Phoenix Solar announces positive EBIT result for the first time in several years

The USA continued to be the Company’s strongest sales region in the 2016 financial year
The USA continued to be the Company’s strongest sales region in the 2016 financial year

Phoenix Solar AG (Sulzemoos, Germany) on March 31st, 2016 issued its 2016 Annual Report, attested by the independent auditor and adopted by the company’s Supervisory Board.

In the financial year 2016, Phoenix Solar AG generated consolidated revenues of EUR 139.2 million (2015: €119.4 million) an increase of 16.6%. Total solar PV systems installations rose to 153.7 MWp (2015: 98.7 MWp).

"Our revenues grew at a reasonable rate in 2016 and for the first time in several years we are able to report a positive EBIT result, with cost controls, supply chain efforts and absolute discipline on project margins being the main contributors,” comments Tim P. Ryan, Group CEO at Phoenix Solar AG.


US solar business generated a gross profit margin of 12.7%

The USA continued to be the Company’s strongest sales region in the 2016 financial year. Here we achieved sales revenues of EUR 108.7 million, an increase of EUR 10.7 million, or 11.0% (2015: €98.0 million).

Sales growth would have been significantly higher had it not been for an eight month construction delay on one of our large-scale projects, the company notes.

The business in the USA generated a gross profit margin of 12.7% (2015: 7.5%), driven by a concerted effort to upgrade our supply chain team and related activities. The operating EBIT contribution from the US Region (segment result) amounted to EUR 4.6 million (2015: €2.2 million), a major improvement in profitability in the Company’s core market. Supply chain, cost controls and pricing discipline all contributed to this result. The consolidated, weighted project sales pipeline for the US as of December 31st, 2016, was at 252 MWp.


Solid growth in Middle East

Phoenix Solar’s Middle East region business also achieved solid growth. It more than doubled its sales revenues to EUR 20.7 million (2015: €8.4 million), an increase of, EUR 12.3 million or 146.2%.

In particular, the company secured a significant position in the high-growth market in Turkey. The overall result reflects strong investments in upgrading our team and capabilities in the Region, including the establishment of a wholly-owned subsidiary in Ankara, Turkey. The business in the Middle East generated a gross profit margin of 10.0% (2015: 6.7%). The operating EBIT contribution from the Middle East region (Region result) amounted to EUR 0.6 million (2015: €0.0 million). The weighted project sales pipeline for the Region as of December 31, 2016 was at 47 MWp.


Modest sales revenue growth in Asia/Pacific

The company achieved modest sales revenue growth in Asia/Pacific in 2016. This reflects both a change in management (exit of former minority shareholders from the operating business) as well as a reorientation towards larger commercial rooftop and ground-mount systems, away from very small residential systems.

Compared to Region revenue of EUR 8.6 million in 2015, Phoenix Solar grew by 5.0% to reach EUR 9.0 million. A key success factor was our subsidiary in the Philippines, founded in late 2015 and which has already acquired and successfully constructed several new projects in the commercial rooftop segment.

The Asia/Pacific business generated a gross profit margin of 22.6% (2015: 23.6%). The operating EBIT contribution from Asia/Pacific (Region result) showed a slight loss at EUR -0.2 million, a significant improvement over the pre-year (2015: €-1.0 million). The project and sales pipeline for the region as of December 31, 2016 was at 29 MWp.


Weak market in Europe

In Europe, the overall market trend was weak in the face of uncertainty on government policies regarding renewable energy sources, resulting in a decline in sales revenues to EUR 0.8 million (2015 (including holding): EUR 4.4 million).

This decrease is also attributable to the discontinuation of Phoenix Solar’s distribution business in France. The team in Greece has become the engineering center for the Middle East Region. New management in both France and Greece, driven by experienced industry experts, is already uncovering new opportunities.

The profit contribution from the Europe Region (Region result) amounted to EUR 0.4 million (2015: €0.6 million). The positive profit contribution was driven by the net gain on the sale of an asset, the Bâtisolaire 3 system in France. The project and sales pipeline for the Region as of December 31sr, 2016 was at 2 MWp.



Gross margin development drives earnings improvement

The outstanding gross profit trend shows that we are systematically improving our core business model of designing, planning and constructing highly efficient solar photovoltaic power plants around the globe.

Overall, Phoenix Solar improved gross margins (sales revenues less cost of materials) from 8.4% in 2015 to a much stronger level of 12.6% for the full year 2016.

This is a direct reflection of systematic improvements and investments made in 2016 in both our global supply chain team and process as well as in the area of estimating and bidding. These efforts combined with iron pricing discipline on all of our projects worldwide resulted in significant earnings improvements. This result was achieved despite massive downward pressure on system prices in all of our markets, with declines on average over 30%.

Furthermore, Phoenix Solar invested heavily in expanding its staff to meet current and future growth challenges, hiring seasoned industry experts in engineering, supply chain, operations and sales. As of December 31st, 2016, the Phoenix Solar Group employed a workforce totaling 121 people (excluding Executive Board members temporary staff); up from the previous year’s headcount of 78. Personnel expenses increased to EUR 11.3 million (2015: €7.6 million), representing 8.2% of sales revenues (2015: 6.4%%).


Earnings before interest and taxes (EBIT) improved to EUR 0.6 million (2015: €-1.6 million), the first positive operating result since 2010.

 The EBIT margin as a percentage of sales amounted to 0.4% in 2016 (2015: -1.3%). The net financial result of EUR -4.3 million in 2016 was slightly better than in the previous year (2015: €-4.4 million). Financial income of EUR 293k (2015: €98k) was offset by financing expenses of EUR 4.6 million (2015: €4.5 million).

The consolidated net result for the period attributable to shareholders stood at EUR -4.6 million (2015: €-5.2 million). A consolidated net loss of EUR 0.1 million was attributable to minority interests (2015: €-0, 4 million). Calculated on an average number of 7,372,700 shares, the basic earnings per share stood at EUR -0.62 (2015: €-0.71).


Order Book Position

The free order backlog as of December 31st, 2016 was at EUR 55.8 million (December 31st, 2015: €148.5 million). The Group's total order book position (including sales revenues already invoiced) amounted to EUR 186.4 million as of December 31st, 2016, a reduction of EUR 65.5 million, or 26% (December 31, 2015: €251.9 million).

The consolidated, weighted project and sales pipeline (M3 – M5) reached a total of 330 MWp as of December 31st, 2016. Of these, a total of 245 MWp were under construction (M5; December 31st, 2015: 108 MWP); this represents the highest number of revenue generating projects that the company has ever had under construction, another unprecedented number.


Financial Situation

The Phoenix Solar Group achieved a net cash inflow from operating activities of EUR 0.1 million in 2016 (2015 €1.8 million). The Group's cash and cash equivalents improved to EUR 9.4 million in the 2016 financial year (December 31st , 2015: €4.9 million).

 The net debt position (non-current financial liabilities less cash and cash equivalents) was reduced significantly and amounted to EUR 25.9 million as of December 31st, 2016 (December 31st, 2015: €34.2 million), further strengthening the Company’s financial position.

Phoenix Solar anticipates solid growth in consolidated revenues and earnings going forward. 2017 foresees a revenue projection in the range of EUR 160 to EUR 190 million (2016: €139.2 million).

To achieve this, the company is planning projects with a total volume of between 180 MWp and 220 MWp (2016: 153, 7 MWp). The company is thus projecting a positive operating result (EBIT) in the range of EUR 1.0 to EUR 3.0 million.

Given stable financing from our banking consortium through late 2018, as well as planned free credit lines for 2017 averaging around 75% of total debt financing, along with ongoing financing expenditures on bank debt as well as tax implications from our increasingly profitable operating companies lead to conservative estimates of 2017 Group profitability.



Phoenix Solar AG





2017-04-03 | Courtesy: Phoenix Solar AG | © Heindl Server GmbH

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