SMA Solar Technology AG

Ladies and gentlemen, welcome and thank you for joining the SMA Conference Call for the First Half Financial Results 2024. Throughout today's recorded presentation, all participants have been listened only mode. The presentation will be followed by a question and answer session. If you would like to ask a question, you may click the Q&A button on the left side of the screen and then raise your hand. For operator assistance, please press the operator assistant button on the left side of your screen. I would now like to turn the conference over to Barbara Gregor, CFO. Please go ahead, madam.

Thank you, operator, and welcome, everyone. We very much appreciate that you are taking the time for this investor and analyst call on our first half year 2024 results. Today, my colleague and SMA CEO Jürgen Reinhardt joins to provide us insights into the most important current business developments. Welcome to the call, Jürgen. Thanks. This conference call is scheduled for up to 60 minutes and will be recorded. After the management presentation, we will be happy to answer your questions. Today's presentation is available on our investor relations website. The replay will also be available on investor relations website as of tomorrow. Our agenda for today. First, I will give a review of our six months 2024 figures and after that, Jürgen, We'll walk you through the current developments on innovations, the latest solutions, and our platform strategy. Last but not least, we will have a look on our order backlog as well as our outlook for the fiscal year 2024. I expect the presentation part of the call to last about 30 minutes. After the presentation, we are happy to answer your questions. I refer to the disclaimer on page two. So let's move to page four, financial highlights of the first half 2024. Group sales reached 759 million euros and were thus slightly below last year with 779 million euros. Large-scale continues to perform strongly, while home and C&I revenues are still affected by high stock levels at distributors and installers. This situation is also influenced by postponements of investments from households and companies. Due to the high interest rates and the hope that prices for complete installed PV systems continue to fall. I will provide more insights on the individual segments in a moment. EBITDA came in at 81 million euros after 125 million euros in the first half 2023. And free cash flow reached minus 203 million euros, resulting from an increase of networking capital. related to the reduced sales in home and C&I. Order backlog stood at 1.35 billion euros end of June. Now let's go to page 5, sales by regions and by segments. On the left-hand side, you can see that EMEA is still our biggest region, but came down to 50% from 75% last year. due to the soft sales development in home and C&I from January to June. America's revenues share increased from 20% to 41%, mainly driven by the large-scale segment. The large-scale segment remains the strongest in this region, with more than 90%, and C&I contributed with 6%. The APEC region's share of SMS sales increased from 5% to 9% also from strong growth of the large-scale business, which more than doubled in this region. Here, Australia again showed a very strong development. The top three markets for the SMA group in the first six months 2024 were US, Germany, and Australia. Now, let me walk you through the sales per seconds on the right side of the slide. As you all know, the sales development in home and in CNI is still driven by a delayed increase in order intake due to the slower than expected reduction of inventories as distributors and installers. Additionally, lower electricity prices, persistently high interest rates, And customers' expectations that prices from small and medium-sized PV systems will continue to fall have also led to a postponement of investments. Against this backdrop, revenues in home segment decreased by 66% from €327 million last year to €110 million at the end of June. EMEA remained the biggest region for the segment. The segment's share of total sales thus came down to 15% compared to 42% in the first half year 2023. CNI achieved 150 million euros compared to 194 million euros in the first half of last year. EMEA remained the strongest region for this segment with 77% share of total revenues. Large-scale again showed a strong revenue development, more than doubling the sales from €257 million compared to the first six months of 2023 to €536 million end of June this year. Americas remains the strongest region, marking up 54% of the segment sales. As expected, the strong project pipeline built up since H2 of last year is now being realized in our revenues. Now let me provide you with some more information on the first six months 2024 profitability. Profitability for the group was affected by product mix, lower utilization of production capacities, as well as increased cost factors, including effects from inflation. EBITDA came in with 81 million euros compared to 125 million euros last year. EBITDA includes a positive one-time other income which was booked in Q1 from the sale of SMA Alex on stake in the amount of 19 million euros. EBITDA margin reached 11% compared to 16% last year, where last year's margin was strongly influenced by a positive product mix. With about 24 million euros, depreciation was slightly above last year's level of 19 million euros. Now let's have a look at the segments in detail. Home Solutions EBIT was minus 22 million euros in the first six months 2024 due to the low level of sales, changes in product mix and higher fixed costs. This led to an EBIT margin of minus 20% compared to a positive margin of 29% last year. C&I Solutions EBIT declined sharply from 7 million euros in the first half 2023 to minus 45 million euros this year. Also due to the lower sales level and lower utilization of production capacities, and the corresponding lack of fixed cost coverage. EBIT margin therefore came in at about minus 40% compared to 3% last year. Our large scale segment showed the biggest earnings improvement in the first half year, 2024, reaching 101 million euros compared to 9 million euros in 2023. The increase in sales and the associated fixed cost regression combined with a profitable product mix contributed to this very positive margin development. Thus, EBRT margin increased to 19% compared to 3% last year. The overall EBRT margin for the SMA group amounted to 7% compared to 14% in 2023. Now I will move on to the balance sheet and the networking capital development on the next slide. Networking capital, which is shown on top left of the page, reached 588 million euros and is above the 2023 year end figures of 392 million euros. This resulted in a ratio of 31%, which is slightly above the upper end of the management target corridor of 27 to 30%. Let me explain the networking capital development in the period under review. Inventories end of 2023 were at 559 million euros and increased in the first six months to 712 million euros due to purchasing commitments above our current demand in home and CNI, resulting from the high inventory level on our customer side. As the turnaround in home and CNI, which was anticipated for the second half of the year, will not materialize, to reduce our inventories for finished products and raw materials as quickly as possible to free up cash. For this, we have implemented several sales activities to stimulate the pull from the distributors, installers, and end users, including additional bonus programs for existing and new customers as well as several additional activities to win new customers. Trade receivables decreased in line with the lower revenues in the first half of the financial year. Trade payables also decreased as usual compared to year end, also reflecting our lower purchasing volume for home and C&I. Advanced payments received from our customers decreased slightly compared to year-end 2023. But with a good level of incoming customer orders currently in our large-scale segment, we expect this to increase above the 2023 level in the second half of the year 2024. Net cash came down from $220 83 million euro end of 2023 to 66 million euros, mainly as a result of the build up of networking capital in the first six months. Now let's have a look at the group balance sheet on the right side of the slide. And as I have already explained, the changes in the networking capital positions I will now focus on the significant changes in the other balance sheet positions. As I just explained, the change in net cash, I will start by explaining the changes in total cash and financial liabilities. In order to ensure that we constantly have a sufficient cash for our running operational activities, We have utilized 120 million euros from our revolving credit facility. This revolving credit facility has been negotiated with our banks last year as short-term financing for changes in networking capital. So exactly for our current situation. These are the 120 million euros which you see in the financial liabilities. and also explained the difference of our net cash of 66 million euro and our total cash of 186 million euros in the balance sheet. Regarding the other balance sheet items, non-current assets increased to 460 million euros, mainly reflecting investments into our product pipeline in the form of capitalized R&D project costs. Shareholders' equity increased from 686 to 715 million euros as per our net profit in the first half of the year. Provisions decreased from 201 million euros at the end of 2023 to 175 million euros, mainly as a result of the payment for performance-related bonuses in the second quarter. Other liabilities decreased slightly to 420 million euros, with the main effect being the slight decrease of advanced customer payments in H1. That concludes my explanation of the balance sheet, so let's now have a look at our summary of cash flow on the next slide. In the period under review, gross cash flow came in at 53 billion euros compared to 143 million euros in the first half 2023. as our operating result was below the extraordinary level of the first six months last year. Given the lower gross cash flow and the increase of networking capital, cash flow from operating activities amounted to minus 174 million euros compared to plus 130 million euros last year. The group invested 47 million euro in net capex in the first six months, with mainly composed of investments in our product portfolio, including capitalized R&D project costs and investments in fixed assets. The increased level of investment spending was mainly related to our new platform in large-scale and project solutions. For this new platform, we are expanding our production capacities and capabilities here in Germany. Considering all these effects, our free cash flow decreased from 81 million euros last year to minus 203 million euros in the first half 2024, mainly driven by higher networking capital. This is for the moment from my side, and I would like to hand over to Jürgen for the current developments and innovations going forward.

Jürgen. Thank you, Barbara, and a warm welcome also from my side. Now that Barbara has reported on the half-year figures, I would like to take this opportunity to say a few words about SMA's new product and market launches. So innovation has been SMA's strategy since the company was founded. This year, we celebrated the company's 1000th invention. And since our first patent, which was dating from 1997, 320 researchers have contributed to the current total of around 1,600 patents and utility models, which we hold in 21 countries. Our high standards of data security and the demands we place on the sustainability and long-liberty of our products and solutions set us apart from other market players, as well as the fact that the majority of our devices is designed and manufactured entirely in Germany. By the way, all the products you see on this page are designed and manufactured in Germany and are successful building blocks for our long-term platform strategy. These were, are, and will be decisive arguments when it comes to the sustainability of a reliable and, above all, secure energy supply from non-fossil sources. To show you that we will continue on this path, I would like to take the opportunity to report on the past year in which there were once again a number of SMA innovations on the global market. Let me give you a brief overview. Overview starting with the home solution segment. As announced in 2023, the new SMA eCharger is now available. So is the SMA home energy solution consisting of the Sunnyboy smart energy hybrid inverter and the SMA home storage battery. At the end of this year, we will launch a dynamic electric tariff together with a green energy provider, Lichtblick, which enables flexible tariffs for customers and will be a requirement for electricity providers planned for next year. The cooperation with Samsung, which started in 2023, is gaining momentum and now includes the integration of the Sunny Home Manager 2.0 and the integration of solar systems with SMA inverters in Samsung's smart home world, SmartThings. Perhaps you will have the opportunity to experience this at the roadshow that we will be conducting together with Samsung through German cities starting in September. This year we have extensively updated the SMA 360 degree app and the SMA Energy app to improve customer experience and convenience. Our global monitoring portal Sunny Portal powered by NXOS now works with all home inverters. In addition, we have qualified further batteries that are now compatible with the hybrid inverter SunnyTriPower Smart Energy and, of course, SunnyBoy Smart Energy. We are also expanding our portfolio in the commercial and industrial solution segment, offering our customers even more comprehensive solutions for their individual energy needs. The SMA commercial solar solution now also includes the SunnyTriPower 125 solar inverter, and the new SMA Data Manager M, which prepares solar and storage systems with the NXOS energy management platform for the next generation of energy management. In addition to the high performance, the Sunny TriPower 125 also complies with a new SMA design. Its slightly curved cover is fastened with a single central screw instead of the six individual screws of the previous model. In addition, it can handle higher currents and is therefore able to cope with the increasing output of modern PV modules. As the latest generation of all well-known SMA battery inverters for off-grid solutions, the new Sunny Island X supports power classes up to 60 kilowatts and thus also enables larger systems such as those required for the electrification of entire villages. Once again, the product fully being designed in Germany and produced here. We are also pleased that SMA commercial services now also includes planning, certification, and commissioning services, enabling us to offer our customers a complete range of solutions. These services will initially be introduced in Germany and will be expanded to other countries depending on the market situation. Let me now turn to our highly successful segment, large-scale and project solutions. Our flexible and integrative platform solution, which we call Sunny Central Flex, has the potential to change power generation worldwide. This was also recognized by the expert jury at this year's InterSolar Europe. They honored the Sunny Central Flex with a prestigious The Smarter E Award in the photovoltaic category. I'm particularly pleased about this prestigious award, which once again demonstrates SMA's innovative strength After the great success of the U.S. premium of this impressive platform solution, I'm convinced that Sunny Central Flex will transform large-scale energy projects in Europe and beyond in the future. Sunny Central Flex is a comprehensive and flexible solution for all power plant applications, from solar power generation to battery-based grid stabilization and hydrogen production. The system has also been specifically developed to improve the integration of renewable energies into power grids. At Intosoda, we also presented the Camopo software, which was very well received. It automates the optimization of hybrid power plants based on market prices, weather, and plant conditions. In contrast to manual planning, Comopo's SaaS model increases profitability under changing conditions and simulates different strategies to determine the optimal plant size. Comopo is integrated as an independent product into the overall solution in the large-scale segment, and as well as the SMA grid-forming solutions, ensuring grid security plays a key role in shaping the energy transition worldwide. Now, I would like to hand back to you, Barbara, for some words on order backlog and the outlook for 2024.