Sani, welcome everyone. We very much appreciate that you are taking the time for this investor and analyst call on our first half year 2026 results. 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 there shortly. I'm glad to welcome our CEO, Jürgen Reiner, to this call. He joins me today to provide you with the H1 update. First, I will walk you through our first half figures. Then Jürgen will provide you with an update on our transformation program, as well as updates on our business, including new solutions to our portfolio, current regulatory developments, and how we strengthen customer value with our large-scale solutions. Finally, we will wrap up with the updated guidance for the 2026 financial year and take time for your questions. I expect the presentation part to last about 30 minutes. So, let's start. I refer to our disclaimer on page two. So, let's move to page four, financial highlights for the first half 2026. Well, before we deep dive into the various financial KPIs, let me first say that we are very happy with the results of H-1. It clearly shows that SMA is gaining momentum again, and that many efforts taken by the whole team are actually paying off. In addition, all key figures are affected by the tariff refunds we could collect from the U.S. Treasury. Without going into too many details, we can say that we use the mirror accounting principle to book the impact. It means minus 22 million euros is shown as a sales reduction from reversing the revenues we had in the past from passing on tariffs to large-scale customers, and 41 million euros of costs have been reversed in our COGS. As such, the net impact was around 19 million euros of EBIT improvement and cash improved by 42 million euros, as we also received interest on the refunds. We do not consider the tariff refund effects as true one-off effects, since we also did not and do not report the tariff costs as one-offs. So we are being consistent here, but the tariff refund obviously did have a meaningful impact on the Q2 figures. So we do provide transparency on the related effects, just not in terms of adjusting our operating figures. Also, we have collected the vast majority of the IEEPA refunds and do not expect any material impacts going forward. Group sales with 687 million euros were on last year's level of 685 million euros. This shows that we could keep the high level of H1 last year. Please note that this is impacted by the U.S. tariff refunds, which reduce sales as refunds of tariffs previously passed on to customers are recognized as a reduction of sales. If we would exclude this effect, our sales were approximately 4% above H1 last year. This is also the main reason for the sales development in the large-scale and project Solutions Division, which decreased by 5% to 542 million euros after 569 the year before. Sales in the Home and Business Solutions Division increased by about 25% to 145 million euros due to elevated demand in Q2. Operating group EBITDA before one-off earning effects increased to 66 million euros after 50 million euros in the first half of 2025. This includes the mentioned 19 million euro U.S. tariff refunds recognized in earnings. Taking into account the total positive one of earnings effects of 22 million euros in home and business solutions, Group EBITDA increased to 88 million in the reporting period versus 9 million euros last year. I will provide more insights on this and the individual divisions in a moment. Free cash flow increased to 72 million euros in the first half of 2026, compared with 66 million euros in the prior year period. Total order backlog benefited from a record order intake of 567 million euros for a large-scale business in Q2 and increased to 1.75 billion euros at the end of June, compared to 1.16 billion euros at the end of June 2025. Main markets in Q2 this year were the U.S. and Germany. Now, let's go to page 5, sales by region and by division. On the left-hand side, you can see that America's revenue share increased slightly to 35% with consistently strong large-scale sales in the U.S. and good uptake of our home and business solutions revenues compared to H1 last year. EMEA revenue share was slightly down to 47% after 49% in the first half of 2025, as large-scale sales slightly declined as a result of timing of key projects in the region, for which we actually expect a stronger H2 this year. This more than offset a solid sales growth in the home and business solutions division in EMEA. The APEC region share decreased to 18% after 19% in H1 2025, as large-scale revenues in Australia were below the extraordinary high level of H1 last year. The main markets for the SMA group in H1 2026 were Germany, the United States, United Kingdom, and Australia. Now let me walk you through the sales performance by division as shown on the right side of the slide. Given a pickup of demand compared to previous year, sales in the home and business division increased by 25% to €145 million after €116 million in H1 2025. The division share of total sales has increased to 21% compared to 17% in H1 last year. Within our transformation program, EMEA continues to be the key focus region for home and business solutions. So as expected, EMEA remained the division's largest division region in the first six months. Obviously, this growth is partly driven by the rising energy prices as a result of the military conflict in the Middle East. Large-scale showed a revenue decrease of about 5% in the first six months, reaching 542 million euros after 569 last year. The main reason for this was the previously mentioned U.S. tariff refunds, which reduced revenue as refunds of tariffs previously passed on to customers are recognized as a reduction of revenue. now. Regarding sales dynamics, we expect a higher level of project execution than in the first half, particularly in the EMEA region, supported by a stronger project pipeline. Americas was the strongest region with 41%, followed by EMEA with 38%, and APEC with 21%. Now, let me provide you with more information on profitability. EBITDA, excluding special items, which are primarily attributable to the home and business solutions division amounted to 66 million euros after 50 million euros last year. Positive earnings effect of 22 million euros resulted from the sale of previously written down inventories in home and business solutions. Contrary to the original expectations, we were able to identify buyers for these inventories as part of the targeted sales initiatives. In addition, EBITDA benefited from the release of personal provisions of 3 million euros related to the restructuring program. These positive effects were partly offset by 3 million euros in expenses for external sales commissions incurred in connection with the successful sales initiatives. Taking into account the positive earnings effect of 22 million euros from the home and business solutions, one of EBITDA increased to 88 million euros in the reporting period, with an EBITDA margin of 13 percent. Comparable EBITDA in 2025 was 9 million euros, with an EBITDA margin of 1 percent. Depreciation was slightly below last year, with 26 million euros. Looking at the results by division, EBITDA for home and business solutions improved the significantly reaching minus 22 million euros compared to a minus 129 million euros in H1 2025, driven by the restructuring and transformation measures, as well as positive earnings effects of 22 million euros, resulted from the sale of previously impaired inventories. EBIT in our large-scale division reached 78 million euros, which was below the level of H1 2025 with 111 million euros. This was driven by three effects. First, higher scheduled depreciation and amortization on capitalized development projects after completion of the main product development phase of sunny central effects. Second, a less favorable U.S. dollar rate compared to H1 last year. And third, less capitalization of R&D costs. The overall reported EBIT margin for the SMA group was solid with 9%. 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 178 million euros compared to the 2025 year end figure of 213 million euros. This leads to a net working capital ratio of 12%, which is slightly below the ratio at the end of last year. Let me walk you through the net working capital positions. Inventories, including advanced payments to suppliers on inventories not yet received, were at €370 million at the end of June, compared to €357 at year-end 2025. trade receivables at the end of june increased to 192 million euros due to higher revenues at the end of the reporting period these are expected to be converted to cash in q3 trade payables increased by 53 million euros mainly related to timing of supplier payments advanced payments received from our customers slightly increased compared to end of 2025 and are expected to increase in Q3 based on the recently high level of order intake for the large-scale business. As a result, net cash increased by almost €70 million, reaching €245 million at the end of June, following the decrease of net working capital, the positive earnings, and the tariff refunds received. Now, let's have a look at the group balance sheet on the right side of this page. And as I've already explained the changes in the network and capital positions, I will focus on the major changes on the other balance sheet positions. Let's start with the changes in total cash and financial liabilities. As we have been able to bring our cash position to a very strong level again, through our ongoing liquidity improvement measures, we fully repaid our revolving credit facility in the first quarter and have not needed to utilize the cash credit line since then. You see the corresponding reduction of financial liabilities in our balance sheet on the right side of the page. Our total cash is 245 million euros at the end of H1, which is a strong increase compared to the end of last year, driven by operational performance in both our results and networking capital management, as well as the tariff refunds. Regarding the other balance sheet items, non-current assets have increased since the end of 2025, driven by an increase of our deferred tax assets, which increased by over 30 million euros as a result of moving the three-year valuation basis forward to the end of H1, 2029. Other assets are higher than at the end of last year with 70 million euros with the increase primarily from contract assets related to work done and investments into our EPC projects, which when ready will be sold. Shareholder equity increased by 21% to 441 million euros for end of June, leading to an equity ratio of about 32%. The positive development is driven by the good H1 results and the positive effect from the updated valuation of our deferred tax assets as explained. Provisions slightly decreased to 220 million euros at the end of June, mainly from the partial consumption of provisions for restructuring efforts in H1 as planned. Other liabilities increased to 580 million euros, mainly from increases in income tax and VAT liabilities. That concludes my explanation of the balance sheet. Let's have a look at our summary of cash flows on the next slide. Starting with our net income, and if we then add back the non-cash P&L items, such as depreciation and amortization and changes in provisions, you can see that we had a strong positive cash flow from our operating profitability in H1. The non-P&L cash effects are mainly from payments related to our restructuring program, payments for prepaid assets, such as annual IT license fees, which are realized as expenses throughout the full year, as well as income taxes paid. Networking capital continued to be optimized. As explained, we successfully sold off some written-down inventories in the home and business solutions, while increasing inventories for large-scale projects, which will be realized in the second half of this year. For these inventories, we also have higher trade payables at the end of H1, resulting in an overall decrease of net working capital. Net capex amounted to 10 million euros, which is well below the level of H1 2025, as we keep managing our cash position very closely, including reduced R&D capitalization. Considering our cash flows from operating and investing activities in total, our free cash flow was on a good level with plus 72 million euros. Comparing the free cash flows between 2025 and 2026, you can see a big difference. While in 2025, free cash flow was strongly supported by networking capital optimization, The 2026 free cash flow is heavily influenced by the significantly improved net income. Let's move to the next page, order backlog. Looking at the left side of the slide, you see that our order backlog increased significantly to 1.75 billion euros at the end of June compared to 1.35 billion euros at the end of December 2025, and product order backlog increased to 1.42 billion euros. On the right side of the page, you can see that our large-scale product order backlog remains strong with 1.3 billion euros. In home and business solutions, more than doubled its product and order backlog to 100 million euros compared to 43 million euros at the end of December 2025, driven by the launch of our new product portfolio in June. For the group in total, Q2 was a record order intake for large-scale showing 567 million euros. Home and business solutions came in with 137 million euros. Now let's turn to the next page, and I will hand over to Jürgen with an update on our business activities and our ongoing transformation program.
Thank you, Kaveh, and good day to everybody. Our key restructuring and transformation activities have been successfully implemented or are ongoing and are on track to achieve the saving times. In cases where individual savings measures are behind plan, the teams are working on either achieving savings from other measures or introduce additional measures to compensate. From an organizational standpoint, our transformation efforts to establish a multi-shared service center in Poland and a global competence center in India have progressed especially well. In India, more than 30 of the planned 50 FTEs have already been onboarded. with hiring progressing on track together these initiatives not only support our cost reduction targets but also strengthen our global organization with additional capabilities and a more scalable operating model operationally we continue to simplify our setup and optimize warehouse capacity across the group this includes the closure of warehousing sites in brazil and Singapore, reducing complexity and supporting a more efficient cost structure. At the same time, our market performance is continuously improving. This is an important point because financial performance is not solely determined by cost The combination of disciplined execution of the restructuring program and stronger commercial momentum is supporting our ability to achieve, and in some cases, even exceed our financial plans. Looking ahead, our focus remains clear. We will complete the remaining measures, continue to improve operational efficiency, and further advance the transformation of our home and business solutions business. As part of this transformation, we have streamlined the portfolio and addressed key customer needs with targeted solutions. A major milestone was the market launch of the Sunny TriPower Hybrid X, which enables us to address a broader range of customer applications, from a larger residential system with battery storage and a focus on energy independence to multifamily buildings and small commercial applications. At the same time, we will continue to optimize our development and supply chain setup, expand partnerships and sharpen our focus on the most attractive markets. Overall, we are moving from restructuring toward a more competitive and scalable operating model. The remaining actions to achieve overall savings of €250 million are clearly defined. Implementation is well underway, and we are confident that the program will provide a solid foundation for sustainable sustainability beyond 2027. In our home and business solution segment we launched new integrated energy solutions including the Sunny Tri-Power Hybrid X, the SMA Storage M, the SMA Backup Solution and our next generation energy management software Energy Planner and Energy Maximizer. Together these solutions enable customers to generate, store intelligently optimized solar energy within one integrated system, reducing energy costs, increasing energy independence, and providing reliable backup power. At the same time, the integrated hardware and software ecosystem simplifies system planning, installation, and commissioning for our partners. This marks an important strategic step for home and business solutions, furthering evolving SMA from a product supplier to a provider of integrated customer solutions. The new portfolio received very positive customer feedback at InterSolar and was subsequently met with strong media coverage, confirming market interest in our integrated offering. The rollout across Europe will begin in the second half of 2026 and further strengthening our competitive position in the home and business market. In large-scale, we launched, as announced in one of our last analyst calls, a new stability-enhanced DC-carbled hybrid solution that combines PV, battery storage, and grid-forming capabilities in one fully integrated architecture. The solution addresses the growing demand for bankable hybrid power plants with higher efficiency, improved grid stability, and stronger project economics. By integrating power conversion, plant control, and engineering expertise, it further reinforces SMA's technology leadership in the utility scale market. The solution has been commercially available since InterSolar and has been very well received by our customers. Together, these launches underlie SMA's strategic development from a component supplier towards an integrated energy solution provider. They strengthen our differentiation in software and system solutions, increase value creation across customer segments, and support our long-term growth and profitability potential. The regulatory environment is increasingly becoming a strategic factor for the energy industry. Across both Europe and the United States, we are seeing a growing focus on the resilience of critical energy infrastructure, cyber security, and secure supply chains. Energy infrastructure is no longer assessed solely by performance and cost, but increasingly also by its ability to withstand cyber threats, geopolitical risks, and supply chain disruptions. In Europe, implementation of the Net Zero Industry Act is now beginning to translate into concrete procurement activities. The first tenders in Italy, Spain, and France, with Germany expected to follow, indicate that sustainability, supply chain transparency, and resilience are gaining importance alongside traditional commercial criteria. This development is broadly supportive of companies like SMA with an established European manufacturing base and transparent supply chains. A similar trend is emerging in the United States. At the end of July, the U.S. Federal Communications Commission, FCC, expanded its covered list framework to include certain foreign-produced power and hybrid inverters. Importantly, the vast majority of SMA products currently on the U.S. market already hold FCC authorization and are therefore not directly affected. The new framework primarily affects future product approvals for the U.S. market. More broadly, the decision reflects the growing importance of trusted technologies, cybersecurity, and resilient supply chains in critical energy infrastructure. While it is still too early to assess the commercial impact in detail, we believe this direction is strategically supportive for our large-scale and project solution business, where these capabilities are becoming increasingly important procurement criteria. For urban business solutions, we currently expect a more limited impact. Overall, we see regulatory developments creating a supportive environment for trusted technology providers. This reinforces the long-term importance of resilience, cybersecurity, and secure supply chains in the energy transition. The market for large-scale solutions is also evolving beyond individual components. Today, customers increasingly expect integrated solutions that improve project execution, strengthen resilience, and reduce operational complexity. A good example is the new U.S. integration facility in Arkansas, which we opened together with our longstanding partner, CHEP. Local integration enables shorter delivery times, strengthens supply chain resilience, and allows us to respond more effectively to customer requirements in one of our most important strategic markets. In addition, our partnership with West Chaffle strengthens local transformer sourcing, further increasing supply chain resilience, reducing dependencies and supporting the growth, the growing demand for domestically integrated solutions in the U.S. market. Another area we are actively targeting is the growing data center market. Rising investment in AI and digital infrastructure is increasing demand for reliable, scalable, and efficiently managed power supply. SMA can address these requirements by combining photovoltaics, battery storage, and intelligent energy management in an integrated solution. This enables operators to manage peak loads, strengthen operational reliability, and improve energy cost predictability. We are gaining more and more traction and visibility in this attractive market segment and have built up capabilities of offerings accordingly. The first project in the United States is already underway. We are also advancing with a VDE FNN certification for the short-term overload capability of our central inverter. This capability is based on the SMA design reserve built into our products and allows the system to provide additional power for a limited period when required. We expect the first product certification by the end of August, and once certified, it is expected to enable additional grid support functions, create opportunities for grid service revenues, and reduce systems costs by lowering the need for oversizing. Overall, these examples illustrate how we translate technology leadership into tangible customer value, and through faster project execution, more resilient energy infrastructure, and greater operational flexibility. I will now hand over back to Kaveh for the outlook and the guidance.
Thank you, Jürgen. On July 16, we raised our sales and earnings guidance for 2026. The updated guidance now forecasts revenue of 1.625 million to 1.725 million euros, and EBITDA of €180 million to €230 million. The guidance increase reflects both the reduction of the significant risk that existed at the beginning of the fiscal year and the improved market conditions currently observed across both divisions. Drivers in the large-scale and project solutions division are the stronger performance expected in the second half of the year and the current improved development of the U.S. dollar exchange rate. The original planning for the fiscal year 2026 was based on the assumption that the U.S. dollar would weaken against the euro. The further positive factor was, while it was totally unclear what the Supreme Court ruling would mean, it turned out that refunds related to the IEEPA tariff were received almost in full in the second quarter. For the large-scale and project solutions division, we expect a stronger operating performance in the second half of the year. Full-year sales will be above the high level of the previous year as a result of the existing high-order backlog and sustained demand. In the Home and Business Solutions Division, we also anticipate improved sales development in the second half of 2026, supported by the higher-order intake recorded in the second quarter. Group EBITDA will see a significant positive impact in 2026 due to reductions in costs and increases in efficiency as part of the restructuring and transformation program, the tariff refunds paid in Q2, and a strong operational performance on large scale in the second half. Other expected positive drivers include stronger demand in home and business solutions, continued favorable FX developments compared to our initial expectations, and potential further reversal of inventory write-downs resulting from targeted mails and sales measures in the second half of the year. Despite higher sales, we expect EBIT for large-scale to remain broadly in line with the prior year level as a result of higher costs necessary for operations and less capitalization of R&D costs. A significant part of the cost increase reflects investments in expanding our service operations to strengthen the service organization within large scale. For home and business solutions, the management board is once again expecting negative earnings in 2026, but with significant improvement over the previous year due to the ongoing transformation process and elevated demand. Looking ahead for the group, we anticipate further improvements in sales and operating EBITDA in the second half of the year compared with the first half. Based on our current planning, Q3 should improve sequentially versus Q2, followed by a further acceleration in Q4, which is currently planned to be the strongest quarter of the year. This development is primarily driven by higher revenue recognition and continuous improvements in operating performance. So, in summary, we are optimistic despite the different headwinds, as management currently sees also some tailwinds, including higher-than-expected demand in HBS and a positive FX development in large scale. However, any new trade restrictions, tariffs, or FX movements may require adjustments to our assumptions. Last but not least, a note on our upcoming events. Nine-month results will be published on November 12th, combined with an analyst and investor call. With this, I conclude the presentation, and we are happy to take your questions.
Operator
We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and 2. Questioners on the phone are requested to disable the loudspeaker mode while asking a question. Anyone who has a question may press star and one at this time. The first question comes from Konstantin Heste from Jeffries. Please go ahead.
Good afternoon. Thank you so much for taking my questions and congrats on the numbers. I've got a few questions. I would like to start with order momentum. I'd like to break it down in basically two parts. It's one in large scale, clearly a very, very strong quarter. What I want to understand here is what's driving this? Do you have any exposure to data centers here that you know of? And is this sustainable into the second half? That's the first part of the question. Second part of the question is just on HBS. I'm assuming that the momentum we saw in Q2, and I think this is something that we discussed at InterSolar as well, we should expect a normalization of that in Q3.
Yeah, Konstantin. Yeah, hi, Konstantin. So on your first question, I'm starting with large scale. So we do have the situation that we see in the discussions with our utility customers that they tend to go over more and more to decentralize the purchase using PV and, of storage instead of normal procurement of electricity over other supplies, of course. And we do see a bigger trend towards PV. That's the one thing. So that's one part of the sustainable part that we see the whole time, and that is the same for U.S. and from Europe. But what we also see is that we have gained momentum when it comes to Altenso, the project developments are going well and continue to go well, and therefore, as you said, we really had a record high Q2, mainly coming, of course, from large-scale water intake. And we also see this to be sustainable. Probably we will not have the same momentum or the same amount as in Q2 as it was a record quarter, but it should not drop too much due to the fact that we do see these factors that I just mentioned as sustainable. And in addition, as you also mentioned, the data centers are coming in. I did just say we also received the first order there, and we do expect further orders to come in there, as we are very good positioned in the data center area with the grid forming capabilities with the technology we have and the reliability. So we do think this is sustainable both for large-scale and Altenza orders. When it comes to HBS, of course, we have had some tailwind when it comes to the crisis in the Middle East and the change in the feed-in tariffs here in Germany. But we also see the fact that the de-stocking has been completed now, and we are in a situation where the distributors fill up their stock again, and they are moving up to us because we do have also new products which excite them. This is really visible from the inter-solar discussions we've had and the in-solar discussions we've had. We are in a good position to take some market share from others and that they come back to us on those hybrid products that we did not have in those power classes and because that we have addressed this also with the availability of storage and energy management and the energy planner and maximizer. So I think we have a good momentum there to pick up even beyond what the market is doing itself.
This is great. Thanks. Second question is just on the U.S. Now, I think we understood that it's clearly supportive towards SMA, as it seems to be something that, you know, banning rather Chinese products instead. said, what I want to understand is if we could have a bit more details on maybe what your customers are saying, what the dialogue has been, what kind of feedback have you been getting as a result of that, are you potentially planning to expand capacity in the U.S. even I think Power Electronics was talking about doubling capacity in the U.S., so any color you could give us here for the U.S. going forward, that would be very helpful.
Yeah, I would say this is rather a little bit too early. We would see something like more than a few months or a quarter or maybe even two that we see potential tangible differences there. What we do know, of course, as you also know, this is about all foreign-produced inverters, but not, of course, those that already have an FSC certification. So we are good right now anyway, And we also do think, as you were suggesting, that we are quite well positioned for the future due to the fact that we can show that we have a resilient supply chain, that we have a governance which is clearly identifiable and clear to our customers, that we are in a situation that we can prove that our supply chain is not only resilient, but also mainly from European manufacturers or manufacturers outside China. And all of this will help us in getting the future certifications as well. So we are positively looking into that. And coming to your question regarding customers, they see it the same way. So we will have to wait how this exactly evolves, but we are quite positive that this should be helping us. When it comes to manufacturing, as you know, we already have the transformers and the integration there. So that's roughly half of the sales price and half of the cost of the product. And we do currently not intend to build up any manufacturing for the inverters there. but that we can handle that very well, even on the FCC floor, in the way, in the setup we have right now. That's for the Tundi.
Okay, this is great. Thanks. And lastly, just on the innovation point, I think during the inter-solar conference, there, I think, one absolutely key component that everyone is talking about was solid-state transformers. Clearly, we're still a few years away from it, but we have been seeing quite a few announcements already of product launches, prototypes being put in place. And I think during InterSolar, you basically said that this is a market that you looked at in the past, and then you stopped looking at it, and now you're basically retaking some actions in there. What's the plan here in order to make sure that SMA doesn't stay behind?
Yeah, I would like to start with a last sentence. I think we have shown over the last years that we have really been able to be very innovative. If you look at our market share against competition in large scale that you talk about many when it comes to SST, for example, we did take market share, especially based on revenues over the last three years, and we even would see this year the same tendency. and that is because we have really performed very well in making our solutions very good when it comes to grid stability, grid forming and all that that goes into that apart from, of course, quality and features we already always had and are known for. So I think this is something where we have always anticipated it very well. When it comes to SST in specific, I think the market is actually still split because of the fact that, on the one hand, of course, there's obvious reasons for SST, especially in data-centered applications. On the other hand, there's also arguments against it because you need to have a very, very high reliability of 99.5 times 9 and 5 percent. And normally a transformer itself is always the most reliable part compared to transformer and twice power electronics. And the other part would also be the cost, which is probably also rather comparable. So we have been looking into that, as you said. We are looking into that, but we will only make a clear statement to the outside once we have decided to do it or not. And right now we are investigating into that. And as you know, we are good in power electronics, probably much better than some of the competitors that mainly do small powers. and we have an own manufacturing of transformers with a very high knowledge even on high-frequency transformers. So we are well-positioned for that. We are looking into that, and we will then, in due time, come back whether we see this as a real game-changer or not.
That's great. Thanks. If I can just throw in just the last one, just on the regulatory environment in Europe, I think if we think about it historically over the last few years, Europe has famously been more of a barking than biting. And, I mean, clearly we've seen about a month and a half ago, a couple of months ago, the announcement of a funding ban from the European Investment Bank. But what do you actually see on the ground, the market? Like, are things really moving in the direction that, you know, we will probably see a potential ban on anything that's grid connected? Or is that something that, you know, you think is rather not really realistic?
I think it's very difficult to say, as you said, Europe tends to be a little bit more conservative, if I put it like that, towards the U.S. or even Japan or Australia, as we see it right now. and the move towards banning some countries on inverters for publicly funded projects was already a big step for the EU and we would not typically probably expect very concise and hard measures in the coming years. Of course, we would be surprised if that happens and would look at that, but we would not expect that to happen rather quickly. On the other hand, what has happened already with a ban of inverters for publicly funded inverters out of some countries, we do see a lot of discussion around it with our customers. So customers are asking us of how we can replace, how they could move over to our technology, et cetera. It's also too early to put that into figures, but we are definitely in discussions, especially also in the intersolar and after that. And this is what I can say for the time being. I would not expect Europe to become too bold. But what is happening is actually in our direction.
Operator
As a reminder, if you wish to register for a question, please press star and one on your telephone. The next question comes from Guido Hooyman from Metzler. Please go ahead.
Yeah. Good afternoon, gentlemen. I have actually four questions, three on HPS and one on large scale. I think we can do it one by one. So the first one would be, how are the margins on your order intake in HPS at the moment? Are they better than pre-crisis? And if so, I hope so.
Is that due to the optimized cost structure? or is it about in less interest customer interest for chinese products as we have just discussed you know so is there a stronger interest in say european or your your products that's the first one margins yeah let me let me take uh let me take this one i think um i think we have to distinguish a little bit when it comes to order intake whether we look at the um pv only products let's say the existing product base, or if you look at the new solutions that we're offering since a month, I think what is fair to say is that the new product line has much better margins, and the order intake for that is really good. So I think that's a good trend. What we've seen, obviously, for the older products, and that's mainly the products that we had written off in the inventory, that we benefit now from the write-downs. but those would not have good margins if we hadn't written them down yet. So I think that's a twofold question. Going forward, obviously, the old base will dry out, and then the new base will kick in, and then the margin level should be definitely higher.
The second one would be, I think you indicated that the break-even cost base in HBS would be three to four hundred million sorry the sales you need to break even three to four hundred million in hbs and given the the scope of the order intake in q2 um and and i think the short relatively short lead times here can we expect hbs to break even in q3 or in q4 uh i think it's too early to say I think we see a good development in order intake also profitability improves as you can
read in the numbers but we have too little actuals to say that so I would not commit to a very early breakeven in Q3 or Q4 I think our plan is to be breakeven next year that's what we're targeting and we will definitely have one or two months maybe this year where we will be breakeven but then depending on the sales amplitude so to say especially in the outer months of the year when it's winter time we'll probably be not that positive again so this would be a little bit of fluctuation but I think that the trend is definitely there that we improve month over month but if you're already breaking in Q3 or Q4
I wouldn't commit to it now okay and you know given these two trends you know you cut down your costs and maybe also capacities in a way at the same time a strong increase in demand so do you actually have sufficient capacities now to handle all that you know assuming that the demand stays high and in other words do you have already or do you recognize already longer lead times? Is there already some sort of excess demand? In short, do we have sufficient capacities actually to handle a stronger demand in the future?
Let me take that. I think the capacity when it comes to production side lines and people is not a problem at all on both divisions, both HBS and large scale. So when it comes to large scale, which is, as you know, roughly 80% of the revenues, then I would also say we do not have any problems. Why? Because normally, of course, we have six to ten months in lead time between order and then delivery, and thereby we can much more anticipate that with a supply chain. And also, if you would look at processes, for example, so chips with intelligence integrated, then we would have only one or a few in the whole central inverters and the same for one small inverter. So, of course, we would prioritize the big inverters. So there we would also not have a problem. Where it could be and where we do see the tendency that you mentioned is longer lead times and even price increases, for example, on copper, aluminum, and steel, but also on naked PC boards. and that is the same in the whole industry or even other industries where we do see some trends and they would then in this case come in mainly on HBS and only if the demand really is much different to what we anticipate anyway. So there is a tendency towards higher lead times and higher prices on those that I mentioned and a few other components which we are trying to adapt of course to in the best possible way but to put that into perspective once again it's not on the production side it's not on large scale it's mainly on hbs and then only a portion of that and especially if it would change volumes quite considerably then then we would be in a situation where we need to have longer lead times but all in all it's still a comfortable situation.
Okay, and the last one is on a large scale. If we adjust the Q2 EBIT for the tariff refunds, and I understand that you consider that to be operational, but anyway then the margin would have been, I think, some 8% or 9% only.
So I would say rather weak, also compared to its previous quarters and so what is the reason for that actually yeah i can i can take that one i think um i think it's fair to say that the revenue level is a bit lower as well so of course you have this uh this effect of the fixed cost that you have to carry so when when i do the math i come to around 10 which is lower um so so i give you that so that's that's one point um the other point is if you compare it to last year for example of course the FX development has been negative we improved versus our guidance because we expected it to be worse but if you compare it to last year the FX effect also has a big big impact and the third thing obviously is we also mentioned is we don't capitalize on the expenses in the same amount right so also this is putting the the margin lower compared to last year while it's we still have the same cash flow down so I think those would be the three the three main Okay.
Operator
The next question comes from Jeff Osborne from TD Cowan. Please go ahead.
Thank you. Good afternoon. Just a couple quick ones on my side. I was curious on the German market if you're seeing ahead of any EEG changes in distributor behavior in terms of wanting to build inventory, what you're hearing on the ground in terms of potential pull-in and demand.
Hi, Jeff. Jürgen here. But no, I think the distributors and also installers are rather careful after the experience of the last year. So I would not expect, or we have also had a discussion, Kavi and I, the other day, we would not expect anybody to really build a buffer, and they would be rather reluctant and careful there. So we do see, of course, that there is changes coming in the EEG in Germany, for example, even if it's still under discussion, but they will not do too much, actually. They are small enough not to make a big disturbance, and as you said, we would not expect distributors or installers to really buffer. So we do see an upward trend due to the fact that destocking has taken place, due to the The fact that people see here also in Germany, the trend towards, and then rest of Europe towards all electric society, more electric vehicles are being sold also due to the other factors from the higher oil prices, et cetera. And therefore, we do see a positive market momentum. And as I said earlier, also a little bit of extra tailwind for us due to the new products and solutions. but we do not see an extraordinary trend coming out of the fact that EEG is adapted in the tiny nuances that it is adapted.
Makes sense. Thank you for the detailed answer. Just two other quick ones. One on the utility inverter side. I'm just curious, could you share with us how much of the unit volume is just related to battery-only solutions?
It seems like you've gained quite a bit of traction there. yeah it's an interesting trend so so in q1 i think because we get this question very often q1 the trend was more of batteries less of pv right um in q2 actually on the order intake side of things it's the other way around so we had more pv and and and less batteries overall batteries are still growing as all the intake is growing but um it's always interesting with the big projects that we're supplying into. If you have one or two big projects in one area, they obviously change the proportion or the figure. So I think we are growing in both areas. So year-to-date is more or less 50-50, but there was a shift in Q1 and Q2, and I don't think that's a strategic move. It's, let's say, due to the randomness of project business and the size of the tickets more.
Perfect. And just very quickly, the last one I had is just as we approach the FIAC implementation in the U.S., are you seeing any observable trends in the commercial inverter market where you've historically had a large market share along with Chint?
No, we don't see any huge change there. We are performing quite well in the commercial market, and as you said, we always had a good market share there, but we don't see a huge difference there actually coming over FIAC right now, but we also anticipate there that it would rather help us with the products that are also aligned with FIOC, but we haven't seen a huge difference compared to what we said earlier in Q1, so we are seeing an increase towards last year in commercial, which is good, but not anything specifically coming notably from FIOC, I would say. Thank you. That's all I had. I appreciate it.
Operator
The next question comes from John Mark Muller from JMS Invest AG. Please go ahead.
Yes, thank you for taking my questions. You mentioned that the order intake momentum is continuing quite strongly, maybe not at the very high levels we've seen in Q2, but still at very high levels. At the same time, given your guidance, you expect some sales momentum in the second half. I mean, just for us, from what you see today, should we expect a book to build in the second half to be above one?
I mean, that is difficult to say. Good question. But as we said, we do see a stronger second half than the first half when it comes to sales. And we did have a good order intake in the first half, mainly due to quarter two. So, out of that perspective, sales going up and auto intake already on a very high note, it is difficult to say whether the one or the other is going to be higher. But the essence of the question also, as I said earlier, is we do see sustainability in our auto intake due to the fact also that we are in a good position and also the data center part is coming along as well. So it's difficult to say right now whether the one or the other one will be higher, but both on a very good level, we think.
Okay, cool. And then on HBS quickly, I mean, the way I look at it, and it was referred to in the call, I mean, the breakeven level, I heard now 300 to 400 million. The way I do the math, it's probably, it has to be at least 400 million. You mentioned that you would like to achieve a break-even level in 2027. So I would have to expect sales level of around 400 million for HBS in 2027. Is this correct?
I think the 300 million is not possible. You're right. I think the last time we mentioned that it was 350 to 400. So I think it should be in that range. And it really depends in the end of the day of the product mix and the margins that we can achieve in the end with a new portfolio, which is not only the inverters, but also the batteries, also the proportion of energy management revenues we can generate. So all these come in line. If we would have just one product, the answer would be more simple for me to calculate. But I think the product mix will depend. So if you have a good product mix, we will be a bit lower. if the product is less in our favor then we will go more towards the 400 so I think that's from given that we have one month the product, the solutions in the field I think given that history let's say in data, I think to work with a 350 to 400 million range is probably the best we can do right now I mean I was more wondering also regarding auto intake in 26 You know, you were referring to a new product introduction, inventory being low.
So obviously, these are two items that should help order intake in 2026. But still, it's kind of hard to see an order intake in HBS of 400 million, which then actually would build enough order backlog for you to actually then have the 350 to 400 million sales in 2027. to then again, you know, break even on an EBIT level.
Yeah, I think the turnover rate is much higher in HBS, right? So usually we have, depending on the product, something between two weeks and two months currently from order intake to delivery and sales. So we don't need to leave the year with 400 million of order backlog. That's more for the large scale piece, right? That's why for large-scale, we have much better visibility and forecasting capabilities. For HBS, it's more tricky. So I'm okay with the order backlog we have now and the current planning. But of course, we need to see how the next month, the previously mentioned solution portfolio will kick in.
Sure. What is plan B? I'm sorry. And I just wanted to say... No, no, I mean, it all sounds good. I was one of the encouraging plans. What would be plan B for HBS? I mean, if you see that break-even levels are more towards 400 million, et cetera, and it seems ambitious, you know, that you reach this level on a continuous basis.
So what options do you see? Good question. We also got in one of the last analyst calls. I mean, of course, you can imagine having gone through a very heavy time with HBS. We've looked at all possible actions and plan B and C. So we have been looking at that. We are quite happy for the time being with, as Kavi also said, of how the new products have been taken into the market, how the order intake is developing. Still too early to say for sure because it's only one and a half months. But we do see a good trend and therefore also a good possibility to go into profitability into next year. So, we will fully focus on that plan, but of course, as you can imagine, one always has to look at the alternatives, should it not come in the way we anticipate. So, and those options, I think they're also clear of what those could be.
Can you enlighten me again quickly? I mean, is closing down, selling, I mean…
Yeah, I mean, those are, of course, the obvious choices. But as I said, we currently are happy with the performance. We see the trend that is positive. And that is our main option that we are following.
Good. Thank you very much.
Operator
We now have a follow-up question from Konstantin Hester from Jefferies. Please go ahead.
Thank you. Just quickly, Kaveh, just on the cadence, I think you said Q3, Q4 revenue in EBITDA, faster Q3, and then the strongest is Q4, right? Is that correct? Thank you very much.
Operator
Ladies and gentlemen, that was the last question. I would like to turn the conference back over to Kaveh Rui for any closing remarks.
Well, thank you again for your interest, and please do not hesitate to contact us in case you have any further questions. Having said that, goodbye to all of you, and have a great summer day.
