SMA Solar Technology AG

Welcome to the SMA Solar Technology AG Half-Year Financial Results 2025. I'm Moritz, the course call operator. I would like to remind you that all participants will be in a listen-only mode and the conference has been recorded. The presentation will be followed by a question and answer session. You can register for questions at any time by pressing star and 1 on your telephone. For operator assistance, please press star and 0. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Kaveh Rui, CFO. Please go ahead, sir.

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 2025 results. With me today in the call is my colleague and SMA CEO, Jürgen Reinet. Welcome to the call, Jürgen. Thank you, Kai. 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 the website shortly. Our agenda for today. First, I will give a review of our first six months figures followed by an update on the restructuring and transformation program. Last but not least, we'll have a look at order backlog as well as our outlook for this financial year 2025. I expect the presentation part to last about 30 minutes. After the presentation, we are happy to answer your questions. I refer to our disclaimer on page two. So let's move to page four, financial highlights for the first half year 2025. Group sales reached 685 million euros and were below last year with 759 million euros in the first half 2024. In the large-scale and project solution division, sales improved compared to the previous year. The home and business solution division declined year-on-year. Operating group EBITDA before one-offs was positive 55 million euros with a strong operating performance in our large-scale division more than offsetting for low sales and the resulting lower fixed costs regression in the HBS division. Reported Group DA came in at 9 million euros after reaching 81 million euros in 2024. This was mainly due to one-time effects such as write-offs on inventories and provisions for purchase obligations. I will provide more insights on the individual division in a moment. Free cash flow reached about 66 million euros 203 million euros the year before. Mainly resulting from ongoing measures to reduce that working capital, which achieved good results in the first half of 2025. Total order backlog stood at 1.2 billion euros at the end of June. 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 with 49% compared to 50% in 2020. which has the majority of its sales in the EMEA markets. America's revenue share decreased from 41% to 33% as H1 2024 was very strong for the large-scale division, so that there is a decline in H1 2025 despite solid revenues. The APEC shares region increased from 9% to 19%. Here, Australia showed a very strong development in the large-scale business again. main markets for the SMA group in the first half were Germany, US, UK and Australia. Now let me walk you through the sales division on the right side of the slide. Sales development in the division home and business solutions was affected by lower demand as well as high competitive and price pressure and therefore decreased by 48% from 223 million euros in the first half 2024 to 160 million this year. The home business contributed 54 million euros and CNI contributed 62 million euros in H1 this year. The division share of total sales thus came down to 17% compared to 29% in the first half of 2024. EMEA remained the biggest region for the division. Large scale again showed a strong revenue development from 536 million euros last year to 569 million in the first half 2025. Compared to last year where Americas was the strongest region, EMEA was now the strongest region with 41% of the segment sales, slightly higher than the Americas share reaching 37%. Now let me provide you with more information on the profitability. Operating Group EBITDA came in with 55 million euros compared to 62 million euros in the first six months of the last year. Including one-offs, reported Group EBITDA reached 9 million euros. As mentioned at the beginning of the presentation, one-offs include write-offs on inventories and provisions for purchase obligations of about 50 million euros in total, as well as provisions for doubtful receivables of 7.5 million euros due to the insolvency filing of a customer in the U.S. These one-time effects significantly affected our H1 results this year. In addition, please note that this year's EBITDA includes a positive one-time effect from a claim settlement of 10 million euros, while last year's results included a positive one-time effect from the sale of SMA's Alexander steak at 90 million euros. If you exclude all these effects, our operating EBITDA was very solid with 55 million euros in H1 of this year and reflects the positive contributions from savings related to our restructuring program. EBITDA margin reached 1.3% compared to 10.6% in the first half last year. If we exclude the noted one-time effects, our operating margin H1 this year. With about 28 million euros, depreciation in the first six months was slightly above the level of last year with 24 million euros. Now let's have a look at the segments in detail. EBIT in our large-scale segment again showed an earnings improvement in the first half of 2025 reaching 113 million euros compared to 101 million euros in 2024. Reasons were the higher level of sales and fixed cost regression. Factors that contributed to this included the increase in revenue, especially in the field of battery storage projects, the profitable product mix, and the reversal of provisions for legal disputes in connection with the settlement of an O&M contract in North America in the mid-single digits million euro range. On the other hand, inventory provisions of 1.1 million euros had an adverse effect on profitability. EBIT for HBS amounted to minus 129 million euros compared to minus 67 euros in the first half of 2024 due to the price and volume related sales decline as well as the one-off effects from inventory provisions of about 47 million euros. Excluding the one-timers, HBS profitability was approximately 10 million euros below last year's level despite more than 100 million euros less sales. Hence, the saving efforts are contributing strongly here, but the market headwinds and related one-time effects were too significant to compensate for. If the business prospects for HBS deteriorate further in the course of the current fiscal year, additional write-offs on inventories may be necessary. The overall reported EBIT margin of the SMA group amounted to minus 3% compared to 7% 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 left of the page, decreased to 283 million euros compared to the 2024 year end figure of 473 million. This leads to a networking capital of receivables already mentioned. Let me explain the networking capital. Inventories at the end of first half year were at 534 million euros compared to 564 at the end of 2024. The decrease is related to the inventory write downs of 47 million euros, as well as an additional decrease of physical inventories in our HBS divisions of of 67 million euros related to projects in our large-scale division. Trade receivables decreased as a result of lower revenues compared to Q4-24, as well as ongoing measures to ensure timely customer payments and reduction of overdue payments and the one-time effects from a provision for doubtful receivables. Trade payables increased in the first half of this year, mainly related to timing of supplier payments. Advance payments received from our customers slightly increased since the end of 24 in line with our solid large-scale project pipeline. Net cash increased by over 50 million to 135 million euros at the end of H1, mainly driven by the networking capital improvement I just explained. The most significant improvements on inventory management and accounts receivable collection have already been achieved in H1. However, our liquidity protection measures remain ongoing. For example, we carefully review and analyze any inflow of inventories. Now let's have a look on the group balance sheet on the right side of this page and, as I've already explained, the changes in the networking 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 financing liabilities. As we need to ensure that we have sufficient cash for our business operations, we continue to use our revolving credit facility with a utilization of about 70 million euros per end of June. You will find this under financial liabilities in our balance sheet. Our total cash is hence 205 million euros at the end of June. Regarding the other balance sheet items, non-current assets have increased as a result of an additional IFRS 16 asset related to our new gigawatt factory building lease. Other assets increased to 106 million euros, mainly explained by IFRS 15 contract assets related to projects in our Altenso business, part of large scale division. And receivables from currency derivatives related to our currency hedging positions. Shareholder equity decreased to 505 million euros at the end of June as a result of the negative result. Provisions decreased to 179 million euros at the end of H1, mainly driven by a settlement agreement and payments made relative to an exit agreement in our own end business, as well as initial severance payments as part of our restructuring program. Other liabilities increased to 526 million euros, mainly related to additional leasing liabilities for the new production facility. This is the corresponding liability to the Alpras 16 asset. 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, our cash flow from operating activities was plus 90 million euros as compared to minus 174 million euros in the first half of 2024. The strong turnaround on cash is driven by the significant decrease of net working capital in the first half of this year, as explained earlier. Net capex amounted to 24 million euros in the first half of 2025, below the level of last year, as we are managing our cash spending very closely and currently focusing investments mainly on our new large-scale platform. Considering our cash flows from operating and investing activities in total, our free cash flow was positive with 66 million euros in the first half of this year and much better compared to last year with minus 203 million euros. Please note that we had cash outflows from the restructuring program in Q2 and further payments will also be made in 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 a level of about 1.2 billion euros at the end of June and product order backlog stood at 848 million euros. On the right hand side of the page, you can see that our large scale product order backlog remains strong with 802 million euros and HBS with 46 million euros. For the total group but order intake for the last trade division was lower than the last quarters due to the uncertainties from the old BBB and US tariff situation. I would now like to hand over to Juergen who will briefly give an update on our restructuring and transformation program as well as new products and solutions.

Thanks, Gabi. And as you know, we have to find an ambitious cost-saving target with an EBIT improvement of 150 to 200 million euros. And we are well on track to achieve more than half of our original EBIT improvement ambition already this year, which is above our plan. The cost savings at the end of June resulting from our key measures for decreasing material costs and operational expenditures are better than originally planned. The savings for personal costs, which is the biggest level, are also well underway. In total, we are confident that we will achieve our ambitious savings targets. We go to the next slide. Then I would like to mention that alongside the successful implementation of our restructuring program, we have, during the first half of 2025, also launched new products and solutions to meet evolving customer demands. in the field of storage and grid stability. The new Sunny Island X is extremely versatile and ideal for both on-grid and off-grid installations. It allows to adjust the AC power and battery capacity of the system to meet customer specific needs. Thanks to the integrated DC-DC converter, the Sunny Island X is compatible with a wide range of batteries, offering great flexibility in energy storage. For large-scale customers, we introduced the Sincentral Storage App S, and this one is featuring silicon carbide MOSFET technology, and it offers superior power conversion efficiency and grid forming capabilities. The silicon carbide technology of the power of silicon ducts can switch faster with lower losses than conventional silicon technology. And last but not least, we are continuing to provide solutions that allow seamless integration of renewable energies worldwide. Like in Chile, where one of the largest battery storage projects in South America is being built in the Atacama Desert. It complements an existing 220 MW power plant, providing a capacity of 980 MWh battery storage. At the heart of the project are 67 SMA battery systems. And these innovative offerings make us look into the future with confidence. This is it from myself and I'll hand back to you, Karli.