UPDATE 2-SMA Solar fights to defend market share, margins

Thu May 26, 2011 8:06am EDT

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* Says foreign markets to drive business from Q2

* Plans annual investments of 100-130 mln eur in 2011, 2012

* Sales decline in Germany will be offset by foreign markets

* Shares down 0.2 percent

(Recasts, adds CFO quotes, updates shares)

By Christoph Steitz

KASSEL, Germany, May 26 (Reuters) - SMA Solar (S92G.DE), the world's largest maker of solar inverters, is gearing up for a tough defence of its 20 percent-plus profit margins and leading market share as competition intensifies in the lucrative sector.

"We are looking very, very closely at our competition and don't get me wrong -- we're fighting for our customers every day," incoming Chief Executive Pierre-Pascal Urbon told the company's annual shareholders' meeting on Thursday.

The company is coming under attack from new players such as Power One Inc PWER.O, whose market share soared last year to make it the global No.2 and which reported sharply higher quarterly earnings earlier in May. [ID:nN05170694]

Urbon, who also retains his chief financial officer post, said the company's margin would retreat in the mid-term from last year's near-30 percent on the basis of earnings before interest and tax (EBIT) as competitive threats increase.

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Graphic on solar inverter market share:

r.reuters.com/xuk78r

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Unlike module and cell makers such as Q-Cells QCEG.DE and Solon SOOG.DE which suffered from weak demand ahead of solar power subsidy cuts, SMA Solar remained profitable in the first quarter. [ID:nLDE74B1BJ]

But its EBIT margin fell to 5.4 percent in the period from the 27.4 percent reached last year, after clients' high inventories eroded profitability.

The company, however, kept its outlook for an EBIT margin of 21-25 percent in 2011, compared with a Thomson Reuters I/B/E/S estimate of 22 percent.

SMA said demand for its products would pick up from the second quarter onwards, counting on markets outside Germany, the world's biggest solar market and where state support is set to be cut.

"We see enormous potential in foreign markets, particularly Asia and North America," outgoing Chief Executive Guenther Cramer said. SMA made 45 percent of 2010 sales outside Germany.

Solar inverters convert electricity generated from solar modules into a form which can be fed into an electricity grid.

SMA Solar also plans to invest between 100 million euros ($139.7 million) and 130 million a year in 2011 and 2012, according to a presentation at its shareholder meeting.

The company -- whose shares were down 0.2 percent at 1107 GMT -- competes with smaller German players Fronius and Kaco, but also with conglomerates such as Siemens (SIEGn.DE) and Schneider Electric (SCHN.PA) in the field of solar inverters. (Editing by Hans Peters and David Holmes) ($1=.7158 Euro)

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