Covid-affected supply chain and projects send SGRE to a loss

Disruptions caused by the coronavirus directly led to a negative impact of €56 million to its Ebit in Q2, Siemens Gamesa Renewable Energy (SGRE) reported.

SGRE installed its SG 11.0-193 DD offshore wind turbine prototype in the first three months of 2020
SGRE installed its SG 11.0-193 DD offshore wind turbine prototype in the first three months of 2020

SGRE posted a €165 million net loss in Q2 of its financial year due to the ongoing impact of the Covid-19 pandemic.

Its revenue also fell by 8% year on year to €2.2 billion due to lower sales of turbines, while reported Ebit came in at a loss of €118 million, down from a €90 million profit a year earlier.

The manufacturer suffered supply chain disruptions due to factory closures, while difficulties in moving project installation teams caused delays to project executions, CEO Markus Tacke explained in a conference call.

It reported that the ongoing pandemic intensified challenges for its onshore business in Northern Europe and India between January and March 2020.

Siemens Gamesa has rerouted supply chains, optimised remote monitoring to guarantee service operations, and extended periods of maintenance for teams working at sea to shield its employees and the company’s operations from the pandemic.

Its €165 million net loss in Q2 2020 is down from a €49 million profit from 2019, and contributed to a €339 million net loss in the first half of SGRE's financial year, which runs from October to September.

SGRE follows rival manufacturer Vestas in falling into a loss in the first three months of 2020, with both companies suffering logistical challenges and supply chain bottlenecks due to the pandemic.

Siemens Gamesa’s CEO Tacke said opportunities to secure turbine supply contracts “will not disappear” and agreements due to be signed in Q2 would likely be finalised in Q3.

But the ongoing pandemic might continue to squeeze its profitability throughout the year, he added.

“I would assume that the direct impact for the rest of the year might be in the order of magnitude we have seen in Q2,” he told reporters. “There will be some effects in Q3 and Q4.”

However, the manufacturer believes it is well-guarded against the impacts of the virus due to its order book reaching record levels and the company has credit lines worth €4 billion — "against which it has drawn €1.1 billion".

Siemens Gamesa’s order book rose to €28.6 billion by the end of Q2 — up 21% from a year earlier, and 1.7% from the end of the previous quarter.

By the end of Q2, it had reduced net debt to €295 million — down from €724 million — having now paid for Senvion’s service assets.

A lack of short-term predictability owing to the pandemic prompted Siemens Gamesa to withdraw its guidance for the 2020 financial year.

But the company stated that it remains optimistic about its own long-term prospects. 

It is also buoyant about the long-term prospects of the wind power industry and the clean energy sector, given analysts’ projections of continued growth and the opportunity to link Covid-19 recovery efforts with green goals.

Tacke joined calls for post-pandemic recovery stimulus packages to boost decarbonisation targets and for renewable energy to be at the “core” of such aid.

“Siemens Gamesa considers that the renewables industry must play a key role in the economic recovery to move towards a sustainable energy model that generates quality jobs,” he said. 

“It is in our hands to avoid another crisis: the climate crisis.”

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