Increased orders fail to boost SGRE's profits

Siemens Gamesa (SGRE) increased order intake across all segments in the first quarter of its 2020 financial year but project delays put a stop to an increase in earnings.

High orders in Siemens Gamesa's service and offshore business units pushed its order backlog to a record-high €28.1 billion
High orders in Siemens Gamesa's service and offshore business units pushed its order backlog to a record-high €28.1 billion

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Its offshore wind order intake of 1,279MW in Q1 2020 dwarfed the 12MW of orders recorded a year ago, while its backlog grew 95.7% year on year to 3,343MW, boosted by increased activity in Asia Pacific.

Meanwhile, its €1.47 billion of service orders between October and December 2019 was a record-high for the manufacturer, with the segment now accounting for 46% of the manufacturer’s total order book’s value.

It recorded a more modest 8.1% increase in its onshore order intake in Q1 2020, logging 2.56GW of orders, with 44% of these being for turbines with power ratings above 4MW.

These increases pushed the manufacturer's total order backlog to a record-high €28.1 billion by the end of Q1 2020.

However, Siemens Gamesa’s increased order intake did not translate into an increase in revenue or earnings, with previously announced project delays hitting the company’s profits.

The manufacturer reported first-quarter revenue of €2 billion, down 12% year on year, and €136 million loss of earnings, down from a €138 million profit.

Both of these metrics were blamed on the early arrival of winter weather preventing the manufacturer from carrying out installations at five wind farms in northern Europe.

Siemens Gamesa’s CEO Markus Tacke described this as a “one-off impact” that the company does not expect to recur in the future. 

“The company's financial performance fell short of the expectations we had when we set our targets for the year," Tacke said.

However, he remained positive for the company's future growth.

In a conference call, he told reporters that Siemens Gamesa would “strengthen our risk management to ensure that we are in good positions with all our projects around the world” following the project delays in northern Europe, but would not provide further details.

Senvion boost

Siemens Gamesa’s acquisition of strategic assets from Senvion — announced in October 2019 and completed in January 2020 — would further boost the manufacturer’s service business, Tacke added. 

“Senvion’s service business has been an attractive business, with profitability somewhat in line with that of our own service business.

“It expands our backlog with 9GW of additional contracts in markets that are relevant for us.

“At the same time, it helps to build our competences for fleets not designed or manufactured by Siemens Gamesa," said Tacke. 

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