF forecasts economic growth of just 0.2% as opposed to 0.5% in January (2023: –0.3%). The experts expect growth of 0.8% for the eurozone (2023: 0.4%).
Overall, global economic growth remains historically weak. This is due to short-term factors such as higher interest rates on loans, weak productivity growth and increasing geo-economic fragmentation as well as the ongoing impact of the war in Ukraine or the pandemic.
The IMF expects a global rate of price increases of an average of 5.9% in 2024, 0.1 percentage points higher than was forecasted as recently as January. The industrialized countries will reach their inflation targets faster than the developing and newly industrialized countries.
Risks that could slow down growth include recent price increases due to geopolitical tensions, which could lead to permanently higher key interest rates and, in turn, weaken private consumption and corporate investment.
Future general economic conditions in the photovoltaics sector
Solar energy to become largest source of energy supply 1
Greater efforts to expand renewable energies are widely regarded as the central pillar in the response to climate change. Politicians are taking account of this with action plans, such as the European Green Deal, to achieve climate neutrality within the EU by 2050 and by appointing top-class teams of experts to tackle climate change, like the U.S. government is doing. These attitudes will expedite expansion of renewable energies over the coming years and decades. The analysis company Wood Mackenzie describes the solar industry as "highly investable" because it is increasingly able to meet both economic and political targets. 2
The International Energy Agency (IEA) emphasizes the major role of solar energy in combating the climate crisis: In their "Net Zero by 2050 – A Roadmap for the Global Energy Sector" study, it is described that by 2050 the global energy supply will need to be based largely on renewables, with solar energy as the single largest source of supply. The Potsdam Institute for Climate Impact Research (PIK) forecasts that green electricity could cover threequarters of global energy use in the long term, given a consistent climate policy.
1 Source: IEA "Net Zero by 2050 – A Roadmap for the Global Energy Sector" 2 Source: Wood Mackenzie "Total eclipse: How falling costs will secure solar's dominance in power 2021"
In this context, the electrification of other sectors, such as mobility and heat, and the production of green hydrogen will additionally drive electricity demand as further important elements in achieving climate protection targets. In their Energy Transition Outlook 2023, the experts of the consulting company DNV predict that electricity's share in global total energy demand will increase from 19% in 2022 to 35% in 2050. The share of renewable energies in global power generation will also rise from about 31% currently to more than 80%. Solar energy will account for half of this. Connectivity and fast demand response through flexible storage will become crucial success factors for a decarbonized power system with a high share of fluctuating renewable energies.
According to Bloomberg New Energy Finance's New Energy Outlook 2022, global CO2 emissions will need to drop by an average of 6% per year to realize the goal of global climate neutrality by 2050. Decarbonizing the power sector will require such actions as trebling the current level of new PV capacity installations. Global investment in climate-friendly technologies for power generation and storage would need to increase to a total of about \$35 trillion to achieve the goal of climate neutrality by 2050.
Along with climate change targets, further decreases in levelized costs of electricity are contributing to the anticipated growth of solar and wind energy. According to the PIK, the cost of solar power generation has fallen by 85% over the past ten years and further cost reductions can be expected in the future thanks to rapid technological progress. The experts at Bloomberg New Energy Finance classify newly installed wind or PV power plants to be already the most cost-effective form of electricity generation in almost all major markets. These markets cover two-thirds of the world's population, about 77% of global GDP and 91% of total power generation. Moreover, in a growing number of countries, including China, India and a large part of Europe, it is now more cost-effective to build new renewable energy capacity than to operate existing coal- and gas-fired power plants.
In addition to the gradually decreasing consumer cost electricity from PV systems, their decentralized and local generation can be combined very well with battery storage systems. The combination of photovoltaics and storage systems is therefore particularly attractive for private, commercial and industrial consumers. DNV's experts see photovoltaics combined with battery storage systems as a separate power plant category that can supply electricity reliably and on demand, just like conventional power plants. According to their projections, combined PV and storage power plants will have a storage capacity of more than 20 TWh by 2050, accounting for around two-thirds of the world's electricity storage capacity.
SMA Solar Technology AG // Quarterly Statement January to March 2024
In the energy system of the future, cutting-edge communication technologies and services for cross-sector energy management will represent key building blocks for the modernization and expansion of the power grid infrastructure. In its World Energy Outlook 2022, the IEA states that, in conjunction with the increasing electrification of the transportation and heating sectors through renewable energies, modern utility grids and smart energy management, there is great potential to sustainably reduce both the high electricity costs and CO2 emissions.
The SMA Managing Board is therefore convinced of the market appeal and has thus positioned SMA to ensure it benefits from future developments in the fields of photovoltaics and storage technologies as well as in the markets for e-mobility, digital energy services and green hydrogen production, which experts predict will experience exponential growth in the future.
Global PV installations remain roughly at the previous year´s level at over 368 GW
The Managing Board of SMA Solar Technology AG anticipates growth in newly installed PV power worldwide of approximately 368 GW to 384 GW in 2024 (2023: 374 GW). The Managing Board estimates that global investments in system technology for traditional photovoltaic applications will decrease by around 7%. Investments in system technology for storage applications (excluding investments in batteries) will rise by approximately €500 million to €600 million compared to the previous year. Overall, the Managing Board therefore expects investments in PV system technology (including system technology for battery storage systems) of around €16.1 billion to €17.7 billion in 2024 (2023: €17.4 billion). The expected market development is subject to an undisturbed delivery situation.
Demand in EMEA at least at previous year's level
For the Europe, Middle East and Africa (EMEA) region, the Managing Board of SMA Solar Technology AG expects an increase in newly installed PV capacity of around 72 GW to 76 GW in 2024 (2023: 72 GW). In addition to growth in the countries in the Middle East and Africa, this is also due to the positive development in European markets, such as France, the UK and in North and East European markets. According to SMA estimates, investments in PV and storage system technology will be at approximately €5.2 billion to €5.6 billion (2023: €5.7 billion). In Europe, new programs for targeted support for climate change mitigation technologies (e.g., REPowerEU) are creating new investment incentives. The photovoltaic market is expected to benefit significantly from this in the medium term.
In many European countries, particularly in Germany, the UK and Italy, battery storage systems are becoming increasingly important because, together with renewable energies, they further improve independence from traditional energy sources. Self-consumption of solar power is a particularly attractive option for the operators of these systems.
In addition to business involving new systems for consumption of self-generated energy, retrofitting of existing systems with new inverters and storage systems will yield high potential in the medium term. For traditional PV markets such as Germany, Italy, the UK and Australia, government subsidization for PV systems will end in the coming years, as the maximum subsidy duration has been reached.
Americas region continues to grow
For the Americas region, the Managing Board of SMA Solar Technology AG anticipates growth in newly installed PV power to approximately 55 GW to 59 GW (2023: 52 GW). Roughly between 35 GW and 37 GW of this amount is attributable to the North American markets. The U.S. market in particular is currently exhibiting a dynamic environment. The Inflation Reduction Act (IRA) passed by the U.S. Congress in August 2022 includes a long-term extension of the Investment Tax Credit (ITC) for PV systems and, with the Production Tax Credit (PTC), will additionally create significant overall investment incentives for climate change mitigation technologies. The photovoltaic market is also expected to benefit significantly from these positive factors in the medium term. Inverter technology investments are expected to amount to around €4.1 billion to €4.5 billion in the Americas region (2023: €4.1 billion).
Investments in the Asia-Pacific region at previous year's level
The most important markets in the APAC region include China, India, Japan and Australia. In Japan and Australia, the installation of PV systems combined with battery storage systems to supply energy independently of fossil energy carriers offers additional growth potential. In China, the Managing Board expects PV installations to consolidate at a high level of 202 GW to 206 GW in 2024 (2023: 217 GW). Investments in inverter technology are expected to decrease to approximately €5.1 billion to €5.5 billion (2023: €5.8 billion). For the APAC region, excluding China, the SMA Managing Board expects newly installed PV power to grow to around 39 GW to 43 GW in 2024 (2023: 33 GW). This growth is in particular attributable to the positive development in India. The Managing Board of SMA Solar Technology AG expects investments of approximately €1.7 billion to €2.1 billion in inverter technology for the region as a whole (2023: €1.8 billion).
Growth markets: energy management, digital energy services and operational management
The trend to decentralize power supplies is progressing. More and more households, cities and companies are making themselves less dependent on unsustainable, imported energy sources and rising energy costs by having their own PV systems. This will lead to a rise in demand for energy storage solutions in the residential, commercial and industrial sectors. Plus, energy will be increasingly distributed via smart grids to manage electricity demand, avoid consumption peaks and take the strain off utility grids. E-mobility is also expected to become an essential pillar of these new energy supply structures. Integration of a prospectively large number of electric vehicles will help increase self-consumption of renewable energies and offset fluctuations in the utility grid. Using artificial intelligence, the behavior of decentralized energy consumers and storage systems can be adapted to the fluctuating production of electricity from renewable energies, thus enabling the overall system to be optimized.
In this context, the Managing Board of SMA Solar Technology AG holds that innovative system technologies that temporarily store solar power and provide energy management to private households and commercial enterprises offer worthwhile business opportunities. Rising, volatile prices for conventional domestic and commercial power and many private households and companies wanting to drive forward the energy transition by making their contribution to a sustainable and decentralized energy supply are the basis for new business models. Demand for solutions that increase self-consumption of solar power is likely to continue to rise, particularly in the European markets, the U.S., Australia and Japan. In these markets, renewable energies are already taking on a greater share in the electricity supply. Additionally, electric utility companies are increasingly using battery storage systems to avoid expensive grid expansions, stabilize grid frequency and balance fluctuations in the power feed-in from renewable energy sources. The Managing Board expects the still fairly new storage market to grow to approximately €2.6 billion to €2.8 billion in 2024 (excluding investments in batteries). Estimated demand is already included in the specified development projections for the entire inverter technology market.
In addition to storage technology, digital energy services aimed at optimizing household and commercial enterprises' energy costs and their connection to the energy market are becoming increasingly significant. The Managing Board expects this area to represent an addressable market of approximately €2.6 billion in 2024. The market will record strong growth in the medium and long run.
Overall statement from the Managing Board of SMA Solar Technology AG on expected development of the SMA Group
Sales and earnings within expectations
On February 29, 2024, the Managing Board of SMA Solar Technology AG published its sales and earnings guidance for the current fiscal year. It envisages sales of between €1,950 million and €2,220 million (2023: €1,904 million) and operating earnings before interest, taxes, depreciation and amortization (EBITDA) of between €220 million and €290 million (2023: €311.0 million). The Managing Board anticipates stronger sales and earnings in the second half of 2024.
Depreciation and amortization are expected to come to approximately €45 million in 2024. On this basis, the Managing Board expects an EBIT of €175 million to €245 million. In 2024, capital expenditure (including capitalized development costs and lease investments) will be approximately €200 million and thus significantly above the level of 2023 (ACTUAL 2023: €95.1 million). The SMA Group is investing in the future to benefit from the significant potential arising from the megatrends of decentralization, decarbonization and digitalization of the energy supply worldwide, and is developing highly integrated and digitalized solutions that precisely meet the resulting requirements. Against this background, investments, especially in new products, land and buildings, technical equipment and machines for the new GIGAWATT FACTORY, at the site in Niestetal, Kassel, as well as the capitalization of research and development expenses are planned for 2024.
For details regarding risks, please refer to the Risks and Opportunities Report in the SMA Annual Report 2023 starting on page 90.
SMA Group guidance for 2024 at a glance
| Key figure | Guidance 2024 | Actual 2023 | |
|---|---|---|---|
| Sales in € million | 1,950 to 2,220 | 1,904.1 | |
| Inverter output sold in GW | 20 to 22 | 20.5 | |
| EBITDA in € million1 | 220 to 290 | 311.0 | |
| Capital expenditure in € million | approx. 200 | 95.1 | |
| Net working capital in % of sales | 19 to 23 | 20.6 | |
| Net cash in € million | approx. 300 | 283.3 | |
| EBIT in € million1 | 175 to 245 | 269.5 |
1 Including €19 million positive one-time effect from the sale of shares in elexon GmbH
SMA Solar Technology AG // Quarterly Statement January to March 2024
The SMA Group's sales and earnings depend on global market growth, market share, price dynamics and the supply of electronic components. Our global presence and our comprehensive portfolio of products and solutions for all segments (Home Solutions, Commercial & Industrial Solutions and Large Scale & Project Solutions) enable us to respond quickly to changing market conditions, offset fluctuations in demand and take advantage of developments in global photovoltaic and storage markets, including the market for green hydrogen.
The Managing Board of SMA Solar Technology AG forecasts the following performance for individual SMA segments in the 2024 fiscal year:
Segment guidance for 2024 at a glance compared to previous year
| Segment | Sales | EBIT |
|---|---|---|
| Home Solutions | Down significantly |
Down significantly |
| Commercial&Industrial Solutions | Up slightly | Down slightly |
| Large Scale&Project Solutions | Up significantly | Up significantly |
System and solution expertise strengthen long-term competitiveness
In recent years, the SMA Group has laid important groundwork for its future viability. The Managing Board of SMA Solar Technology AG therefore also sees excellent growth prospects for the future. In addition to the continued positive development of the global PV market, key drivers include growth in important future fields such as storage, e-mobility, digital energy services and green hydrogen. With its Strategy 2025, its global presence in 20 countries on six continents and its innovative products and solutions, the SMA Group is well positioned to benefit from this market growth and consolidate and/or expand its market position. The company is continuously driving forward the further development of its portfolio toward a comprehensive system landscape for decentralized energy supply. The SMA Group is already an innovative and sustainable energy transition company. As part of our Strategy 2025, we are developing comprehensive and futureproof systems and solutions with high customer benefits for all key areas of the future energy supply and opening up new business fields. Our high level of system expertise and close cooperation with strong partners will also enable us to consistently develop this strategy in the future.
SMA Group will continue to reap the benefits of megatrends
The expansion of renewable energies and battery storage systems and the electrification of other sectors, such as mobility, heating and air-conditioning, will further accelerate the increased fight against climate change and the striving for an energy supply that is largely independent from imports of raw materials. Photovoltaics in particular will benefit from this expansion, also due to the already low levelized cost of electricity compared to other types of generation. The three megatrends of decarbonization, decentralization and digitalization are having an accelerating effect on the expansion of PV but also on the innovation of new business models, for example in the area of smart energy management and grid stabilization solutions.
The SMA Group is well positioned to benefit from these trends in all market segments and regions. With our products and solutions, we actively contribute to combating the global climate crisis. In addition, we have an international sales and service organization and decades of experience and technological expertise in all PV and storage applications as well as key future fields for energy supply. Our total installed inverter output of more than 150 GW worldwide is a particularly good foundation for data-based business models, as valuable energy data can be compiled by the inverter. Our extensive knowledge of managing complex battery storage systems and linking solar power systems to other energy sectors, such as heating, ventilation and cooling technology as well as e-mobility, is an excellent basis for developing future growth potential for digital energy solutions. The SMA Group also has extensive expertise in the area of grid stability and has been bundling its services in this area centrally at its competence center in Bangalore (India) since October 2023. In addition, the SMA Group has already positioned itself in the high-margin business field of green hydrogen production, which is expected to see strong growth in the future. With the Electrolyzer Converter for the grid-friendly processing of electricity for electrolysis, we successfully launched our own range of solutions for optimized hydrogen production on the growing market, which we will continue to expand.
SMA Group will take advantage of the potential of digitalization
Thanks to its extensive knowledge and experience in PV system technology, the ability to quickly implement changes, alignment of the subsidiaries toward future business areas and its numerous strategic partnerships, the SMA Group is well prepared for the digitalization of the energy industry and will take advantage of the opportunities that it yields. As a specialist in holistic solutions in the energy sector, we will help shape the energy supply of the future, launch a number of innovations and establish further strategic partnerships as part of our centralized and focused partner management. In the process, we will build on our strengths to design additional system solutions for the conversion to a costeffective, reliable and sustainable energy supply that is based on decentralized renewable energy. We will be helped in this endeavor by SMA's corporate culture and our motivated employees who make a decisive contribution to the company's long-term success and are therefore also given a share in the SMA Group's financial success.
Niestetal, April 30, 2024
SMA Solar Technology AG The Managing Board
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
Income statement SMA Group
| in €'000 | Jan. – Mar. (Q1) 2024 |
Jan. – Mar. (Q1) 2023 |
|---|---|---|
| Sales | 361,775 | 367,178 |
| Cost of sales | 266,945 | 252,906 |
| Gross profit | 94,830 | 114,272 |
| Selling expenses | 34,085 | 29,384 |
| Research and development expenses | 23,393 | 12,727 |
| General administrative expenses | 20,883 | 17,103 |
| Other operating income | 28,938 | 7,917 |
| Other operating expenses | 7,165 | 12,569 |
| Operating profit (EBIT) | 38,242 | 50,406 |
| Financial income | 1,896 | 2,231 |
| Financial expenses | 2,400 | 1,237 |
| Financial result | –504 | 994 |
| Profit before income taxes | 37,738 | 51,400 |
| Income taxes (expense (+)/income (–)) | 9,284 | –286 |
| Net income | 28,454 | 51,686 |
| of which attributable to shareholders of SMA AG | 28,454 | 51,686 |
| Earnings per share, basic (in €) | 0.82 | 1.49 |
| Earnings per share, diluted (in €) | 0.82 | 1.49 |
| Number of ordinary shares (in thousands) | 34,700 | 34,700 |
Statement of comprehensive income SMA Group
SMA Solar Technology AG // Quarterly Statement January to March 2024
| in €'000 | Jan. – Mar. (Q1) 2024 |
Jan. – Mar. (Q1) 2023 |
|---|---|---|
| Net income | 28,454 | 51,686 |
| Unrealized gains (+)/losses (–) from currency translation of foreign subsidiaries | 633 | –1,389 |
| Changes recognized outside profit or loss (currency translation differences) | 633 | –1,389 |
| Overall result | 29,087 | 50,298 |
| of which attributable to shareholders of SMA AG | 29,087 | 50,298 |
Balance sheet SMA Group
| in €'000 | 2024/03/31 | 2023/12/31 |
|---|---|---|
| ASSETS | ||
| Intangible assets | 123,382 | 117,277 |
| Property, plant and equipment | 229,973 | 226,107 |
| Investment property | 4,712 | 4,773 |
| Other financial assets, non-current | 4,894 | 1,562 |
| Deferred tax assets | 74,735 | 78,511 |
| Non-current assets | 437,696 | 428,230 |
| Inventories | 685,523 | 559,066 |
| Trade receivables | 224,341 | 277,398 |
| Other financial assets, current (total) | 42,579 | 70,152 |
| Cash equivalents with a duration of more than 3 months and asset management | 1,914 | 41,391 |
| Rent deposits and cash on hand pledged as collaterals | 27,961 | 22,541 |
| Remaining other financial assets, current | 12,704 | 6,220 |
| Income tax assets | 6,735 | 6,270 |
| Value added tax receivables | 26,766 | 41,587 |
| Other non-financial assets, current | 20,938 | 15,279 |
| Cash and cash equivalents | 211,747 | 219,383 |
| 1,218,629 | 1,189,135 | |
| Assets held for sale | 0 | 4,550 |
| Current assets | 1,218,629 | 1,193,685 |
| Total assets | 1,656,325 | 1,621,915 |
| LIABILITIES | ||
| Share capital | 34,700 | 34,700 |
| Capital reserves | 119,200 | 119,200 |
| Retained earnings | 561,369 | 532,282 |
| SMA Solar Technology AG shareholders' equity | 715,269 | 686,182 |
| Provisions, non-current | 105,464 | 105,057 |
| Financial liabilities, non-current | 22,885 | 23,037 |
| Contract liabilities, non-current | 149,457 | 150,540 |
| Other non-financial liabilities, non-current | 2,919 | 2,895 |
| Deferred tax liabilities | 1,056 | 1,854 |
| Non-current liabilities | 281,781 | 283,383 |
| Provisions, current | 102,368 | 95,992 |
| Financial liabilities, current | 8,846 | 8,816 |
| Trade payables | 289,477 | 303,796 |
| Income tax liabilities | 15,960 | 15,694 |
| Contract liabilities (advances) | 156,492 | 140,526 |
| Other contract liabilities, current | 48,572 | 57,696 |
| Other financial liabilities, current | 383 | 922 |
| Other non-financial liabilities, current | 37,177 | 28,908 |
| Current liabilities | 659,275 | 652,350 |
| Total equity and liabilities | 1,656,325 | 1,621,915 |
Statement of cash flows SMA Group
SMA Solar Technology AG // Quarterly Statement January to March 2024
| in €'000 | Jan. – Mar. (Q1) 2024 |
Jan. – Mar. (Q1) 2023 |
|---|---|---|
| Net income | 28,454 | 51,686 |
| Income taxes | 9,284 | –286 |
| Financial result | 504 | –994 |
| Depreciation and amortization of property, plant and equipment and intangible assets | 11,697 | 9,601 |
| Change in provisions | 6,783 | 8,747 |
| Result from the disposal of intangible and fixed assets and non-current assets | 371 | 187 |
| Change in non-cash expenses/revenue | –834 | 5,652 |
| Interest received | 383 | 34 |
| Interest paid | –359 | –232 |
| Income tax paid | –5,184 | 1,173 |
| Gross cash flow | 51,098 | 75,568 |
| Change in inventories | –127,608 | –69,555 |
| Change in trade receivables | 53,436 | –22,168 |
| Change in trade payables | –14,319 | 43,492 |
| Change in other net assets/other non-cash transactions | –6,225 | 37,761 |
| Cash flow from operating activities | –43,618 | 65,099 |
| Payments for investments in property, plant and equipment | –9,998 | –4,645 |
| Proceeds from the disposal of property, plant and equipment | 6 | 2 |
| Payments for investments in intangible assets | –10,302 | –10,505 |
| Proceeds from the sale of shares in associates and available-for-sale assets less cash given up | 18,211 | 0 |
| Proceeds from the disposal of securities and other financial assets | 41,186 | 3,911 |
| Payments for the acquisition of securities and other financial assets | –613 | –3,845 |
| Cash flow from investing activities | 38,490 | –15,082 |
| Change in other financial liabilities | 71 | 0 |
| Payments for lease liabilities | –2,437 | –2,051 |
| Redemption of financial liabilities | –2 | –2 |
| Cash flow from financing activities | –2,368 | –2,053 |
| Net increase/decrease in cash and cash equivalents | –7,496 | 47,964 |
| Changes due to exchange rate effects | –139 | 885 |
| Cash and cash equivalents as of January 1 | 219,383 | 165,355 |
| Cash and cash equivalents as of March 31 | 211,747 | 214,203 |
Statement of changes in equity SMA Group
| in €'000 | Share capital | Capital reserves |
Difference from currency translation |
Other retained earnings |
Consolidated shareholders' equity |
|---|---|---|---|---|---|
| Shareholders' equity as of January 1, 2022 | 34,700 | 119,200 | 3,836 | 305,787 | 463,523 |
| Net income | 51,686 | 51,686 | |||
| Other comprehensive income after tax | –1,389 | –752 | –2,141 | ||
| Overall result | 49,545 | ||||
| Shareholders' equity as of March 31, 2023 | 34,700 | 119,200 | 2,447 | 356,721 | 513,068 |
| Shareholders' equity as of January 1, 2024 | 34,700 | 119,200 | 1,694 | 530,588 | 686,182 |
| Net income | 28,454 | 28,454 | |||
| Other comprehensive income after tax | 633 | 0 | 633 | ||
| Overall result | 29,087 | ||||
| Shareholders' equity as of March 31, 2024 | 34,700 | 119,200 | 2,327 | 559,042 | 715,269 |
Financial ratios by segments and region
| External product sales | External services sales | Total sales | ||||
|---|---|---|---|---|---|---|
| in € million | Q1 2024 | Q1 2023 | Q1 2024 | Q1 2023 | Q1 2024 | Q1 2023 |
| Segments | ||||||
| Home Solutions | 59.4 | 161.1 | 3.2 | 2.2 | 62.6 | 163.3 |
| C&I Solutions | 69.8 | 78.7 | 0.7 | 1.5 | 70.5 | 80.2 |
| Large Scale&Project Solutions | 214.4 | 101.1 | 14.3 | 22.6 | 228.7 | 123.7 |
| Total segments | 343.6 | 340.9 | 18.2 | 26.3 | 361.8 | 367.2 |
| Reconciliation | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Continuing operations | 343.6 | 340.9 | 18.2 | 26.3 | 361.8 | 367.2 |
| Depreciation and amortization | Operating profit (EBIT) | |||
|---|---|---|---|---|
| in € million | Q1 2024 | Q1 2023 | Q1 2024 | Q1 2023 |
| Segments | ||||
| Home Solutions | 1.3 | 0.3 | –3.6 | 50.3 |
| C&I Solutions | 2.6 | 1.8 | –18.2 | –1.2 |
| Large Scale&Project Solutions | 0.8 | 0.8 | 41.3 | 2.3 |
| Total segments | 4.7 | 2.9 | 19.5 | 51.4 |
| Reconciliation | 7.0 | 6.7 | 18.7 | –1.0 |
| Continuing operations | 11.7 | 9.6 | 38.2 | 50.4 |
Sales by regions (target market of the product)
SMA Solar Technology AG // Quarterly Statement January to March 2024
| in € million | Q1 2024 | Q1 2023 |
|---|---|---|
| EMEA | 207.4 | 276.6 |
| Americas | 112.1 | 85.0 |
| APAC | 50.6 | 17.8 |
| Sales deductions | –8.3 | –12.2 |
| External sales | 361.8 | 367.2 |
| thereof Germany | 118.8 | 154.6 |
Reconciliation of the segment figures to the correlating figures in the Financial Statements is as follows:
| in € million | Q1 2024 | Q1 2023 |
|---|---|---|
| Total segment earnings (EBIT) | 19.5 | 51.4 |
| Elimination | 18.7 | –1.0 |
| Consolidated EBIT | 38.2 | 50.4 |
| Financial result | –0.5 | 1.0 |
| Earnings before income taxes | 37.7 | 51.4 |
Circumstances are shown in the reconciliation, which by definition are not part of the segments. In particular, this comprises unallocated parts of group head offices, including centrally managed cash and cash equivalents, financial instruments, financial liabilities and buildings, the expenses of which are allocated to the segments. Business relationships between the segments are eliminated in the reconciliation.
FINANCIAL CALENDAR
| 2024/05/28 | Annual General Meeting 2024 |
|---|---|
| 2024/08/08 | Publication of Half-Yearly Financial Report: January to June 2024 Analyst Conference Call: 13:30 p.m. (CEST) |
| 2024/11/14 | Publication of Quarterly Statement: January to September 2024 Analyst Conference Call: 13:30 p.m. (CET) |
PUBLICATION INFORMATION
Published by SMA Solar Technology AG
Text SMA Solar Technology AG
Consulting, Concept & Design Silvester Group, Hamburg www.silvestergroup.com
Photos Stefan Daub
CONTACT
SMA Solar Technology AG Sonnenallee 1 34266 Niestetal Germany Tel.: +49 561 9522-0 Fax: +49 561 9522-100 [email protected] www.SMA.de/en
Investor Relations [email protected] www.SMA.de/en/investor-relations
Sustainability [email protected] www.SMA.de/en/sustainability
REGISTERED TRADEMARKS
The SMA company logo, as well as the names coneva, Energy that Changes, ennexOS, SMA, SMA Solar Technology, Sunny Boy, Sunny Home Manager, Sunny Island und Sunny Tripower are registered trademarks of SMA Solar Technology AG in many countries.
DISCLAIMER
The Quarterly Statement, in particular the Forecast Report included in the Management Report, includes various forecasts and expectations as well as statements relating to the future development of the SMA Group and SMA Solar Technology AG. These statements are based on assumptions and estimates and may entail known and unknown risks and uncertainties. Actual development and results as well as the financial and asset situation may therefore differ substantially from the expectations and assumptions made. This may be due to market fluctuations, the development of world market prices for commodities, of financial markets and exchange rates, amendments to national and international legislation and provisions or fundamental changes in the economic and political environment. SMA does not intend to and does not undertake an obligation to update or revise any forward-looking statements to adapt them to events or developments after the publication of this Quarterly Statement.
SMA Solar Technology AG
Sonnenallee 1 34266 Niestetal Germany
Tel.: +49 561 9522-0 Fax: +49 561 9522-100 [email protected] www.SMA.de/en