Ladies and gentlemen, thank you for standing by. Welcome, and thank you for joining the SMA Solar Technology AG Analyst and Investor Presentation, quarterly statement January to September 2023. Throughout today's recorded call, all participants will be in a listen-only mode. The presentation will be followed by a question and answer session. If you would like to ask a question, you may press star followed by one on your touchtone telephone. Please press the star key followed by zero for operator assistance. I would now like to turn the conference over to Barbara Gregor, CFO. Please go ahead.
Thank you very much, operator, and welcome everyone. We very much appreciate that you are taking the time for this investor and analyst call on our nine month results. You can find today's presentation on our investor relations website. This conference call is scheduled for 60 minutes and will be recorded. The replay will be available for seven working days. After the presentation, I will be happy to answer your questions.
Our agenda for today. First, I will start with an overview, with some key financial highlights. After that, I will walk you through the figures of the first nine months, as well as our full year outlook, 2023. I expect my presentation to last about 30 minutes. After the presentation, I'm happy to answer your questions. I defer to our disclaimer on page two. Let's move to page four, Financial Highlights for first nine months, 2023.
Summary of key financials. After a strong first half year, we successfully continued our growth course in Q3 2023. Group sales in the first nine months increased by 85% to EUR 1.3 billion. Especially the segments, Large Scale and Project Solutions, showed a very positive development. I will come back to the individual segments later. EBITDA also increased significantly after nine months, and was more than 4x higher than last year, reaching EUR 231 million, after EUR 50 million in the first three quarters of 2022. Free cash flow was also very strong again, with about EUR 79 million, and Order Backlog is still on a very high level of about EUR 2 billion, despite the high revenue volume. So let's go to page five, Sales by Regions and Segments. Sales by Regions and Sales by Segments.
On the left-hand side, you can see that EMEA, our biggest region again, increased from 60%-72% end of Q3 2023. 50% of the EMEA sales derived from the Home Solution segment. Revenue share in Americas decreased from 27% to 22% due to the much stronger growth in the EMEA region. However, Americas is still the second strongest region and increased revenues by 60% compared to the first nine months of 2022. The regions show a good development, especially over the last three months. More than 80% of the Americas sales are in Large Scale Segment. In our APAC region, we continue to face challenging Asian competition. As such, the share of this region decreased from 13% to 6%.
Now, let me walk you through the sales per segment on the right side of the slide. In our Home segment, revenues more than doubled from EUR 29 million last year to EUR 486 million in the first nine months of 2023, with EMEA as the strongest region again. The segment's share of total sales was 36% compared to 32% last financial year. Reasons for this extraordinary revenue growth are the normalization of the supply chain, which helped us to further process the order backlog, as well as an ongoing high demand in EMEA. C&I achieved EUR 334 million compared to EUR 191 million last year. A plus of 74% and already a very strong Q2.
Like in the Home segment, reasons are the normalization of the supply chain, which helped us to further process the order backlog, the order backlog. EMEA was the strongest region, with 81% for this segment, too. Large Scale revenues also increased strongly by 71%, from EUR 304 million to EUR 517 million after nine months. With Americas, again, the strongest region, making up roughly half of the segment's sales. Especially in Q3, the project pipeline could be proceed as planned, and we faced no considerable postponements. Now, let me provide you with more information on the nine-month profitability. Profitability for the group has grown substantially and reaching EUR 106 million of EBITDA in the third quarter alone.
Thus, we achieved a group EBITDA of EUR 231 million after the first nine months of the year, compared to EUR 50 million in the previous year. This positive development was driven by both the increase in revenues as a result of the improved material supply and the associated fixed cost degression in production, as well as in continued high margin product mix. Thus, EBITDA margin came in at 17% compared to 7% in the first nine months of 2022.
The Large Scale segment posted outstanding earnings developments in the third quarter and significantly contributed to this improved profitability in the period under review. And as already explained in our H1 call, we did receive approximately EUR 5 million of other income, of other income from customer cancellation fees in the first half of this year.
In comparison, our EBITDA for the first nine months of 2022 included positive one-time effects of EUR 28 million from the sale of property, as well as customer cancellation fees. With EUR 30 million, depreciation was slightly above last year's level. Gross margin for the group improved significantly to 30% after 21% last year. This improvement was preliminarily driven by strong sales growth in all three segments, positive capacity utilization effects from production, and improved fixed cost coverage across all functions.
Now let's have a look at the segments in detail. Home Solutions, again, the most profitable segment also in Q3, this substantially grew its EBIT to EUR 137 million after nine months, versus EUR 35 million in 2022. This was mainly driven by triple-digit sales growth, higher productivity, and fixed cost degression.
This led to an EBIT margin of 28%, compared to 15% last year. We are very happy that both segments, C&I and Large Scale, continued their dynamic sales and earning growth also in the third quarter, as expected by us. In the nine-month period, C&I increased its EBIT from EUR -17 million last year to EUR +16 million this year, which is a positive earnings swing of EUR 33 million. Main drivers were higher revenues and increased production utilization. EBIT margin, therefore, came in at about 5%, compared to -9% last year. Our Large Scale segment also improved significantly after nine months, reaching EUR 47 million, compared to EUR -50 million in 2022, an improvement of EUR +62 million.
The significant sales increase led to improved production utilization with fixed cost regression, and therefore, EBIT margin amounted to 9% compared to -5% in 2022. So all three segments are clearly in black, as expected. Now I will move on to the balance sheet and the net working capital development on the next slide. Net working capital, cash, and balance sheet. Our net working capital, which is shown on the top left of the page, reached EUR 353 million, and is well above the year-end figure of EUR 239 million. This resulted in a ratio of 21%, and this is still in the middle of the management target corridor for this year of 19%-23%. So let me explain how net working capital developed in the period under review.
Inventories end of September 2023 were at EUR 528 million and increased compared to year-end 2022, with EUR 309 million necessary in order to ensure the forecasted dynamic revenue growth. We consistently invest into higher stocks on critical components to ensure delivery capability and to better steer our supply chain. Trade receivables, which increased due to the high sales in the first nine months, were offset by an increase in trade payables, which is related to the higher inventories purchased. Furthermore, advanced payments received from our customers also increased significantly, driven by our strong large-scale product pipeline. Net cash increased by 38% from EUR 220 million at the end of last year to EUR 303 million, driven by significantly improved profitability compared to last year.
Now, let's have a look on the group's balance sheet on the right side of the page, and as I have already explained, the changes in net working capital positions, I will now focus on the significant changes in the other balance sheet positions. Our non-current assets increased to EUR 426 million, mainly reflecting investments into our product pipeline in the form of capitalized R&D project costs, as well as an increase of our deferred tax assets. Shareholder's equity increased to EUR 642 million, supported by the positive result of the first nine months. Provision increased to EUR 187 million, mainly as a result of increased warranty provisions in line with the higher level of sales.
Other liabilities grew to EUR 464 million, mainly from the strong uptake of advanced customer payments, which are considered in the net working capital. That concludes my explanation of the balance sheet, and let me now have a look at our summary of cash flows on the next slide. In the reporting period, SMA generated a gross cash flow of EUR 253 million compared to EUR 21 million the year before, driven by the strong positive result in the first nine months of this year. Given our positive gross cash flow and a solid net working capital ratio, cash flow from operating activities were 13x higher than last year, reaching EUR 130 million end of September 2023.
The group invested EUR 51 million in net CapEx in the first nine months, which mainly composed of investments in our product portfolio, including capitalized R&D project costs and investments in assets, such as the extension of our production capacity. Considering all these effects, our free cash flow for the first nine months, 2023, significantly increased from EUR -32 million last year to EUR +79 million this year. On the next slide, I would like to show you the quarterly operating development per segment for sales and EBIT for Q3 and 1 to Q3, 2022-2023. As you can see, we continued our growth path on both top and bottom line for all segments since Q4 2022, as expected and communicated.
As you all remember, we have emphasized since the beginning of this year that we will foresee a change in our product mix over the year 2023. As such, we will expect more normalized growth rates in home, and higher revenue and earning contribution from C&I and Large Scale over the next quarters. This is shown on the sales and EBIT chart of this slide. And we expect this trend also to continue in Q4, as communicated in our last call. This will result in a change of our product mix towards C&I and Large Scale, but both segments will continue to strengthen their margin profile, driven by higher sales volumes. That brings me to our order backlog and the outlook for the full year 2023.
Looking at the right side of the slide, you see that order backlog, end of September, remains on a very high level of about EUR 2 billion, which is the same level at the beginning of this financial year. Product order backlog is also on a high level of EUR 1.6 billion. On the left side of the page, you can see that our Large Scale segment product order backlog remains very strong, with more than EUR 930 million, followed by C&I, with about EUR 400 million, and Home Solution with EUR 320 million. The stable order backlog for the group after nine months shows that the high order intake as of today, combined with the existing order backlog, offset the high revenue volume in the period under review.
Thus, even with currently lower order intake compared to H1 2023, our existing order backlog is robust to cover revenues also in the upcoming months. This means for Home, about six months, and about seven months for C&I, and Large Scale is about 14 months of revenue coverage. Let me say some words to order intake, as this was intensively discussed the last couple of months. Since last year, we faced an extraordinary situation with incoming orders on a far higher level than normal. Additionally, since Q1, we have communicated that order intake at SMA will decrease during the year, as we have asked our customers to place their orders for the full year 2023 already, end of Q1.
Now, since end of Q2, the market environment has changed and has become more challenging due to high inventory levels at distributors, which affected mainly the Home and partly the C&I segment. However, we do not see this as a structural issue. It's far more an imbalance between supply and demand. After two years of heavy supply constraints, the distributors were forced to build up their stocks beyond normal level to be able to deliver. Depending on how fast the distributor stocks can be reduced, we expect new normal inventory level and restart of order intake for Home and C&I Q2 of next year. With this, let's turn to the last page, our guidance for 2023. As communicated on October 4th, we once again raised our 2023 full year guidance for sales and EBITDA. This was the third guidance upgrade this year.
The guidance increase is based on our strong Q3 performance due to a very positive revenue and earnings development, preliminarily driven by Large Scale and C&I. Against this backdrop, we published an adjusted 2023 guidance, with sales of EUR 1.8-EUR 1.9 billion, and EBITDA of EUR 285 million-EUR 325 million, which we can confirm today. Let me summarize why we believe SMA is more resilient, even in more challenging markets. SMA is a leading global specialist for photovoltaic and storage systems technology, with more than 40 years of market experiences and a brand which is well known in all relevant markets.... SMA has a broadly diverse product portfolio covering three key segments, home, C&I, and Large Scale.
SMA has a global footprint and a strong customer base in both the distribution business and with EPCs, enabling us to cover all business dynamics. Today, SMA inverters, with a total output of more than 135 GW, have been installed in more than 200 countries worldwide. SMA's products stand for high quality, durability, and reliability, and with doubling of our manufacturing capacities beginning 2025, we enhance our flexibility and expand our offering in the coming years.
SMA is financially well equipped with a healthy capital structure and a debt-free balance sheet. SMA is truly sustainable, with a state-of-the-art CO2 neutral production in Germany and outstanding ESG ratings. All this together is more important than ever to defend our value proposition, particularly in uncertain economic times, as is currently the case. This is why we believe in SMA's resilience.
Last but not least, a note on our upcoming events. Preliminary full year figures for 2023 and the guidance for 2024 will be published at the end of February 2024. Our annual report will be published on March 27th, 2024. And for your diaries, please be informed that our next Capital Market Day will be held in 2025. With this, I conclude my presentation, and happy to take your questions.
Ladies and gentlemen, at this time, we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on the touch tone telephone. If you wish to remove yourself from the question queue, you may press star followed by two. In the interest of time, please limit yourself to two questions only. If you are using speaker equipment today, please click the handset before making your selections. Anyone who has a question may press star followed by one at this time. One moment for the first question, please. Our first question comes from the line of Sebastian Growe with BNP Paribas. Please go ahead.
Yeah, hello, good afternoon, everybody. Hi, Ms. Gregor. The first one would be on LSPS. You said on prior occasions that you were sold out for the next year, 2024, in segment. At the same time, we have now seen the backlog declining by more than EUR 100 million to roughly EUR 930 million at the end of quarter three. So first question here is, then, can you help us understand what the capacity limit at LSPS is when looking into 2024? And related to this, am I right to assume that the terms are fixed, so volumes and pricing, so that any cancellations that might occur would trigger penalty payments for the customer? We could start there, please.
Thank you very much, Mr. Growe, for the first question. First of all, currently we are still at a capacity utilization of round about 85% in our overall capacity possibilities. That means that we are currently working three shifts a week from Monday to Friday, and sometimes also adding weekend shifts where necessary and where profitable. For the Large Scale segment, we also see significant growth possibilities for next year, and therefore we will try a little bit to renew and also to shift some capacities from the C&I and Large and, and Home segment, where possible. Overall, our production lines are well prepared, especially for one or the other segments, but there are possibilities also to shift a little bit in between.
We are very confident that we will grow our sales, our revenues in 2024 overall, and the main portion of the growth will come out of our Large Scale segment. Coming to the question of the current order backlog in the Large Scale segment, there was a shorter dip into the Q3, but overall, we see that there are growing possibilities, and this is only a temporary dip where we have a clear order backlog, which is serving currently our overall sales expectation in Large Scale for more than 12 months. This gives us the confidence to increase our overall sales expectation for Large Scale also for next financial year.
Thank you for this. Then in regards to the cancellation fee question, so, if a customer wanted to cancel the contract, then it would automatically then trigger penalties on behalf of the customer, right? So there's, in a way, full protection, if you want so, from the order backlog at LSPS. That's the right way to look at it?
... We have seen cancellations from customers, especially in Home and C&I over the last week, as seen in the whole industry, due to the overstocking at the distributor. However, we were able to increase our full year guidance. So if there are cancellations, there are also some negotiation on penalties, also depending on the different contracts. So there is no one-to-one regulation. There's always also some negotiation. First of all, we try not to accept any cancellation, but to postpone orders then into next financial year, 2024, which gives us then a more stable view on the next year. Our order backlog is still covering, in Home segment, currently six months roundabout, and in C&I, seven months. Therefore, we feel confident with our sales and revenue expectation for next financial year.
Okay, thank you for this. If we can then quickly move on to the more sort of trading business, and I call it this way, so Home Solutions and C&I. You made a couple of comments earlier on, and then also in response to my earlier question. It's a bit the crystal ball, but nonetheless, obviously your commentary is very similar, I think, to that from SolarEdge, which has been pointing to expected destocking of around two to three quarters.
My question here is simply, and although obviously the distributors are unwilling to place an order as we speak, do you have the impression by what you hear from your salespeople and also key accounts, that 2024 volumes overall should exceed those of 2023? Related to this year, on pricing, I know how difficult that is to answer at this point. How do you view the risk that if and when volumes were slow, that one or the other competitor might try to attract demand by lowering prices? Any comment on this would be much appreciated.
Mr. Growe, I think these were more than 10, 10 questions only in one question. I will try to answer as best as I can. First of all, as we said, yes, we see currently some cancellation, but this has not any effect on our 2023 guidance. We increased our guidance again on October 4, and we are confident really to match it. And so we are sticking on our growth targets also for 2024. So we do not see the current decline in incoming orders or cancellation as a really structural decline in demand. We see that it is a temporary decline in demand due to overstocking at distributors. And we are convinced that this will disappear latest in Q2 of the next year.
So latest in Q2, order intake will come back, and our order backlog is still covering our sales expectation until this, this date. So therefore, we will feel very confident with our overall guidance, and we stick on our target to increase our overall sales volume for 2024, for the whole, for the whole group. And what competitors comment, we do not comment on the competitors' development.
The very, very last one from me, and it's a very simple one and not ten questions in one. You made now, I think two, three times reference, that you do expect growth in 2024. So on the last call, you said 20% sales growth, and you also said 10% EBIT margin. Would you repeat, confirm that framework given the current uncertainties?
We are currently in the planning process, and I cannot answer any details, but I'm pleased to repeat what I said at the Capital Market Day, and also in our conference call in August. We are targeting a positive double-digit EBIT margin for the group for next year, and also we are targeting a sales increase above the market overall. That means 20% is reachable, and the clear guidance for 2024 will be published end of February next year.
That's encouraging. Thank you so much, Ms. Barbara.
You're welcome.
The next question comes from the line of Anis Zgaya with ODDO BHF. Please go ahead.
Sorry. Yeah, hello. Sorry, my question have been answered. My question were mainly on order intakes and on the short-term nature of the dip in order intakes. So you confirm this short-term nature and on 2024, so you confirm the growth for 2024, so thank you very much.
No problem. You're welcome. Thank you for your comment.
The next question comes from line of Lasse Stuben with Berenberg. Please go ahead.
Hi, good afternoon. You mentioned you had some cancellations in the order backlog. Your previous kind of comments were more around that you wouldn't be accepting those cancellations. So I'm just wondering, sort of, how did those conversations with those customers go? What changed your mind to start accepting cancellations? And would it be able to just give an idea of the scale of the cancellations? And then the second question I would have would be on your own working capital position.
You mentioned that, you know, you're expecting that working capital to normalize. I'm just wondering how that kind of works, given, you know, it might be difficult, just given, you know, you're not expecting many orders until Q2. So it'd be good to know how you're thinking about your own inventory levels and how you manage that in the face of lower order intake. Thank you.
Thank you very much for your question, Mr. Stuben. Yeah, we had some cancellation from customers, especially in Home and C&I over the last weeks, as it has been seen for the whole industry. So we were very, very long, very resilient against this, and also negotiate postponement for next year.
But at some point, you are in a partnership, especially with long-term relationship customers, and you come to a point where negotiations come to come some of compromises also for this financial year, because we want to do exceptionally sales growth and exceptionally good business also for next year with our customers. So therefore, we accepted some cancellation, but always after very strong and intensive negotiation for postponement and other possibilities. So but last, but not least, we have also to follow the overall market development, but more resilient and lower and not as fast as maybe others.
Therefore, we were able, therefore, still to increase the full year guidance, and we also show that we were more resilient by our diverse product portfolio and our regional footprint than maybe others are. Coming to our net working capital development, currently, we see that there is a necessity also to improve our net working capital by investing in critical material, as we see that there could be always, in come up any sustainable or any critical restrictions in the supply chain. Therefore, we have the possibility, as we have the cash and as we have the momentum, to invest currently in net working capital to be stable, and then to cover our upcoming sales and growth expectations for our next financial year.
So we secure our sales expectation by investing in net working capital currently, as long as it's necessary and as long as it is on a profitable base. We still stick on our net working capital ratio. We are currently at 21%, and our ratio, which has been communicated between 19% and 23%, we still stick on our target, so we do everything not to get above this ratio, because this is our absolutely upper limit. But in between, with the possibility to do some investments to secure the upcoming sales development, we do some investments in net working capital.
Right.
If it is net working capital, it will also be used at short notice.
Understood. One more follow-up, if I may. Just on the sort of your expectation that orders come back in Q2, is that sort of an expectation of, or your baseline expectation that distributors have to start restocking? Or is this on the basis of underlying demand in the market picking up again? Because that seems to be a bit weaker, at least in Q3, according to other players in the market. Thank you.
It, it's both. It's a mixture of both. First of all, there will be a willingness and also a necessity to start restocking at the distributor side when their stocks are going down. This is for sure. So there is a temporary overstocking, which will disappear by not coming additional orders in. On the other hand, we do not see really a decline in demand, so there is still a stable demand from the market in our products, in our regions, in discussion also with the market, with the market provider.
We see that there is still stable demand, C&I for Home and also for Large Scale, especially. And from this side, we are very convinced that this temporary overstocking will come to an end latest in Q2, and therefore, then order intake will come accordingly. Decline in demand, we do not see in our regions, in our products, and in our specific markets we are well established in.
Right. Thank you very much.
You're welcome.
As a reminder, if you wish to register for a question, please press star followed by one on your telephone. Our next question comes from the line of Jeff Osborne with TD Cowen. Please go ahead.
Good afternoon. Just a couple questions on my side. I wanted to better appreciate, Barbara, how when in 2024, the revenue will shift to the utility scale segment, what the implications are for margins. Can you just maybe at a high level, talk about the differentials in margins that you saw in 2023, given the strength in residential relative to what we should expect in 2024 with the strength in utility scale?
Thank you very much, Mr. Osborne, for your questions. Yes, first of all, based on our market estimation and our internal outlook, the Large Scale segment is expected to maintain double-digit growth over the next five years. So our capacity expansion is necessary to keep up with this growth and to enable us to launch our new solutions into the market.
For sure, as usual, in margins may fluctuate over the first quarters as we ramp up production in 2024, but overall, we expect margins to remain at a very good level for the segment. The margin for this segment are also part of our overall EBIT margin expectation, which we still confirm. Our target is to achieve a two-digit positive EBIT margin for next year. So also Large Scale has to contribute to this overall target. For sure, if you ramp up a capacity for the time of the ramp up, there will be some fluctuation which you will have to cover.
Got it. I mean, just on a, if you were 100% residential versus 100% utility scale, is it safe to say that the gross margin difference between the two would be, you know, give or take 10 points? I'm just trying to understand the mix of the gross margin level in particular.
10%, 10 points, I would not confirm, but what we have seen from the beginning of the financial year and what we have also always mentioned from the beginning of the financial year, is that especially in Q1, we were dominated from the Home Solution segment, sales wise and also EBIT wise. And for sure, this segment is our margin highest segment. Therefore, by also increasing portion from C&I and Large Scale, it's absolutely in line with our expectation that the overall margin during the year decreased a little bit compared to Q1, Q2, Q3. So this is in line with our expectation, but all three segments are contributing positively, and we are not focused only on short-term margin development.
We are more focused on long-term sales and growth development, and therefore we absolutely stick on our decision to invest highly into the Large Scale segments here at our German factory, where we double our capacities from 20-40 GW. So the short-term margin constant was very high for, for Home for the first quarter, and then due to the mix in our portfolio, which was absolutely foreseen and was, which was absolutely also indicated by us, there is a kind of erosion. But the overall sales expectation and growth expectation in the PV market and in our overall market is absolutely convincing us that our strategy to install additional capacities for Large Scale are the right decision.
Perfect. Just a couple other quick housekeeping ones. I typically ask you what the storage and third-party trading revenue was for switchgear and other equipment that you don't manufacture, but record low margin revenue on. Is that something you could share?
Yeah. It's one-digit percentage. So it's really a minor portion with one percent digit. With one-digit percentage, so.
For both storage and trading?
For hybrid. So we are, we do not count our hybrid, our smart energy solution into the storage. So for hybrid solution, our portion or percentage was around 20% year to date and also in Q2, Q3.
Excellent. My last question is just, I think in the past you've talked about potentially building a factory in America for utility scale, given your strong position. Is that something that you're still considering?
Yes, absolutely. We are. The picture is getting more and more clear, and we have currently no announcement to make, but we are still in the process of investigating. So the decision will be between contract manufacturing, collaborating with manufacturing partners, establishing our own dedicated manufacturing facility. So there are so many different scenarios. We are currently still calculating, but we are planning to come to a decision with the supervisory board end of this year, and afterwards we will communicate accordingly.
Excellent. Thank you. That's all I had. I appreciate your comments, Barbara.
Thank you very much for your questions.
The next question comes from the line of Guido Hoymann with Metzler. Please go ahead.
Yeah, thank you for taking my questions. Actually, most of them have been asked now, but two left. And one, the first one is on the capacity expansion again, in particular in Kassel. Here again, the question: Does the destocking situation as we are experiencing it at the moment, does it have any consequences on the expansion plans, i.e., can you, for example, slow down the building process? I guess you won't change it, of course, the plans, but can it be maybe slowed down, postponed, maybe also into 2025 or so?
That's the first one. And the second one, maybe a more market and general question, is on the EU Net-Zero Industry Act. I think this is meant to protect also the European producers, or to support them. So how do you assess the plans in this Net-Zero Industry Act? Shouldn't that be pretty supportive for a European producer, as you are? Thank you.
Thank you for your questions, Mr. Hoymann. First of all, concerning the capacity increase in Kassel, we are investing currently, mainly to increase the capacity for the Large Scale business. So this additional 20 GW we will produce in the new factory are mainly used for the Large Scale business. And in this business, we currently do not have these challenges due to overstocking at suppliers, at distributor side. So it's a different segment, and it's a different market view, where we have still already an order backlog, which covers more than one year sales expectation in Large Scale. So the order backlog is there. There is a growth expectation, and our additional capacity will be mainly used for Large Scale.
Mainly means that then in the original fabrication, there will be open spaces which can be also then used for C&I and home, if needed and if necessary. The opportunity to grow is also there for Home and C&I by installing the new capacities for Large Scale. But the decision to increase production in Large Scale is not affected by any overstocking at the distributor side currently. Coming to the Net-Z ero plans from Europe, for us, it's still not very, a little bit frustrating that the European decision takes so long. Germany was the first to really step into this issue and made a lot of additional announcements. For example, the debate about the resilience bonus is still something which we are covering.
So SMA is actively involved in the development of the resilience bonus, which has been proposed by the Bundesverband of the Solarwirtschaft, BSW, and resilience auctions and resilience bonuses, and support these measures to establish a framework for building a resilient solar value chain. So there are still a lot of questions open to be clarified end of November, and the timeline foreseen that it will come into force on January 1st, but we do not expect the schedule to be met. And SMA is still well positioned, is still well established, and we have made all our plannings for next financial year and the upcoming years without this resilience bonus. So we are not dependent on the short-term implementation, but we are working on the best solution for SMA, as the entire portfolio would benefit from this, from this.
Our growth expectations, our revenue, and also EBIT expectation are done without any stimulus from government side. Currently, and there we stick to our growth and our expectation also without this benefit.
All right, perfect. Thank you for your explanation. Thank you.
You're welcome, Mr. Hoymann. Thank you.
The next question comes from the line of Mengxian Sun with Deutsche Bank. Please go ahead.
Hi, thank you very much for taking my question. So, apology for going back to the Large Scale segment. Can you confirm that your comments of expecting a normalizing of order intake in the next Q2 next year, these comments also apply for the Large Scale, that we should expect to see the order intake to decline in the next few quarters and stabilize in the Q2? Do I understand that correctly?
And the second question is on the profitability on the Large Scale. So Q3 has been exceptional for the Large Scale segment. Is this profitability should be a run rate that we are expecting for the next few quarters? And the last question is on the ramp-up cost that you just mentioned. Do you have a ballpark figure for us? What do you expect for ramp-up cost for next year and also for 2025? Thank you very much.
Thank you, Mrs. Sun, for your questions. Currently, order intake for Large Scale will increase in Q4 and also in Q1. So this is what we absolutely see. This is a project business, where order intake and order intake development is not driven by overstocking at any distributor site. It's really project by project. We are well established in the market. We are known in the market since decades. We have an order book which is very well prepared and highly booked. So therefore, there is no question about increasing order intake also for the next months. But what we currently see is that we had also there an extraordinary long order backlog covering more than, more than 12, more than 14 months in advance.
In the past, before any constraint in the supply chain occurs, the normal order backlog, also in Large Scale, was around six months. So if there will be a new normal between 12 and six months, we have to see. But this is only driven by the project's development, and it's not driven by overstocking at any distributor site. So, the profitability, which increased significantly in Q3, is driven by the fact that we have now a utilization rate, also in Large Scale, driven by the high sales volume that covers the fixed cost more efficiently. And therefore, due to fixed cost regression, we see that the profitability is on a very good and stable basis. So we do not see that there is any reduction if by taking this overall sales development for the next month.
But for the Large Scale capacity expansion, for sure, as I have already explained, it's usual that margins will fluctuate over the first quarters, where the ramp-up of the production will take part. Only to give you an example, we have to hire additional employees to increasing our capacities, and these employees will come into our P&L before production starts and before any additional sales volume occurs. So this is normal by investing in new fabrication, that you have, first of all, increasing some costs and then additional sales and margin will occur. We will start working and producing out of the new production line beginning of 2025, and there will be a ramp up.
But the ramp up will also depend on how long our existing products will be demanded, because with this new fabrication, there's also a new baseline and a new product line included. So also our existing product lines will be used and also the platform, the current platform, will also be booked. And then there will be a ramp up and a switch over the year where we increase the capacity out of the new fabrication. We do not give any detailed information currently, because we are still investigating how fast can we do this ramp up and what is the demand, which then occurs out of our order b]acklog to serve this additional platform for 2025.
Thank you very much. This has been very helpful. Just a follow-up question on the order intake, again, sorry, on the Large Scale. It's encouraging to hear that you said that, that the order intake is going to increase next quarter, but that we have already seen that in this quarter, in Q3, the order intake in the Large Scale and project segment has been declining. Any reason for that?
This is only driven by really the project-depending order intake. So the order book overall is very well, very well booked. But depending on how different projects are then to be realized, then it depends how much the order intake will increase and will come back again. So there is no structural and there is no lack in demand. It's only depending on day, on the different projects and the realization items and the realization time frames which occur.
Okay, thank you very much.
You're welcome.
There are no further questions at this time. I hand back to Barbara Gregor for closing comments.
Yeah, thank you very much for taking part and your interest, and please do not hesitate to contact us in case of any open or further questions. Goodbye, and Auf Wiedersehen.
Ladies and gentlemen, the conference is now concluded, and you may disconnect your telephone. Thank you for joining, and have a pleasant day. Goodbye.