UPDATE 2-SMA Solar's profit plunges as industry crisis spreads
* Proposes 2012 div of 0.60 eur/shr vs 1.30 eur for 2011
* 2012 EBIT 102 mln eur vs 122 mln Rtrs poll avg
* 2012 sales 1.46 bln eur vs 1.47 bln Rtrs poll avg
* Shares indicated 2.5 percent lower
FRANKFURT, March 27 (Reuters) - SMA Solar's profits and dividend more than halved last year, hit by plunging prices that have led to a wave of insolvencies in the solar industry.
The world's largest maker of solar inverters - a key component in solar installations needed to feed solar power into the electricity grid - on Wednesday reported a 58-percent drop in 2012 operating earnings to 102 million euros ($131 million).
Analysts had on average expected an operating profit of 122 million euros.
Asian rivals that are selling cells and modules at cheaper prices have caused a profit crunch in the solar industry, forcing several Western solar players to drop out of the market.
"The competition risks have increased in comparison to the previous year," SMA Solar said, adding sustained lower prices from competitors could "severely impair" its business.
The crisis has even reached some Chinese players, with Suntech's Wuxi unit in insolvency proceedings, and is slowly reaching other parts of the industry, including SMA's solar inverters.
SMA has previously said that about 40 percent of the global inverter market is held by 300-400 small players, of which more than 200 are Asian.
The crisis has filtered through to SMA's operating margin, which plummeted from about 27 percent in 2010 to 7 percent last year.
The group reiterated it could not rule out an operating loss this year, as well as its forecast that sales were likely to fall from 1.46 billion euros in 2012 to between 0.9 billion euros and 1.3 billion euros this year.
Its shares were indicated 2.5 percent lower in pre-market trade.
"It shouldn't be a surprise since the whole solar industry is sick," a trader said.
The pressure on margins also saw German engineer Siemens as well as manufacturing conglomerate Bosch recently end their ventures in the solar industry.
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