SMA Solar Technology AG

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 quarter 2025 results. Today in this call is my colleague and SMA CEO Jürgen Reinert. Welcome to the call, Jürgen. Thank you very much, Karwin. 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 Invested Relations website. The replay will also be available on the IR website shortly. Our agenda for today. First, I will give a review of our first quarter figures, followed by an update of the restructuring and transformation program. Last but not least, we'll have a look at order backlog as well as our outlook for the financial year 2025. I expect the presentation part to last about 30 minutes. After the presentation, we are happy to answer your questions. Well, as this is my first earnings call as the CFO of SMA, let me just briefly introduce myself. My name is Kaveh Ruhi, and I'm 46 years old. I joined SMA in July 2024. Prior to SMA, I was working in the international finance and services industry, including a leading strategy consultancy. My focus areas were strategy development, business planning and controlling, as well as M&A. Let me say I'm very excited about that, and I'm very much looking forward to working with you in the future. I refer to our disclaimer on page two. So let's move to page four, financial highlights for the first quarter 2025. Group sales reached 328 million euros and were below last year with 362 million euros in Q1 2024. Large scale continued to perform strongly while home and CNI revenues were still affected by the continuing market weakness and customer stock levels. Group EBITDA came in at 25 million euros after reaching 50 million euros in 2024. This was due, among other reasons, to low sales and the resulting lower fixed cost regression in the home and CNI segments. I will provide more insights on the individual segments in a moment. Free cash flow reached 96 million euros, mainly resulting from ongoing measures to reduce networking capital, which achieved good results in the first quarter. Total order backlog stood at 1.3 billion euros at the end of March. Now let's go to page five, sales by region and by segment. On the left-hand side, you can see that EMEA is still our biggest region, but came down to 48% from 68% in 2024 due to the soft sales development in home and CNI, which have the majority of their sales in this region. America's revenue share increased from 25% to 40%, mainly driven by the large scale segment. The large-scale segment remains the strongest in this region with more than 90%. The APEX region share decreased from 14% to 12%. Here, Australia again showed a very strong development, but other APEX markets were weak for SMA in Q1. Top three markets for the SMA group in the first quarter were the United States, the United Kingdom, and Italy. Now let me walk you through the sales per segment on the right-hand side of the slide. SACE development in home and CNI was driven by a slowly increasing but still soft order intake and a sustained overcapacity in the market. Additionally, lower electricity prices, high interest rates and increased uncertainty due to the current trade policy environment, particularly the considerable uncertainties resulting from US tariff policy and the countermeasures of other governments led to postponements of investments. Against this backdrop, revenues in the home segment decreased by 65% from 63 million euros in Q1 2024 to 22 million in the first quarter of this year. The segment's share of total sales thus came down to 7% compared to 17% in Q1 2024. EMEA remained our biggest region for the segment. D&I achieved 26 million euros compared to 17 million euros in Q1 2024. EMEA remained the strongest region for this segment with 74% share of total revenues. Large scale again showed a very strong revenue development from 229 million euros in Q1 24 to 280 million in Q1 25. All regions recorded double digit growth. Americas remained the strongest region with 39% of the segment sales. Now let me provide you more information on 2025 profitability. EBITDA came in with 25 million euros compared to 50 million euros in Q1 2024 due to low sales and the resulting lower fixed cost regression in home and CNI. Please note that this year's EBITDA includes a positive one-time effect from a claim settlement of around €10 million, while last year's results included a positive one-time effect from the sale of SMA's Alexon stake of €19 million. EBITDA margin reached thus about 8% compared to 14% in Q1 2024. With about €30 million, depreciation was nearly at the same level of Q1 last year with €11 million. Now let's have a look at the segments in detail. EBIT for the home segment amounted to minus 20 million euros compared to minus 4 million euros in Q1 2024 due to the price and volume related sales decline. DNI came in at minus 26 million euros versus minus 18 million euros in Q1 2024, also due to the decline in sales, reduced utilization and corresponding lack of fixed cost aggression. Our large-scale segment again showed an earnings improvement in Q125, reaching 50 million euros compared to 41 million euros in Q124. Reasons were the high level of sales and fixed cost integration, increased in sales, the profitability product mix, and the high profitability of the Altenso business contributed to this. The overall EBIT margin for SMA's group amounted to 4% compared to 11% in Q1 last year. Now I will move on to the balance sheet and networking capital on the next slide. Networking capital, which is shown on the top left of the page, decreased to 364 million euros compared to the 2024 year end figure of 473 million. This leads to a networking capital ratio of 24%, which is significantly improved compared to the ratio at the end of last year. Let me explain the networking capital. Inventories at the end of Q1 were at 583 million euros compared to 564 at the end of 24. On the first glance, you're probably wondering why we built up more stocks in the first quarter, but this can be explained by the different situations in our segments. Given the low level of revenues in the home and CNI segments, we have several measures in place to decrease inventories here, which we did by over 20 million euros in Q4. Meanwhile, we need to deliver on our strong project pipeline in the large-scale segment, as in order to do this, we needed to increase stocks in this segment in Q1, which is the reason for the total increase of inventories in the quarter for the group. Trade receivables decreased as a result of lower revenues compared to Q4 24, as well as ongoing measures to ensure timely customer payments and reduce of overdue payments. Trade payables increased in the first quarter as we purchased stocks for our large-scale business and are also working to extend DPOs to help improve our cash conversion cycle. Advanced payments received from our customers also increased since the end of 2024, driven by our strong large-scale project pipelines. Net cash increased by over 90 million to 177 million euros at the end of Q1, mainly driven by the net working capital improvements I just explained. Since the end of Q3 24, we have been able to recover our cash position by more than 130 million euros and our liquidity protection measures remain ongoing. Now let's have a look on the group's balance sheet on the right hand side of this page and as I've already explained the changes in the network and capital positions, I will now focus on the major changes in the other balance sheet positions. As I just explained the change in net cash, I will start with the changes in total cash and financial liabilities. As we need to ensure that we have sufficient cash for our business operations, we need to use our revolving credit facility with a utilization of 120 million euros from March 31st, 2025. You find this under financial liabilities in our balance sheet, which also includes accumulated interest due to approximately 1 million euros. Our total cash is hence 298 million euros per the end of Q1. Regarding the other balance sheet items, non-current assets increased to 535 million euros, mainly as a result of ongoing investments in our new large-scale product platform, including approximately 50 million euros additional leasing assets related to the total value of the leasing contract for the new production building. Shareholder's equity remains stable with a balance of 557 million euros per March. Provisions also remained stable with 230 million euros at the end of Q1. Other liabilities increased to 536 million euros, mainly related to additional leasing liabilities for the new production facility. This is the corresponding liability to the IFRS 16 asset I explained before. That concludes my explanation of the balance sheet. Let's now have a look at our summary of cash flows on the next slide. In the reporting period, gross cash flow came in at 21 million euros compared to 51 million euros in Q1 24. As our operating result was below the level of Q1 last year. However, with a significant decrease of networking capital in Q1 this year, we were able to generate a positive cash flow from operating activities of 110 million euros, whereas an increase of networking capital in Q1 of last year had led to a negative cash flow from operating activities. Net capex amounted to 40 million euros in Q1 below the level of Q1 24 as we are managing our cash spending very closely and currently focusing investments largely on our new large scale platform. Considering our cash flows from operating and investing activities in total, our free cash flow was a positive with 96 million euros in Q1 and much better compared to Q1 last year with a minus 46 million euros. Please note that we had no significant cash outflows from the restructuring program in Q1, and these will occur mainly in Q2 and Q3. Let's move to the next page, order backlog. Looking at the left side of the slide, you see that our order backlog remained on the level of about 1.3 billion euros at the end of Q1, and product order backlog stood at approximately 1 billion euros. On the right hand side of the page, you can see that our large scale product order backlog remains strong with nearly 960 million euros, followed by CNI with about 33 million euros and home with 22 million euros. For the group in total, order intake in Q1 showed positive signs for the home and CNI segment, albeit on a relatively low level. while order intake for the large-scale segment was lower than in the last quarters due to the uncertainty from the US tariff situation. Let me now briefly give you an update on our restructuring and transformation program and where we currently stand. As you know, we have defined an ambitious cost-saving target with an EBIT improvement of 150 to 200 million euros. Of the planned up to 200 million euros, we aim to realize approximately 40% already this year. The key measures for decreasing material costs and operational expenditures are on track. The savings for personal costs, which is the biggest lever, are also well underway, and we know already today that we will overachieve our ambitious targets here. Let's turn to our last page, our guidance for 2025. Even though we see signs of improvement for some product in our home and CNI order intake, we remain cautious. given the deterioration in the macroeconomic environment and increased uncertainty due to the volatile tariff policies and the resulting potential direct and indirect impacts on the global solar market as well as our business. The large scale and projects division had a strong start in Q1 and high order backlog helps to secure its full year sales and profitability targets. However, The large-scale project pipeline has started to be impacted by the uncertainties from the U.S. tariff policy, making a reliable assessment of the order intake going forward very difficult. But once the situation settles down, we expect a strong uptake again. Against this backdrop, we expect sales and EBITDA for 2025 in the lower third of the guidance range of 1,500 to 1,650 million euros, and 70 to 110 million euros EBITDA. Last but not least, a note on our upcoming events. Today at 2 PM, we will host an IR event at InterSolar in Munich. For those who are there, please join us in room B22, hall B2. The first half of 2025 financial results will be published on August 7, combined with an analyst and investor call. With this, I can conclude the presentation, and now we're happy to take your questions.

Ladies and gentlemen, we'll now begin the question and answer session. Anyone who wishes to ask a question may click the Q&A button on the left side of the screen and then click the raise your hand button. If you wish to remove yourself from the question queue, you may press the lower your hand button from the webinar. Anyone who has a question may queue up now. As a reminder, for questions from the webinar, please click the Q&A button on the left side of the screen and then click the raise your hand button.

There are no questions at this time.