Quarterly Report • May 13, 2011
Quarterly Report
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SMA solar technology AG
| SMA Group | Q1 2011 | Q1 2010 | Change | Year 2010 | |
|---|---|---|---|---|---|
| Sales | € million | 255.9 | 339.3 | –25% | 1,920.1 |
| Export ratio | % | 66.4 | 38.8 | 44.9 | |
| Inverter output sold | MW | 1,019 | 1,288 | –21% | 7,750 |
| Capital expenditure1 | € million | 35.2 | 36.2 | –3% | 158.3 |
| Depreciation | € million | 10.4 | 5.6 | 86% | 31.3 |
| Operating profit (EBIT) | € million | 13.7 | 92.4 | –85% | 516.8 |
| Operating profit margin | % | 5.4 | 27.2 | 26.9 | |
| Consolidated net profit | € million | 10.3 | 66.6 | –85% | 365.0 |
| Earnings per share2 | € | 0.30 | 1.92 | 10.52 | |
| Employees (average during the period)3 | 5,735 | 4,656 | 23% | 5,519 | |
| in Germany | 5,246 | 4,389 | 20% | 5,179 | |
| abroad | 489 | 267 | 83% | 340 | |
| SMA Group | 03/31/2011 | 12 / 31 / 2010 | Change | ||
| Total assets | € million | 1,282.5 | 1,251.5 | 2% | |
| Equity | € million | 737.3 | 728.4 | 1% | |
| Equity ratio | % | 57.5 | 58.2 | ||
| Net working capital4 | € million | 314.9 | 284.6 | 11% | |
Net working capital ratio5 % 17.1 14.8
Net Cash € million 462.0 523.4 –38%
1excl. finance leases
2 converted to 34,700,000 shares
3 incl. temporary employees 4inventories and trade receivables minus trade payables
5 relating to the last twelve months (LTM)
6 rebased to 100%
| ۰, $\sim$ |
$\sim$ | ٧ |
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Economic Conditions
Disclaimer
Inside cover: Financial Calendar 2011, Imprint, Contact
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The Share
| Security code number | A0DJ6J |
|---|---|
| ISIN | DE000A0DJ6J9 |
| Stock market code | S92 |
| Reuters | S92G.DE |
| Bloomberg | S92 GR |
| Listing | Prime Standard of |
| Frankfurt Stock Exchange | |
| Share class | Bearer shares without par value |
| Share capital | € 34.7 million |
| Number of shares | 34.7 million |
| Index | TecDAX ® |
Developments of stock market indices in the first quarter of 2011 were influenced decisively by the events in Japan and North Africa. The dramatic development in Fukushima led to panic selling of shares. As a result, the DAX slumped to 6,647.66 points (March 15, 2011). At the end of the period under review, the DAX recovered and eventually achieved a plus of 0.74% (7,041.31 points, March 31, 2011). The negative impact of the nuclear catastrophe on the TecDAX was just temporary. At the end of the quarter, the TecDAX was up 8.2% (930.61 points, March 31, 2011), driven mainly by solar stocks.
SMA shares began the year 2011 at a market price of € 70.15 (January 3, 2011, Xetra closing price). The ongoing discussions about the German Federal Government's plans to cut solar incentive programs led to uncertainty in the market. The share price reached its low for the quarter on January 14, 2011 and was quoted at € 63.20. Following publication of the preliminary figures on January 17, 2011, the SMA share price recovered significantly and increased by approx. 6.6% to € 68.86 within one day (January 18, 2011, closing price Xetra trading platform). The share price received a further impetus only one day later, when Federal Environment Minister Röttgen and the German Solar Industry Association (Bundesverband Solarwirtschaft e.V.) agreed on flexible adjustments to subsidies. By the middle of February 2011, the share price stabilized at a level of above € 70 and reached its monthly high on February 18, 2011 with € 82.23 (Xetra closing price). This upward trend came to a halt on February 22, 2011, after the French government announced the introduction of a 500 MW annual cap on PV installations and a reduction in feed-in tariffs of 20%. Thereafter, the SMA share price faced a downward trend.
in%, rebased to 100 points
130 120 110 100 90 80 Jan Feb Mar
The price of SMA shares increased by 26.1% after considerable price losses at the beginning of the quarter.
SMA share
TecDAX ®
ÖkoDAX ®
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This means that the price of SMA shares increased by a total of 26.1% in the first quarter to € 88.44 (March 31, 2011, closing price Xetra trading platform).
The volume-weighted average price of SMA stock in the reporting period was € 74.83. The average trading volume of SMA shares was 149,161 per day (Xetra) and thus 7.5% above the trading volume of the previous year.
The shareholder structure was unchanged in the reporting period. 27.14% of shares are free-floating, 25.20% are bundled in a pooling agreement and the remaining 47.66% are still held by the founders.
In the first quarter of 2011, two banks and investment firms began reporting on SMA shares. Thus, by the end of the first quarter, twenty banks and investment firms reported regularly on SMA shares. The following list shows the range of sell side coverage.
| Volume-weighted average price in 2011 | € 74.83 |
|---|---|
| Market capitalization (Ø) | € 2.61 billion |
| Daily trading volume (Ø) | 149,161 shares |
| Maximum price (March 30, 2010) | € 89.25 |
| Minimum price (January 14, 2011) | € 63.20 |
| Closing price (March 31, 2011) | € 88.44 |
in%
| 27.14% | Free float |
|---|---|
| 25.20 % | Pool SMA Solar Technology AG |
| 12.79 % | Günther Cramer |
| 12.81 % | Peter Drews |
| 12.81 % | Reiner Wettlaufer |
| 9.25 % | Prof. (em.) Dr. Werner Kleinkauf |
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| Institution | Analyst |
|---|---|
| Bank of America / Merrill Lynch | Claus Roller |
| Barclays Capital | Rupesh Madlani |
| Berenberg Bank | Lars Dannenberg |
| Bryan, Garnier&Co | Julien Desmaretz |
| Citi | Andrew Benson |
| Commerzbank | Ben Lynch / Lauren Licuanan |
| Deutsche Bank | Alexander Karnick |
| DZ Bank | Sven Kürten |
| Equinet Bank | Sebastian Growe / Sebastian Freudenreich |
| Goldman Sachs Group | Stephen Benson |
| HSBC Trinkaus&Burkhardt | Christian Rath |
| HVB UniCredit | Michael Tappeiner |
| Landesbank Baden-Württemberg | Erkan Aycicek |
| Macquarie Group | Robert Schramm |
| Main First | Andreas Thielen /Hüseyin Özkaya |
| Metzler | Daniel Seidenspinner |
| Natureo Finance | Ingo Queiser |
| Steubing | Alla Gorelova |
| UBS | Patrick Hummel |
| West LB | Peter Wirtz |
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Openness and credibility are what characterizes our communication culture and investororiented information policy. We maintain a continuous dialog with the capital market with the aim of building up a trusting, long-term relationship with shareholders. Our Investor Relations Web site www.IR.SMA.de provides comprehensive and up-to-date information about our Company – this includes, for instance, financial publications and a financial calendar. An interactive share chart enables comparisons between SMA share prices and selected stock market indices.
In the first quarter of 2011, the Chief Financial Officer and the Investor Relations team participated in two investor conferences. In January 2011, SMA took part in the CA Cheuvreux 10th German Corporate Conference and in March 2011 in the Commerzbank Growth&Responsibility Conference. In addition, a road show to London was carried out after the end of the reporting period. In the first quarter of 2011, SMA conducted about 100 one-to-one discussions and phone conferences with investors. The Investor Relations team will use 2011 to further intensify the successful dialog with institutional and private investors.
CEO Günther Cramer and CFO Pierre-Pascal Urbon announced the results of the 2010 fiscal year and the outlook for the current fiscal year at the financial Press Conference on Annual Results on March 30, 2011 in Frankfurt am Main. In addition, an analyst conference call was held. Important information for the press and analysts was the fact that SMA's Managing Board confirmed its forecast for fiscal 2011 and that it expects sales of between € 1.5 billion and € 1.9 billion with an EBIT margin of between 21% to 25%.
The Annual General Meeting will be held on May 26, 2011 in Kassel. All information and documents are available on the SMA Web site at www.SMA.de/Hauptversammlung. In view of the good business development in 2010, the Managing Board and Supervisory Board will propose an increase of the dividend from € 1.50 to € 3.00 to the Annual General Meeting.
OF WHICH 17 FOREIGN COMPANIES
WITH 21 COMPANIES
IN 16 COUNTRIES
ON 4 CONTINENTS
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The development of the world economy in the first quarter of 2011 was marked decisively by the continuing economic recovery, but also by the events in Japan and North Africa. In addition, the development of oil prices influenced the economic situation. The price for Brent oil climbed to USD 123.56 per barrel, which was the highest increase in two and a half years.
The International Monetary Fund (IMF) expects a dampening effect from these developments. Nevertheless, it predicts relatively robust global growth of 4.4% in 2011 as a whole since the majority of enterprises have overcome the financial crisis and are generating earnings again. Overall, more dynamic development is expected in the second half of the year. The IMF sees the extreme oil price rise as the key risk to growth. Should there be supply bottlenecks resulting from upheavals in the oil-producing countries, the rise might threaten the global economy. Should commodity prices stabilize as expected, the IMF projects inflation of below 2% in 2011 in the advanced economies. In emerging and developing countries, however, the rate of inflation might shoot up to 7% (World Economic Outlook 2011).
The German economy was characterized by a considerably more dynamic development than other European countries. The upswing shows no sign of ending so that Germany's leading economic research institutes raised their 2011 growth forecast from 2.0% to 2.8% at the beginning of April 2011.
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2010 was a record year, not only for SMA but also for the entire photovoltaics sector. According to the projections of SMA's Managing Board, the global market for PV inverters reached a market volume of 17GW to 20GW. This corresponds to growth of 125% to 150% compared to the previous year. Germany was once again the world's largest photovoltaics market with approx. 7.4 GW of newly installed output.
The nuclear catastrophe in the Fukushima nuclear power plant in Japan has marked significantly the political discussions about renewable energies in the first quarter of 2011. Immediately after the catastrophe, the German Federal Government formed a commission for exiting nuclear energy. Other countries are also intensively discussing a faster exit from nuclear energy. The forthcoming months will show to what extent the broad public consensus will be reflected in higher expansion targets for photovoltaics.
Germany is a pioneer as regards energy policy matters. The agreement in February 2011 between the German Solar Industry Association (BSW) and the Federal Government on bringing forward the date of the reduction in the subsidy for solar energy, which is tied to the increase in solar output, to July 1, 2011 will secure a further expansion of solar energy in Germany. The recommendation was approved by the Federal Cabinet and the Federal Council in the first quarter of 2011.
Other European countries are also discussing incentive programs for renewable energies. Before the catastrophe in the Fukushima nuclear power plant, the French government had decided to reduce feed-in tariffs for solar power plants by 20% and to limit new PV installations to a capacity of 500 MW a year. The political discussions about the further expansion of photovoltaics in Italy have not yet come to an end.
Due to the weather conditions and high prices of solar modules, there was low demand for photovoltaic plants in the first quarter of 2011. The strongest solar markets include Germany, Italy, North America, Australia and France.
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SMA, being the world market leader, is characterized by its unique product portfolio and international presence as well as its high level of flexibility. SMA only produces after an order has been placed and therefore adjusted its production in the fourth quarter of 2010 to take account of the changed demand situation. The demand for SMA photovoltaic inverters decreased once again in the first quarter of 2011. The reasons for this were our customers' high inventory levels, the high prices of solar modules and the bad weather conditions.
SMA believes that the development of the photovoltaics sector is only at an initial phase. The markets in North America and Asia in particular display considerable potential for the future, both by attractive incentive conditions and the desire to ensure reliable energy supply. Accordingly, SMA intends to expand its production capacities in North America and to strengthen further its presence in Asia through the establishment of new service and sales companies in Thailand and Japan. The Managing Board of SMA confirms its 2011 forecast for sales of between € 1.5 billion and € 1.9 billion with an EBIT margin of between 21% and 25%.
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SMA achieves positive results in spite of distinct decline in sales As the market leader, SMA depends on the development of global demand for solar power plants. The development in the traditional photovoltaics markets in Europe has been declining since autumn 2010 and the fall in demand was only partially offset by newer foreign markets. SMA was unable to escape the effects of this trend.
In the first three months of 2011, the bad weather conditions in Europe and North America as well as the high prices of solar modules have led to a further fall in global demand for solar power plants. In the 2011 reporting period, there were no pull-forward effects, which resulted in stronger demand in the first quarter of 2010.
In the first three months of 2011, the SMA Group sold photovoltaic inverters with a total capacity of 1,019 MW. This corresponds to a decline of 21% compared to the first quarter of 2010 (Q1 2010: 1,288 MW). Sales of the SMA Group totaled € 255.9 million and thus were below the previous year's figure (Q1 2010: € 339.3 million). This disproportional decline of 24.6% in comparison to sales has resulted from the changed product mix.
The Medium Power Solutions segment with its sales share of 74.1% (€ 189.6 million) was the strongest segment of the SMA Group in terms of sales in the first quarter of 2011. The sales share in the first quarter of 2010 was 91.2% (Q1 2010: € 309.4 million).
The High Power Solutions segment gained importance in the first quarter of 2011 owing to the foreign business. Sales increased on a year-on-year basis by 144% to € 56.6 million (Q1 2010: € 23.2 million).
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The period under review was marked by a regional shift in demand. The SMA Group generated 33.6% of its sales in Germany (Q1 2010: 61.2%). In the foreign markets, SMA increased its gross sales by 32.2% to € 173.9 million (Q1 2010: € 131.5 million) due to its excellent sales and service structures as well as the full range of products. However, it was not possible to compensate the declining domestic demand by the stronger foreign business. Italy, North America, Australia and France were among the most important foreign markets.
In view of the expected growth in future years, the SMA Group expanded its structures in fiscal 2010. Important measures included, in particular, the establishment of production sites in North America and the expansion of the sales and service organization in Germany and abroad. In addition, development activities were intensified consistently. The SMA Group created more than 1,500 jobs worldwide in 2010.
Although sales almost halved compared to the fourth quarter of 2010 (Q4 2010: € 477.6 million), the SMA Group closed the first quarter 2011 with earnings before interest and taxes (EBIT) of € 13.7 million (Q1 2010: € 92.4 million) owing to its high level of flexibility. This corresponds to an EBIT margin of 5.4%. Consolidated net profit was € 10.3 million (Q1 2010: € 66.6 million). Earnings per share fell to € 0.30 (Q1 2010: € 1.92).
Medium Power Solutions segment is the main sales driver In the Photovoltaics Technology division, external sales amounted to € 246.2 million (Q1 2010: € 332.6 million) in the first quarter of 2011. The main sales driver was the Medium Power Solutions segment with € 189.6 million (Q1 2010: € 309.4 million). With € 56.6 million (Q1 2010: € 23.2 million), a share of 22.1% in total sales was attributable to the High Power Solutions segment.
The Medium Power Solutions segment covers the products Sunny Boy, Sunny Mini Central, Sunny Tripower, Sunny Island, Sunny Backup and products for monitoring solar power plants. The grid-connected inverters and Sunny Backup inverters are deployed mainly in residential and commercial buildings, while Sunny Island is used for stand-alone systems, so-called off-grid applications.
The product families of one-phase inverters have power classes ranging from 700 watts to 11 kilowatts (kW). The new product generation of three-phase inverters under the trade name Sunny Tripower covers the power classes from 8 kW to 17 kW.
The products of the Medium Power Solutions segment are produced, exclusively based on purchase orders, in Kassel and North America. The delivery periods in the first quarter of 2011 were up to four weeks. With a share of 40.3% in gross sales revenues, Germany was the most important sales market. The most successful foreign markets were Italy, Australia, North America and France. The product mix has changed on a year-on-year basis. In the
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first quarter of 2011, the inverter types Sunny Tripower 12000TL to 17000TL and Sunny Boy 3000TL to 5000TL were important sales drivers. The Sunny Mini Central product family, which was one of the best-selling inverter types in 2010, was of minor significance in the first three months of 2011.
Earnings before interest and taxes (EBIT) amounted to € 0.3 million (Q1 2010: € 88.3 million). This corresponds to an EBIT margin of 0.1% (Q1 2010: 27.4%) in relation to internal and external sales revenues. The distinct decrease compared to the previous year's period results from the lack of pull-forward effects and, in particular, from the change in the product mix as well as the targeted expansion of structures in the areas of research and development, sales, service and administration in Germany and abroad in the last year.
The High Power Solutions segment comprises central inverters such as the Sunny Central. These devices cover the market for large-scale PV power stations with outputs ranging from over 100 kW to several megawatts. These complex products are produced, after orders have been placed, in Kassel and North America and are delivered within 8 to 10 weeks.
Strong sales growth in the first quarter of 2011 is due to the positive development of sales in the foreign markets, in particular in North America, where the Company generated almost 30% of gross sales revenues in the first three months. The most successful products in the High Power Solutions segment were the Sunny Central 800 Compact Power, which was introduced in the last year, followed by Sunny Central 630HE.
Earnings before interest and taxes (EBIT) amounted to € 12.9 million in the first quarter of 2011 (Q1 2010: € 1.1 million). Extraordinary effects, in particular the successful enforcement of recourse claims against suppliers had a positive impact on the quarterly results. The EBIT margin was 21.6% (Q1 2010: 3.9%).
The Railway Technology division is still characterized by a successful development. External sales in this division improved by 33.9% to € 7.5 million in the first three months of 2011 (Q1 2010: € 5.6 million). In the business, which is marked by larger-scale individual projects, we increased sales in the EU and non-EU countries through an expansion in sales activities abroad. The internal sales figure of € 2.3 million (Q1 2010: € 4.2 million) was mainly attributable to supplies of cable and mechanical components to the High Power Solutions segment. Earnings before interest and taxes (EBIT) rose to € 0.7 million (Q1 2010: € 0.5 million). The EBIT margin was 7.1% (Q1 2010: 5.1%) in relation to internal and external sales. This division, marked by long-term large-scale projects, had achieved good capacity utilization at the end of the quarter.
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The Electronics Manufacturing segment is the main supplier for the other segments, above all the Medium Power Solutions segment. Capacities in the production area were fully utilized. The share of externally produced electronic assemblies was properly adjusted to the demand. In accordance with the declining trend in the Medium Power Solutions segment, the total figure for external and internal sales fell to € 67.9 million as compared to the same quarter of the previous year (Q1 2010: € 81.8 million). Earnings before interest and taxes (EBIT) amounted to € 3.1 million, which is half of the figure for the previous year's first quarter (Q1 2010: € 6.2 million). This corresponds to an EBIT margin of 4.6% (Q1 2010: 7.6%) in relation to the internal and external sales figures.
The cost of sales amounted to € 194.6 million (Q1 2010: € 208.9 million). The gross margin decreased to 24.0% as a result of the changed product mix, lower utilization of production capacities and the continued expansion of the service infrastructure, which was started consistently in the last year (Q1 2010: 38.4%). In the first quarter of 2011, the cost of sales was attributable as follows: 67.2% to material expenses, 19.2% to personnel expenses and 13.6% to other expenses as well as depreciation and amortization.
Selling expenses grew slightly to € 12.6 million (Q1 2010: € 12.0 million). The ratio of selling expenses to sales increased to 4.9% in the first quarter of 2011 due to the comparably low turnover (Q1 2010: 3.5%).
Research and development expenses, excluding capitalized development projects, in the first quarter of 2011 amounted to € 19.2 million (Q1 2010: € 17.2 million). The rise of 12% is primarily attributable to the employment of new staff in this area. At the end of the first quarter of 2011, the SMA Group had 885 employees in the research and development department (March 31, 2010, 675 employees). Total expenses in research and development including capitalized development projects stood at € 20.3 million (Q1 2010: € 20.7 million). Scheduled depreciation of capitalized development projects amounted to € 1.0 million in the first three months of the year (Q1 2010: € 0.0 million).
Administrative expenses amounted to € 12.7 million in the first quarter of 2011 (Q1 2010: € 9.2 million). In view of the expected growth and increasing internationalization, SMA created new structures in the finance, legal and personnel areas in a targeted manner and implemented important infrastructure projects. In relation to the comparably low turnover in the first quarter of 2011, administrative expenses as a proportion of sales increased to 5.0% (Q1 2010: 2.7%).
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The weak development of business in the first quarter of 2011 and the expansion of structures in the last year are also reflected in the gross cash flow. It amounted to € 2.6 million in the first three months of this year and thus stood substantially below the previous year's figure (Q1 2010: € 78.5 million).
In order to reduce procurement risks regarding components with long delivery periods, SMA increased its safety stocks of raw materials, consumables and supplies in the first quarter of 2011. In addition, finished goods rose as a result of the business activity. Trade accounts receivable also increased in the first three months of 2011, in part due to a shift to large scale solar projects. The increase in net working capital in the period under review was restricted, to a minor part, by the growth-related increases in liabilities for guarantee extensions, prepayments received, employee bonus payments and the liabilities under vacation and flexitime commitments. Net cash flow from operating activities totaled € –26.0 million in the period under review (Q1 2010: € 26.4 million).
The expansion of Kassel and Niestetal sites has significantly marked investments in the period under review. Investments in fixed assets amounted to € 30.1 million in the first quarter of 2011 (Q1 2010: € 33.6 million). The outflow of funds for investments in intangible assets amounted to € 5.1 million in this period and is thus below the previous year's figure (Q1 2010: € 6.1 million). With the objective of diversifying its monetary investments, SMA engaged external asset management companies at the beginning of the year in order to invest a portion of liquid funds pursuant to strict, conservative criteria in fixed-interestbearing securities and investment funds.
The cash and cash equivalents amounting to € 183.1 million (December 31, 2010: € 354.1 million) include cash in hand, bank balances and short-term deposits with an original term to maturity of less than three months. Together with the time deposits with a term to maturity of more than three months and fixed-interest-bearing securities as well as noncurrent financial liabilities, this results in net liquidity of € 462.0 million (December 31, 2010: € 523.4 million).
Total assets rose slightly to € 1,282.5 million as at March 31, 2011 (December 31, 2010: € 1,251.5 million).
As at March 31, 2011, net working capital had risen to € 314.9 million (December 31, 2010: € 284.6 million) and was 17.1% of sales over the last twelve months. The ratio was thus slightly below the corridor of 18% to 20%, which was expected by the management. The increase in net working capital is attributable to the planned increase in inventories of raw materials, consumables and supplies as well as the business-related increase in inventories of finished goods. In the first quarter, the inventories of raw materials, consumables and supplies were raised again by 11.4% in order to ensure the maximum utilization of production. The stock of finished goods consists mainly of Sunny Central inverters which were not yet requested by customers due to the postponement of projects.
Trade accounts receivable amounted to € 131.3 million, which corresponds to an increase of 11.9% (December 31, 2010: € 117.3 million). Accounts receivable days increased to 25.7, which was attributable mainly to the expansion in project business and higher foreign sales share (December 31, 2010: 21.9 days). The rise in inventories of raw materials, consumables and supplies is reflected in the trade liabilities, which amounted to € 93.6 million at the end of the first quarter (December 31, 2010: € 70.6 million). The share of supplier credits in total assets rose slightly to 7.3% (December 31, 2010: 5.6%).
Shareholders' equity rose slightly to € 737.3 million as at March 31, 2011 (December 31, 2010: € 728.4 million). The equity ratio of 57.5% underlines the solidity of our balance sheet structure.
Results of Operations, Financial Position and Net Assets Investments
The SMA Group has planned investments of between € 150 million to € 200 million for the 2011 fiscal year. The main investments included the expansion of production capacities, new construction of a modern repair center and office and service buildings, as well as the acquisition of machinery and equipment.
In the first three months of fiscal 2011, the investments in fixed assets and intangible assets amounted to € 35.2 million (Q1 2010: € 39.7 million). Investments in fixed assets totaled € 30.1 million (Q1 2010: € 33.6 million). Of this sum, 58.4% was invested in real estate and buildings and 41.6% in machinery and equipment. Of the investments in intangible assets amounting to € 5.1 million (Q1 2010: € 6.1 million), 21.6% was attributable to capitalized development expenses and 78.4% to other intangible assets.
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Photovoltaics is making an increasing contribution to energy supply. In order to ensure that feeding solar power into the grid goes hand in hand with a high level of grid stability, the SMA Group, as technology leader, has focused on specific topics of grid integration.
To achieve a consistent quality of supply and high feed-in levels of solar electricity into the power grid, reliable feed-in forecasts are necessary. For this purpose, SMA, jointly with partner companies, devised a solution that gives utility operators a degree of planning security as high as already achieved in the area of wind energy. For the extrapolation of the current solar output in the individual grid areas and for the associated forecast for the next few hours and days, the partner companies use comprehensive data provided by SMA's Sunny Portal. This, the world's largest portal for plant monitoring and visualization, has registered about 25,000 photovoltaic plants with an installed overall capacity of 2.3GW in the area of the Federal Republic of Germany alone. The forecasting possibilities created by SMA's tools were presented to the public in February at a press conference.
In addition, SMA provided a significant contribution to designing the new Low Voltage Guideline of the German Association of Energy and Water Industries (BDEW), which is expected to enter into force on July 1, 2011. This guideline stipulates that low-voltage PV plants should also provide system services aiming at a better integration of decentralized power generation systems into the grids.
In the Medium Power Solutions segment, the development of the Sunny Home Manager is one of the main points. The Sunny Home Manager is the SMA product solution to analyzing and optimizing self-consumption – in combination with easy plant monitoring via the Sunny Portal. In addition, the three-phase Sunny Tripower product family has been completed by the market introduction of the Sunny Tripower 8000TL for the lower output classes. In the first quarter of 2011, the Company finalized the audits with Underwriter Laboratories (UL) for the first SMA solar inverter series with high-frequency transformer Sunny Boy 2000HF-US to Sunny Boy 3000HF-US for the US market and started production of these inverters. The new Sunny Boy devices are a clearly more economical system technology, especially for smaller PV installations, than the module inverters available to date in the US market. Furthermore, the innovative Sunny Boy inverters with Bluetooth® technology can be linked to SMA's advanced communications products easily and quickly.
After the High Power Solutions segment had finalized the development of the complete Compact Power series (CP) in the power classes of 500 kW to 800 kW with great success, the focus was on completing the product portfolio for the market in North America. Now, SMA will offer so-called SMA MV blocks in this high-growth market. This is a standardized modular system for large-scale solar plants, consisting of inverters, medium-voltage transformer, switching unit and project-specific control and monitoring systems.
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The SMA Group created almost 1,500 new jobs in fiscal year 2010. At the end of the first quarter of 2011, the SMA Group employed 4,691 persons (Q1 2010: 3,299 employees, figures in each case excluding temporary employees). The number of staff at foreign subsidiaries rose by 64.5% to 459 employees on a year-on-year basis (Q1 2010: 279 employees). At March 31, 2011, we employed 1,114 temporary employees (Q1 2010: 1,577 temporary employees), mainly in production and production-related areas.
The extraordinary dynamics of the photovoltaics market demands for high flexibility requirements, in particular as regards production and production-related areas. We must be able to respond flexibly to the fluctuating utilization of production capacities in individual areas in order to react directly to a revitalization of the market. This is the reason why SMA employs temporary employees especially in these areas. In order to find a reasonable solution for a short-term lack of orders in the first quarter of 2011, our temporary staff agency offered short-time work to temporary employees in various production areas for a preliminary period. Their deployment at SMA will be flexible between 0% and 100% of the working hours, depending on the order situation. At the end of the first quarter of 2011, 1,114 temporary employees were deployed at SMA, of which 580 used the opportunity of working short-time for a preliminary period.
The Great Place to Work® Institute Germany determines and honors the best employers in Germany every year. Quality and attractiveness as an employer are assessed using the criteria of credibility, respect and fairness of management as well as identification of employees with the company and their team spirit. Enterprises of all industrial branches, sizes and regions are assessed from an employee's perspective through anonymous interviews and from an expert's perspective through the analysis of a cultural audit.
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SMA has taken part in this contest since 2006, has always been among the best employers, and won numerous special prizes on the national as well as on the European level. We did even better at this year's award ceremony: for the first time, we succeeded in being the winner in the category for big companies with more than 5,000 employees.
This success must be rated even higher since the strong growth over the last few years has led to restructuring, various changes and high demands on employees. We regard the award as the outcome of our HR policy that, for 30 years, has focused consistently on making employees stakeholders and on creating a working environment in which employees enjoy contributing their energy, their ideas and their initiative. This outcome documents that we have succeeded in raising this spirit in new employees as well. In addition, our HR work is confirmed by the fact that the cultural audit of SMA was assessed to be the best of the entire competition across all size categories.
In particular in the photovoltaics market, which is characterized by dynamics and high volatility, our employees, who identify themselves to a high degree with the Company and are involved with a high level of self-responsibility, are a significant factor for success.
No significant events that might have an impact on the Company's results of operations, financial position and net assets have occurred after the balance sheet date.
The Group's risk and opportunities management as well as possible individual risks are described in detail in the Annual Report 2010. Essentially, the comments made there remain applicable. At the moment, no risks that could seriously jeopardize the Company's continuing existence or could significantly impair its performance are discernible.
026 Interim Consolidated Financial Statements
052 Other Information
The general conditions of the global economy in the first quarter of 2011 were marked decisively by the continuing economic recovery, but also by the catastrophe in the Fukushima nuclear power plant in Japan and the unrest in North Africa.
In its growth forecast in April, the International Monetary Fund (IMF) stood by its forecast of the beginning of the year and expects economic growth of 4.5% both for 2011 and 2012. The growth in the newer industrialized countries is projected to be significantly stronger at 6.5% than in established economies at only 2.5%. In the opinion of the IMF, the earthquake in Japan will have only minor macroeconomic effects. However, it may lead to uncertainty. The price of oil might also have an impact so that growth of the global real gross domestic product (GDP) is estimated to be 4.5% in each of the next two years. Thus, this estimate is slightly below GDP growth of 5% in the last year.
The German economy was characterized by a considerably more dynamic development than other European countries, so that the new growth forecast of the leading economic research institutes for 2011 of 2.8% gives cause for some optimism for future developments.
The nuclear catastrophe in the Fukushima nuclear power plant in Japan has raised intensive discussions about an accelerated exit from nuclear energy. The forthcoming months will show to what extent the broad public consensus will be reflected in higher expansion targets for photovoltaics.
SMA's Managing Board predicts average growth in the amount of newly installed output worldwide of almost 15% p. a. to about 30GW in the period leading up to 2013. The differing growth rates in the individual market segments and the dependence on country-specific incentive programs will in future also lead to sharp fluctuations in demand. Therefore in 2011, the Managing Board of SMA predicts stagnating global PV markets and does not even rule out the possibility of a downturn in growth. The breadth of this forecast may be attributed to the fact that a reduction in subsidies is envisaged in important solar markets in 2011, which will slow down the rate of construction of new solar power plants. These markets include, for instance, Germany, Italy, France, Belgium and the Czech Republic. The growth markets in North America and Japan and the emerging solar markets in China, India, Thailand and Australia may offset the envisaged downturn in the traditional solar markets in 2011, but will not be able to help an increase.
Forecast Report
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Overall, SMA's Managing Board assumes that the regional shift in solar markets will also lead to a change in the size of installations. The Managing Board of SMA predicts stronger growth in the commercial and industrial area (i. e. medium-sized decentralized to largescale solar projects). These market sectors are more developed in those regions of North America and Asia characterized by strong growth than for example in Europe.
The following statements on the future development of the SMA Group are based on the estimates drawn up by the Managing Board of SMA. They result from the expectations concerning the development of global photovoltaics markets set out above.
With its wide range of products, high product quality, high level of flexibility and rapid service structure and, last but not least, its international presence, SMA is uniquely positioned in the solar market. SMA is a world market leader with an amount of inverter output sold of about 7.8GW and an estimated market share of between 39% and 45% in 2010. The Managing Board plans to maintain this excellent market position or to even increase its market share.
Renewable energies are gaining increasing public support worldwide. The Management Board of SMA expects that the demand for solar power will increase significantly in the medium term. For 2011, it predicts global demand for PV plants of between 17GW and 20GW and, therefore, stagnation due to reduced subsidies in important European solar markets. It is not expected that this can be compensated for by growth in emerging foreign markets. A slight downturn in growth cannot be ruled out. The Managing Board of SMA confirms its forecast with expected sales of between € 1.5 billion and € 1.9 billion and a slightly declining EBIT margin of between 21% and 25%.
According to estimates by the Managing Board, the Medium Power Solutions segment with up to 80% will be the major driving force for sales in 2011. The trend to larger photovoltaic plants with an output of between 10 kW and 500 kW will also be reflected in our product mix. Thus, the Managing Board expects that the three-phase solar inverter Sunny Tripower will acquire greater importance and will replace the single-phase Sunny Mini Central. The first quarter of 2011 has already confirmed our assumption.
Large scale solar projects in the High Power Solutions segment with an output of over 500 kW will make up about 20% of total sales in 2011. Above all, a decisive contribution to sales in this segment will be made by business in North America, Italy and France. The Sunny Central Compact Power will in all likelihood be one of the product families that generate the greatest sales in this segment. This product family is characterized by especially low system costs and an advantageous input voltage range.
008 Interim Management Report
026 Interim Consolidated Financial Statements
052 Other Information Forecast Report
The small but successful Railway Technology division with its 5% share in sales, which is part of SMA's core business, is predicted to achieve an increase in sales of around 10%. The expected export ratio is about 80%.
According to estimates by the Managing Board of SMA, the regional shift in demand will result in significantly stiffer competition for the Company. This development will also be reflected in the average selling price per watt. Therefore, the management of SMA predicts that the gross earnings margin will fall slightly in 2011. In order to counter this trend in forthcoming years, SMA will carry out a systematic analysis of production costs aimed at identifying potential for savings and thus lowering production costs consistently.
SMA has been trendsetting in the photovoltaics sector for many years and systematically developed approaches for grid integration and optimization of self-consumption. Therefore, our product, the solar inverter, will continue to be a high-tech product in the future as well. In order to expand our technological edge in 2011, we will invest up to € 100 million in research and development. This corresponds to 5% to 7% of projected sales. In addition, SMA will expand its network of strategic research and development partnerships in a targeted manner.
Important growth stimuli in the future will come from foreign markets. In the coming years, we will pursue our tried and tested strategy of being one of the first solar inverter manufacturers to set up a company in developing markets. Thus, in fiscal 2011, we plan to open a sales and service company in the strong growth markets Japan and Thailand, and will also set up companies for the Railway Technology division in South America and Asia.
SMA will pursue its successful strategy of only producing once an order has been placed. In 2011, we will primarily expand our production capacities abroad in order to fulfill the corresponding requirements of creating added value locally and, at the same time, to reduce currency risks. In the course of the fiscal year, we plan to increase production capacities in North America. Aiming to fully utilize these production capacities in the short term, we will stockpile large quantities of raw materials, consumables and supplies in 2011 and continue to make use of temporary employees in the area of production. In particular, this stockpiling strategy will be reflected in a net working capital ratio of between 18% and 20% in 2011.
The first quarter of 2011 has proven once again that flexibility is the major strength of SMA, which enables us to react quickly to market changes. We think that we are in an excellent position for the future.
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SMA intends to continue to act efficiently, competently and in a customer-oriented way in the solar markets, which are increasingly differentiating at an international level. The functional organization of the SMA Group has reached its limits in doing so. The new organizational structure for solar technology distinguishes between the divisions Medium Power Solutions, Power Plant Solutions, Off-Grid Solutions and Service, thus placing different customer groups and varying market requirements more efficiently than before at the center of our activities. Each division with its own management and all functionalities is given the maximum independence. The directors of the divisions are responsible for the domestic and foreign business and report directly to the Managing Board. The new structure of the SMA Group will be finalized in the course of 2011.
Our proximity to customers and our range of excellent services are of incalculable value. This includes, for instance, the extension of programs for solar power professionals. We will exploit this competitive edge, since we are in an excellent position to benefit from the global development towards renewable energies. Our claim as the world market leader is clear and simple: to provide the technically best product for all installations, all modules and all power classes.
Niestetal, May 4, 2011
SMA Solar Technology AG The Managing Board
€ 339.3 million
€ 255.9 million
028
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| STATEMENT OF COMPREHENSIVE INCOME SMA GROUP | 030 | |
|---|---|---|
| CONSOLIDATED BALANCE SHEET SMA GROUP | 031 | |
| CONSOLIDATED STATEMENTS OF CASH FLOWS SMA GROUP | 032 | |
| STATEMENT OF CHANGES IN EQUITY SMA GROUP | 033 | |
| Notes | to the Condensed Interim |
|
| Financial | Statements as at March 31, 2011 |
034 |
| 034 034 035 036 |
1. Basic information 2. Consolidated group and principles of consolidation 3. Accounting and valuation policies 4. Segment reporting |
|
| 039 C |
Selected Notes to the Statement of omprehensive Income SMA Group |
|
| 039 | 5. Cost of sales | |
| 039 | 6. Selling expenses | |
| 040 | 7. Research and development expenses | |
| 040 | 8. General administrative expenses | |
| 041 | 9. Other operating income / other operating expenses | |
| 041 | 10. Benefits to employees and temporary employees | |
| 042 | 11. Financial result | |
| 042 | 12. Earnings per share |
Contents Interim Consolidated Financial Statements
Interim Management Report Interim Consolidated Financial Statements
Other Information
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| Jan. – March (Q1) 2011 |
Jan. – March (Q1) 2010 |
||
|---|---|---|---|
| Note | € '000 | € '000 | |
| Sales | 4 | 255,933 | 339,325 |
| Cost of sales | 5 | 194,648 | 208,922 |
| Gross profit | 61,285 | 130,403 | |
| Selling expenses | 6 | 12,607 | 11,978 |
| Research and development expenses | 7 | 19,222 | 17,194 |
| General administrative expenses | 8 | 12,713 | 9,163 |
| Other operating income | 9 | 4,211 | 4,376 |
| Other operating expenses | 9 | 7,298 | 3,999 |
| Operating profit (EBIT) | 13,656 | 92,445 | |
| Financial income | 1,513 | 589 | |
| Financial expenses | 441 | 260 | |
| Financial result | 11 | 1,072 | 329 |
| Profit before income taxes | 14,728 | 92,774 | |
| Income tax expense | 4,423 | 26,157 | |
| Consolidated net profit | 10,305 | 66,617 | |
| of which attributable to non-controlling interest | 0 | –26 | |
| of which attributable to shareholders of SMA AG | 10,305 | 66,643 | |
| Earnings per share, basic (in €) | 12 | 0.30 | 1.92 |
| Earnings per share, diluted (in €) | 12 | 0.30 | 1.92 |
| Number of ordinary shares (in thousands) | 34,700 | 34,700 | |
| Consolidated net profit | 10,305 | 66,617 | |
| Other results | |||
| Unrealized gains (losses) from foreign currency translation |
–779 | 610 | |
| Net loss on available-for-sale financial assets | –591 | 0 | |
| Overall result | 8,935 | 67,227 | |
| of which attributable to non-controlling interest | 0 | –26 | |
| of which attributable to shareholders of SMA AG | 8,935 | 67,253 | |
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| Note | 03/31/2011 € '000 |
12 / 31 / 2010 € '000 |
|
|---|---|---|---|
| Non-current assets | |||
| Intangible assets | 13 | 32,257 | 29,242 |
| Fixed assets | 14 | 289,030 | 268,507 |
| Other financial investments | 75 | 73 | |
| Other financial assets | 16 | 1,936 | 3,890 |
| Deferred taxes | 25,276 | 23,687 | |
| 348,574 | 325,399 | ||
| Current assets | |||
| Inventories | 15 | 277,122 | 237,838 |
| Trade receivables | 131,338 | 117,268 | |
| Other financial assets | 16 | 305,385 | 196,798 |
| Claims for income tax refunds | 27,606 | 4,161 | |
| Other receivables | 9,387 | 15,901 | |
| Cash and cash equivalents | 26 | 183,059 | 354,083 |
| 933,897 | 926,049 | ||
| Total assets | 1,282,471 | 1,251,448 | |
| Shareholders' equity | |||
| Share capital | 34,700 | 34,700 | |
| Capital reserves | 119,200 | 119,200 | |
| Retained earnings | 583,443 | 574,508 | |
| Non-controlling interest | 2 | 2 | |
| 17 | 737,345 | 728,410 | |
| Non-current liabilities | |||
| Other provisions | 18 | 84,110 | 80,651 |
| Financial liabilities | 19 | 18,760 | 19,452 |
| Other financial liabilities | 20 | 813 | 0 |
| Other liabilities | 21 | 59,554 | 53,840 |
| Deferred taxes | 13,669 | 13,292 | |
| 176,906 | 167,235 | ||
| Current liabilities | |||
| Other provisions | 18 | 87,333 | 86,686 |
| Financial liabilities | 19 | 1,852 | 1,748 |
| Trade payables | 93,599 | 70,554 | |
| Other financial liabilities | 20 | 117,173 | 133,279 |
| Income tax liabilities | 39,573 | 39,468 | |
| Other liabilities | 21 | 28,690 | 24,068 |
| 368,220 | 355,803 | ||
| Total equity and liabilities | 1,282,471 | 1,251,448 |
031
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| Note | Jan. – March (Q1) 2011 € '000 |
Jan. – March (Q1) 2010 € '000 |
|
|---|---|---|---|
| Consolidated net profit | 10,305 | 66,617 | |
| Income tax expenses | 4,423 | 26,157 | |
| Financial result | –1,072 | –329 | |
| Depreciation and amortization | 10,416 | 5,616 | |
| Change in other provisions | 4,106 | 11,555 | |
| Losses from the disposal of assets | 21 | 836 | |
| Other non-cash expenses / revenue | 2,794 | 805 | |
| Interest received | 593 | 343 | |
| Interest paid | –6 | –472 | |
| Income tax paid | –28,975 | –32,633 | |
| Gross cash flow | 2,605 | 78,495 | |
| Increase of inventories | –40,393 | –60,635 | |
| Increase in trade receivables | –15,271 | –39,796 | |
| Increase / decrease in trade payables | 23,045 | –1,654 | |
| Change in other net assets / other non-cash transactions |
3,983 | 50,011 | |
| Net cash flow from operating activities | 23 | –26,031 | 26,421 |
| Payments for investments in fixed assets | –30,108 | –33,581 | |
| Proceeds from the disposal of fixed assets | 202 | –41 | |
| Payments for investments in intangible assets | –5,113 | –6,098 | |
| Payments for the acquisition of business units | 0 | –2,418 | |
| Payments for the acquisition of securities and other financial assets |
–109,059 | 0 | |
| Net cash flow from investing activities | 24 | –144,078 | –42,138 |
| Repayment of debt | –588 | –48 | |
| Net cash flow from financing activities | 25 | –588 | –48 |
| Net increase / decrease in cash and cash equivalents | –170,697 | –15,765 | |
| Change in cash and cash equivalents due to exchange rate effects |
–327 | 37 | |
| Cash and cash equivalents as of 01 / 01 | 354,083 | 225,010 | |
| Cash and cash equivalents as of 03 / 31 | 26 | 183,059 | 209,282 |
008
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| Equity attributable to the shareholders of the parent company | |||||||
|---|---|---|---|---|---|---|---|
| Share capital € '000 |
Capital reserves € '000 |
Retained earnings € '000 |
Market valuation of securities € '000 |
Total € '000 |
Equity attributable to non-controlling interest € '000 |
Consolidated shareholders' equity € '000 |
|
| Shareholders' equity as of January 1, 2010 |
34,700 | 119,200 | 253,687 | 0 | 407,587 | 0 | 407,587 |
| Consolidated net profit Q1 2010 | 0 | 0 | 66,643 | 0 | 66,643 | –26 | 66,617 |
| Differences from currency translation | 0 | 0 | 610 | 0 | 610 | 0 | 610 |
| Overall result | 67,227 | ||||||
| Changes in minority interests | 0 | 0 | 0 | 0 | 0 | 82 | 82 |
| Shareholders' equity as of March 31, 2010 |
34,700 | 119,200 | 320,940 | 0 | 474,840 | 56 | 474,896 |
| Shareholders' equity as of January 1, 2011 |
34,700 | 119,200 | 574,508 | 0 | 728,408 | 2 | 728,410 |
| Consolidated net profit Q1 2011 | 0 | 0 | 10,305 | 0 | 10,305 | 0 | 10,305 |
| Changes not shown in the income statement |
0 | 0 | 0 | –591 | –591 | 0 | –591 |
| Differences from currency translation | 0 | 0 | –779 | 0 | –779 | 0 | –779 |
| Overall result | 8,935 | ||||||
| Changes in minority interests | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Shareholders' equity as of March 31, 2011 |
34,700 | 119,200 | 584,034 | –591 | 737,343 | 2 | 737,345 |
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The Condensed Interim Consolidated Financial Statements of SMA Solar Technology AG as at March 31, 2011 were prepared – as were the Consolidated Financial Statements as at December 31, 2010 – in compliance with the International Financial Reporting Standards (IFRS) adopted and published by the International Accounting Standards Board (IASB), as endorsed and defined as mandatory by the European Union. Accordingly, the Interim Financial Statements of SMA Technology AG are prepared in line with IAS 34 Interim Financial Reporting in the 2011 fiscal year. In accordance with the regulations of IAS 34, a condensed reporting format compared with the Consolidated Financial Statements as at December 31, 2010 was chosen. The Condensed Financial Statements do not include all the information and disclosures required for Consolidated Financial Statements and are therefore to be read in conjunction with the Consolidated Financial Statements as at December 31, 2010.
The Condensed Interim Financial Statements were prepared in euros. Unless indicated otherwise, all amounts stated were rounded to full thousands of euros (€ '000) or millions of euros (€ million) for the sake of clarity.
The Managing Board of SMA Solar Technology AG approved the Interim Consolidated Financial Statements on May 4, 2011 for submission to the Supervisory Board.
The registered office of the Company is Sonnenallee 1, 34266 Niestetal, Germany. The shares of SMA Solar Technology AG are traded publicly; they are listed in the Prime Standard of the Frankfurt Stock Exchange. Since September 22, 2008, they have been listed in the technology index TecDAX.
The SMA Group produces in Germany, the USA and Canada and distributes inverters throughout the world. More detailed information on the segments is provided in section 4.
The scope of consolidation as at December 31, 2010 has changed with respect to December 31, 2009 and now includes the newly incorporated companies SMA Immo GmbH&Co. KG (Niestetal) ("SMA Immo"), formerly SMA Immo GmbH (Niestetal), SMA Solar Technology Beteiligungsgesellschaft mbH (Niestetal), and the newly incorporated companies SMA Solar Technology Canada Inc. (Vancouver), SMA Solar India Private Limited (Mumbai), and SMA Solar UK Ltd. (London). All companies were fully consolidated. The company so far operating under the name of SMA Service GmbH in Niestetal was renamed SMA Immo Beteiligungs GmbH (Niestetal). Non-controlling interest's share in equity of the consolidated companies is shown separately within equity.
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008
The IFRS 3 rule was not applied to the acquisition of shares in SMA Immo. It was not applicable in this case because this acquisition does not involve a business as defined in IFRS 3. Rather, this transaction concerns the acquisition of a group of assets. The costs of acquisition were allocated to the individually identifiable assets on the basis of their relevant fair values. There have been no significant effects on the net assets, financial position and results of operations in the Consolidated Financial Statements of SMA Solar Technology AG.
The scope of consolidation as at March 31, 2011 was identical to that as at December 31, 2010. The Interim Consolidated Financial Statements are based on the Financial Statements of SMA Solar Technology AG and of the subsidiaries included in consolidation, which are prepared in accordance with uniform accounting policies applicable throughout the Group.
More detailed information is provided in the Notes to the Consolidated Financial Statements as at December 31, 2010.
There were no changes to the accounting and valuation policies in the present Interim Consolidated Financial Statements as at March 31, 2011 compared with the Consolidated Financial Statements of SMA Solar Technology AG as at December 31, 2010. A detailed description of these policies is published in the Notes to the Consolidated Financial Statements as at December 31, 2010.
The SMA Group has implemented all accounting standards that are to be applied mandatorily from the 2011 fiscal year in the preparation of the Interim Consolidated Financial Statements. This relates primarily to IAS 1 "Presentation of Financial Statements". The other standards to be applied initially in fiscal 2011 have no significant impact on the Interim Consolidated Financial Statements.
The SMA Group has implemented all accounting standards that are to be applied mandatorily from the 2011 fiscal year in the preparation of the Consolidated Financial Statements.
This relates to:
Minimum Funding Requirements and Their Interaction (amendment)
Notes to the Condensed Interim Financial Statements as at March 31, 2011
004 The Share
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The standards to be applied initially in the fiscal year 2011 have no significant impact on the Interim Consolidated Financial Statements. The Consolidated Financial Statements as at December 31, 2010 contain a detailed description of the new accounting standards that are on principle relevant to the SMA Group.
The Group's operating segments were defined in compliance with the regulations contained in IFRS 8 and match those of the Consolidated Financial Statements as at December 31, 2010. Sales in the Photovoltaics Technology division are subject to fluctuations, i. a., because of discontinuous incentive programs.
The segment information pursuant to IFRS 8 is made up as follows for the first quarters of 2011 and 2010:
| Segment | Photovoltaics Technology | |||
|---|---|---|---|---|
| Medium Power Solutions | High Power Solutions | |||
| € million | Q1 2011 | Q1 2010 | Q1 2011 | Q1 2010 |
| External sales | 189.6 | 309.4 | 56.6 | 23.2 |
| Internal sales | 11.0 | 12.4 | 3.1 | 5.1 |
| Total sales | 200.6 | 321.8 | 59.7 | 28.3 |
| Depreciation and amortization | 4.4 | 3.7 | 0.6 | 0.6 |
| Operating profit (EBIT) | 0.3 | 88.3 | 12.9 | 1.1 |
| Sales by regions | ||||
| Germany | 78.6 | 206.0 | 5.9 | 10.1 |
| European Union | 69.5 | 73.2 | 26.3 | 10.4 |
| Third-party countries | 47.1 | 40.7 | 24.8 | 3.1 |
| Sales deductions | –5.6 | –10.5 | –0.4 | –0.4 |
| External sales | 189.6 | 309.4 | 56.6 | 23.2 |
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Notes to the Condensed Interim Financial Statements as at March 31, 2011
| Railway Technology | Electronics Manufacturing | ||||||
|---|---|---|---|---|---|---|---|
| Railway Technology | Electronics Manufacturing | Reconciliation | Continuing operations | ||||
| Q1 2011 | Q1 2010 | Q1 2011 | Q1 2010 | Q1 2011 | Q1 2010 | Q1 2011 | Q1 2010 |
| 7.5 | 5.6 | 2.2 | 1.1 | 0.0 | 0.0 | 255.9 | 339.3 |
| 2.3 | 4.2 | 65.7 | 80.7 | –82.1 | –102.4 | 0.0 | 0.0 |
| 9.8 | 9.8 | 67.9 | 81.8 | –82.1 | –102.4 | 255.9 | 339.3 |
| 0.1 | 0.1 | 1.0 | 1.0 | 4.3 | 0.2 | 10.4 | 5.6 |
| 0.7 | 0.5 | 3.1 | 6.2 | –3.3 | –3.7 | 13.7 | 92.4 |
| 2.1 | 1.6 | 1.4 | 1.0 | 0.0 | 0.0 | 88.0 | 218.7 |
| 4.1 | 2.1 | 0.0 | 0.1 | 0.0 | 0.0 | 99.9 | 85.8 |
| 1.3 | 1.9 | 0.8 | 0.0 | 0.0 | 0.0 | 74.0 | 45.7 |
| 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | –6.0 | –10.9 |
| 7.5 | 5.6 | 2.2 | 1.1 | 0.0 | 0.0 | 255.9 | 339.3 |
Notes to the Condensed Interim Financial Statements as at March 31, 2011
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004
The reconciliation of the total segment operating profit (EBIT) pursuant to IFRS 8 to profit before income taxes produces the following figures:
| Q1 2011 € million |
Q1 2010 € million |
|
|---|---|---|
| Total segment earnings (EBIT) | 17.0 | 96.0 |
| Eliminations | –3.3 | –3.6 |
| Consolidated operating profit (EBIT) | 13.7 | 92.4 |
| Financial result | 1.0 | 0.3 |
| Profit before income taxes | 14.7 | 92.7 |
Circumstances are shown in the reconciliation which by definition are not part of the segments. In addition, unallocated parts of the Group head office, including cash and cash equivalents and owned buildings, are included, and their expenses are assigned to the segments. Business relations between the segments are eliminated in the reconciliation.
Segment assets as at March 31, 2011 increased as against the reporting date of the last Consolidated Financial Statements (December 31, 2010) by € 36.3 million in the Medium Power Solutions segment, by € 2.7 million in the High Power Solutions segment and by € 13.1 million in the Electronics Manufacturing segment.
In the reconciliations as at March 31, 2011, segment assets increased by € 22.8 million compared to December 31, 2010.
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008
| Q1 2011 € '000 |
Q1 2010 € '000 |
|
|---|---|---|
| Material expenses | 130,869 | 142,904 |
| Personnel expenses | 37,383 | 38,954 |
| Depreciation | 9,270 | 3,480 |
| Other | 17,126 | 23,584 |
| 194,648 | 208,922 |
Cost of sales includes, as direct costs, the product-related material expenses as well as all other expenses for production, purchasing and service. Production expenses include the cost for device production, production-related testing areas and warehouse management. Service expenses consist of the cost for global customer service, commissioning of central inverters, device repair and the service hotline. The other expenses contain proportionate costs for facility management and IT.
| Q1 2011 € '000 |
Q1 2010 € '000 |
|
|---|---|---|
| Material expenses | 225 | 101 |
| Personnel expenses | 7,246 | 7,406 |
| Depreciation | 110 | 304 |
| Other | 5,026 | 4,167 |
| 12,607 | 11,978 |
Selling expenses include the expenses incurred for global sales activities, internal sales departments and marketing. The other expenses contain proportionate costs for facility management and IT.
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| Q1 2011 € '000 |
Q1 2010 € '000 |
|
|---|---|---|
| Material expenses | 567 | 646 |
| Personnel expenses | 13,085 | 15,406 |
| Depreciation | 886 | 1,018 |
| Other | 5,810 | 3,580 |
| 20,348 | 20,650 | |
| Capitalized development projects | –1,126 | –3,456 |
| 19,222 | 17,194 |
Research and development expenses include all costs that may be attributed to the areas of product development, development-related testing and product management. In addition, costs for technical documentation and patent management are assigned to research and development expenses. The other expenses contain proportionate costs for facility management and IT.
| Q1 2011 € '000 |
Q1 2010 € '000 |
|
|---|---|---|
| Material expenses | 21 | 29 |
| Personnel expenses | 8,565 | 7,975 |
| Depreciation | 149 | 311 |
| Other | 3,978 | 848 |
| 12,713 | 9,163 |
Administrative expenses include costs for the Managing Board, quality management and for the areas of finance and human resources. The expenses for facility management and IT were allocated to all functional areas based on their planned consumption.
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Other operating income mainly comprises income from foreign currency valuation and nonoperating income, for example, from assets classified as "at fair value through profit or loss".
Other operating expenses include, in particular, expenses incurred from foreign currency valuation, impairment losses on receivables and inventories, expenses for the disposal of tangible assets as well as for assets classified as "at fair value through profit or loss".
| Q1 2011 € '000 |
Q1 2010 € '000 |
|
|---|---|---|
| Wages and salaries | 49,032 | 49,974 |
| Expenses for temporary employees | 8,240 | 12,293 |
| Social security contribution and welfare payments | 9,008 | 7,570 |
| 66,280 | 69,837 |
| Q1 2011 | Q1 2010 | |
|---|---|---|
| Research and Development | 800 | 598 |
| Production and Service | 2,333 | 1,483 |
| Sales and Administrative | 1,079 | 759 |
| 4,212 | 2,840 | |
| Trainees and interns | 431 | 329 |
| Temporary employees | 1,092 | 1,487 |
| 5,735 | 4,656 |
042
008 Interim Management Report
026 Interim Consolidated Financial Statements
052 Other Information
| Q1 2011 € '000 |
Q1 2010 € '000 |
|
|---|---|---|
| Interest income | 1.512 | 588 |
| Other financial income | 1 | 1 |
| Financial income | 1.513 | 589 |
| Interest expenses | 182 | 191 |
| Other financial expenses | 63 | 0 |
| Interest share from valuation | 196 | 69 |
| Financial expenses | 441 | 260 |
| Financial result | 1.072 | 329 |
The higher interest income reflects the current development of interest levels and the higher balance of cash and cash equivalents.
Earnings per share are calculated by dividing the consolidated earnings attributable to the shareholders by the weighted average of ordinary shares in circulation during the period.
The consolidated earnings attributable to the shareholders are the consolidated net profit after tax, excluding the portion attributable to non-controlling interests. Since there are no shares held by the Company on the reporting date nor are there any other special cases, the number of ordinary shares issued equates to the number of shares in circulation.
The calculation of earnings in relation to the weighted average number of shares in accordance with IAS 33 yields earnings of € 0.30 per share for the period from January 1 to March 31, 2011. For the period from January 1 to March 31, 2010, there were earnings of € 1.92 per share in relation to the weighted average number of shares in accordance with IAS 33 with an average weighted number of shares of 34.7 million.
There are no options or conversion options at the reporting date. Therefore, there are no diluting effects so that the diluted and basic earnings per share are the same.
The Share Interim Management Report 008
Interim Consolidated Financial Statements 026
Other Information 052
| 03/31/2011 € '000 |
12 / 31 / 2010 € '000 |
|
|---|---|---|
| Software | 7,608 | 8,393 |
| Development projects | 23,649 | 19,849 |
| Prepayments / intangible assets in progress | 1,000 | 1,000 |
| 32,257 | 29,242 |
The additions to the development costs reflect the intensified development activities to secure the SMA Group's technology leadership. The additions to intangible assets result, among other things, from the purchase of software licenses for the growth-related expansion of the ERP system.
| 03/31/2011 | 12 / 31 / 2010 | |
|---|---|---|
| € '000 | € '000 | |
| Land and buildings incl. buildings on third-party property | 114,081 | 114,180 |
| Technical equipment and machinery | 34,120 | 34,706 |
| Other equipment, fixtures and furniture | 76,977 | 77,252 |
| Prepayments | 63,852 | 42,369 |
| 289,030 | 268,507 |
The prepayments in the period from January 1 to March 31, 2011 include investments for the expansion of the site at Sandershäuser Berg and for the construction of office buildings amounting to € 13.3 million.
004
044
008 Interim Management Report
026 Interim Consolidated Financial Statements
052 Other Information
| 03/31/2011 € '000 |
12 / 31 / 2010 € '000 |
|
|---|---|---|
| Raw materials, consumables and supplies | 159,901 | 148,548 |
| Unfinished goods, work in progress | 24,634 | 17,895 |
| Finished goods and goods for resale | 92,414 | 71,091 |
| Prepayments | 173 | 304 |
| 277,122 | 237,838 |
Inventories are measured at the lower value of acquisition or production costs and net realizable value. In fiscal 2010, SMA built up stocks of raw materials, consumables and supplies in a targeted fashion in order to guarantee a higher degree of delivery capacity. SMA only produces once an order has been placed. The change in the impairment on inventories, included under expenses as production costs, amounts to € 1.1 million (Q1 2010: € 0.1 million).
As at March 31, 2011, other current financial assets include in particular time deposits amounting to € 140.0 million (December 31, 2010: € 190.0 million) with a term to maturity of over three months and, initially, financial assets amounting to € 159.2 million as well as accrued interest. The other non-current financial assets include a rent deposit for a building in the USA amounting to USD 2.5 million (December 31, 2010: USD 5.0 million).
The change in equity, including effects not shown in the income statement, is presented in the Statement of Changes in Equity.
Interim Management Report Interim Consolidated Financial Statements 026
Other Information 052
008
Other provisions account for all discernible risks and all contingent liabilities on the balance sheet date and break down as follows:
| 03/31/2011 € '000 |
12 / 31 / 2010 € '000 |
|
|---|---|---|
| Warranties Other obligations deriving from sales transactions Other |
122,652 42,360 6,431 171,443 |
118,091 44,342 4,904 167,337 |
Warranty provisions consist of general warranty obligations (periods of between five and ten years) for the various product areas within the Group. In addition, provisions are set aside for individual cases, and they are used in the following year.
The remaining other obligations deriving from sales transactions include several claims that have been asserted and are currently being examined and negotiated, in particular related to the use of rights and emanating from supply contracts. Clarification regarding these matters is expected in the current fiscal year. Other provisions mainly include provisions for long-service anniversaries, death benefits and partial retirement benefits as well as service-related benefits.
| 03/31/2011 € '000 |
12 / 31 / 2010 € '000 |
|
|---|---|---|
| Current finance lease liabilities | 2 | 4 |
| Non-current finance lease liabilities | 5 | 6 |
| Liabilities towards credit institutions | 20,250 | 20,655 |
| Derivative financial liabilities | 355 | 535 |
| 20,612 | 21,200 |
Derivative financial liabilities consist of interest derivatives related to the initial real estate financing of SMA Immo.
008 Interim Management Report
026 Interim Consolidated Financial Statements
052 Other Information
| 03/31/2011 € '000 |
12 / 31 / 2010 € '000 |
|
|---|---|---|
| Liabilities Human Resources department | 103,122 | 99,468 |
| Liabilities Sales department | 13,516 | 32,699 |
| Other | 1,348 | 1,112 |
| 117,986 | 133,279 |
Liabilities in the Human Resources area contain obligations towards employees regarding performance-based bonuses, positive vacation and flexitime balances as well as variable salary components and contributions to the worker's compensation association. The liabilities in the Sales area primarily contain liabilities towards customers from advance payments received and bonus agreements.
| 03/31/2011 € '000 |
12 / 31 / 2010 € '000 |
|
|---|---|---|
| Deferred income for extended guarantees | 59,161 | 53,397 |
| Liabilities from prepayments received | 24,324 | 19,661 |
| Liabilities due to tax authorities | 2,959 | 3,116 |
| Liabilities from subsidies received | 1,474 | 1,524 |
| Other | 326 | 210 |
| 88,244 | 77,908 |
The accrual item for extended warranties includes liabilities from chargeable guarantee extensions granted for the products in the Photovoltaics Technology division. The main items included in the liabilities towards tax authorities are tax liabilities from payroll accounting as well as turnover tax liabilities. The liabilities from subsidies received relate to taxable government grants from funds of the common-task program "Improvement of the Regional Economic Structure" (EU GA), granted as investment subsidies. The total amount of releases of government grants is stated under other operating income.
Interim Consolidated Financial Statements 026
Interim Management Report
Other Information 052
008
As at March 31, 2011, the Balance Sheet included one forward transaction intended to hedge the exchange rate risks of expected future sales generated with customers in the USA. The derivative is still classified as held for trading. It is not part of a hedging relationship as defined by IAS 39. The acquisition of SMA Immo has resulted in the initial recognition of interest derivatives in fiscal 2010. SMA Immo is exposed to interest risks due to existing financial liabilities. To secure the interest in the long term and to have a secure basis for calculating the financing, interest derivatives were concluded for a part of these financial liabilities. The derivatives are classified as held for trading. They are not part of a hedging relationship as defined by IAS 39.
As at March 31, 2011, there were fund shares (amounting to € 49.8 million) which were classified as held for trading, and interest-bearing securities classified as available for sale amounting to € 89.3 million. In addition, there was a security held to maturity of € 20.1 million.
The liquid funds shown in the Statements of Cash Flows correspond to the balance sheet item "Cash and cash equivalents".
The gross cash flow of € 2.6 million (Q1 2010: € 78.5 million) reflects the operating income prior to commitment of funds.
Net cash flow from operating activities decreased in fiscal 2011 to € – 26.0 million (Q1 2010: € 26.4 million). The decrease is mainly attributable to the year-on-year lower gross cash flow (€ – 75.9 million).
The increase in net working capital results primarily from a targeted increase in the raw material stocks of critical components and the business-related increase in finished goods. Inventories increased on a year-on-year basis by a gross amount of € 40.4 million to a total of € 277.1 million. The changes in other net assets are due primarily to growth-related increases in liabilities for guarantee extensions, prepayments received, employee bonus payments and the liabilities under vacation and flexitime commitments.
048
Interim Management Report 008
Interim Consolidated Financial Statements 024
Other Information 052
The net cash flow from investing activities rose in the year under review to € – 144.1 million as compared to the previous year's figure of € –42.1 million, due to investments in new production capacities. The outflow of funds for investments in fixed assets and intangible assets amounted to € 35.2 million (Q1 2010: € 39.7 million). Pursuant to IAS 7.17, monetary investments with a term to maturity of more than three months are allocated to the net cash flow from investing activities. The outflow of funds for the acquisition of the shares in SMA Immo in fiscal 2010 amounted to € 1.4 million. In addition, all of the short-term financial liabilities on current accounts amounting to € 1.1 million were assumed following the acquisition.
The net cash flow from financing activities includes the redemption of credit liabilities of SMA Immo in the period under review.
The cash and cash equivalents amounting to € 183.1 million (December 31, 2010: € 354.1 million) include cash in hand, bank balances and short-term deposits with an original term to maturity of less than three months. Together with the time deposits with a term to maturity of more than three months and other financial assets, this results in financial resources amounting to € 482.3 million (December 31, 2010: € 544.1 million).
Other Disclosures
008
049
Interim Consolidated Financial Statements 026
Interim Management Report
Other Information 052
There were no significant events on or after the reporting date other than those presented in or recognizable from the statements in the Notes to the Consolidated Financial Statements.
There were no significant changes in respect of related parties as against December 31, 2010. The scope of transactions with team-time GmbH in the first quarter of 2011 has remained unchanged.
Niestetal, May 4, 2011
SMA Solar Technology AG The Managing Board
Günther Cramer Peter Drews Jürgen Dolle Roland Grebe
Uwe Hertel Pierre-Pascal Urbon Marko Werner
008 Interim Management Report
026 Interim Consolidated Financial Statements
052 Other Information
050
Auditor's Review Report
We have reviewed the Condensed Interim Consolidated Financial Statements – comprising the Condensed Statement of Comprehensive Income, Condensed Balance Sheet, Condensed Statement of Changes in Equity, Condensed Statements of Cash Flows and Selected Explanatory Notes – together with the Interim Group Management Report of SMA Solar Technology AG, Niestetal, for the period from January 1, 2011 to March 31, 2011, which are components of the Quarterly Financial Report pursuant to Section 37x (3) of the German Securities Trading Act (WpHG). The preparation of the Condensed Interim Consolidated Financial Statements in accordance with the International Financial Reporting Standards (IFRS) applicable to interim financial reporting as adopted by the EU and of the Interim Group Management Report in accordance with the provisions of the German Securities Trading Act applicable to interim group management reports is the responsibility of the Company's Managing Board. Our responsibility is to issue a review report on the Condensed Interim Consolidated Financial Statements and on the Interim Group Management Report based on our review.
We conducted our review of the Condensed Interim Consolidated Financial Statements and of the Interim Group Management Report in accordance with German generally accepted standards for the review of financial statements promulgated by the Institute of Public Auditors in Germany (Institut der Wirtschaftsprüfer – IDW). Those standards require that we plan and perform the review so that we can preclude through critical evaluation, with moderate assurance, that the Condensed Interim Consolidated Financial Statements have not been prepared, in all material respects, in accordance with the IFRSs applicable to
Auditor's Review Report
Interim Consolidated Financial Statements 026
Interim Management Report
Other Information 052
008
interim financial reporting as adopted by the EU and that the Interim Group Management Report has not been prepared, in all material respects, in accordance with the provisions of the German Securities Trading Act applicable to interim group management reports. A review is limited primarily to inquiries of company personnel and analytical assessments and therefore does not provide the assurance attainable in a financial statements audit. Since, in accordance with our engagement, we have not performed a financial statement audit, we cannot express an audit opinion.
Based on our review, no matters have come to our attention that cause us to presume that the Condensed Interim Consolidated Financial Statements have not been prepared, in all material respects, in accordance with the IFRSs applicable to interim financial reporting as adopted by the EU nor that the Interim Group Management Report has not been prepared, in all material respects, in accordance with the provisions of the German Securities Trading Act applicable to interim group management reports.
Hanover, May, 4, 2011
Deloitte&Touche GmbH Wirtschaftsprüfungsgesellschaft
| Scharpenberg | Schwibinger |
|---|---|
| Wirtschaftsprüfer | Wirtschaftsprüfer |
| (German Public Auditor) | (German Public Auditor) |
008 Interim Management Report
024 Interim Consolidated Financial Statements
052 Other Information Disclaimer
052
This Quarterly Financial Report was published in German and English on May 13, 2011. The German version is authoritative. Both versions are available as downloads on our Web site:
www.SMA.de/IR/Finanzberichte
www.SMA.de/IR/FinancialReports
This document contains forward-looking statements and information – that is, statements related to future, not past, events. These statements may be identified by words such as "expects", "looks forward to", "anticipates", "intends", "plans", "believes", "seeks", "estimates", "will", "projects" or words of similar meaning. Such statements are based on our current expectations and certain assumptions, and are, therefore, subject to certain risks and uncertainties. A variety of factors, many of which are beyond SMA's control, affect our operations, performance, business strategy and results and could cause the actual results, performance or achievements of SMA to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements. For us, particular uncertainties arise, among others, from changes in general economic and business conditions (including margin developments), in the legal and regulatory framework, changes in currency exchange rates and interest rates. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in the relevant forward-looking statement as expected, anticipated, intended, planned, believed, sought, estimated or projected. SMA does not intend or assume any obligation to update or revise these forward-looking statements in light of developments which differ from those anticipated.
| ma y 19, 2011 |
HSBC Luxembourg Event, Luxembourg |
|---|---|
| ma y 20, 2011 |
Deutsche Bank German & Austrian Corporate Conference 2011, Frankfurt am Main |
| ma y 26, 2011 |
Annual General Meeting 2011, Kassel, Kongress Palais |
| August 12, 2011 | Publication of the Half-Yearly Financial Report January to June 2011, Analyst Conference Call: 9:00 a. m. CET |
| Novemb er 11, 2011 |
Publication of the Quarterly Financial Report January to September 2011, Analyst Conference Call: 9:00 a. m. CET |
pUblisher SMA Solar Technology AG coNcept UNd desiGN FIRST RABBIT GmbH, Cologne Text SMA Solar Technology AG pUblicatioN date May 13, 2011
Sonnenallee 1 34266 Niestetal Germany Phone: + 49 561 9522 0 Fax: + 49 561 9522 100 www.SMA.de
Stephanie Kniep Phone: + 49 561 9522 2222 Fax: + 49 561 9522 2223 E-mail: [email protected]
SMA Solar Technology AG Sonnenallee 1 34266 Niestetal Germany Phone: + 49 561 9522 0 Fax: + 49 561 9522 100 E-mail: [email protected] www.SMA.de
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