SMA Solar says EBIT margin target challenging

FRANKFURT: SMA Solar, Germany's largest solar company by sales, said it would be a challenge to meet its 2011 operating margin target and it was relying on a pick-up in demand in coming weeks.

"We stick to our guidance, both for sales and our EBIT (earnings before interest and tax) margin," chief executive Pierre-Pascal Urbon told Reuters, adding the EBIT margin target would be a bigger challenge after a relatively weak first half.

"It will become clear in the next few days and weeks whether we will be able to meet our goals," Urbon said on Friday.

SMA Solar shares were down 3.5 percent at 0850 GMT.

Several brokerages had earlier cited bearish statements made by Urbon about the company's 21-25 percent EBIT margin target for 2011 at the company's capital markets day on Thursday.

"The company has kept, for now, guidance for this year but we believe it will reduce expectations to the lower end in the coming weeks," Jefferies analysts said, lowering their rating on the stock to "hold" from "buy".

SMA Solar has long been seen as a cash cow for the sector, treating investors to margins near 30 percent. It is the world's biggest maker of inverters, which feed solar power from daylight-converting panels into electricity grids.

Concern has grown since SMA said its profit margin in the first three months of 2011 crashed to 5.4 percent from 27.2 percent in the 2010 period. It only recovered to 14.5 percent in the first half, down from 27.0 percent.

The company ramped up production last year to meet a surge in demand from Germany and Italy as customers rushed to buy solar panels before governments started to phase out incentive schemes.

Copyright Reuters, 2011