Siemens Gamesa expects Covid-19 impact to 'tail off'

Siemens Gamesa sounded a positive note in its Q1 conference call, having recorded increased revenue and a return to profit

Siemens Gamesa CEO Andreas Nauen spoke of his hope that a global vaccine roll-out could limit impacts of the coronavirus pandemic on his company
Siemens Gamesa CEO Andreas Nauen spoke of his hope that a global vaccine roll-out could limit impacts of the coronavirus pandemic on his company

Siemens Gamesa Renewable Energy (SGRE) still faced lingering impacts of the coronavirus pandemic when executing projects in the first quarter of its fiscal year, but expects these effects to tail off as vaccines are rolled out.

It explained that Covid-19 had continued to restrict the movement of people and goods, hindering project execution in Q1 (1 October-31 December 2020). However, these obstacles were much less prevalent than in the previous fiscal year.

In a conference call announcing the manufacturer’s first-quarter results, CEO Andreas Nauen said: “Movement of goods has continued to have an impact, but a much, much smaller impact than we had last year. 

“We hope that we will overcome these difficulties once the vaccination gradually rolls out across the world.”

Siemens Gamesa was also confident about the role that the wind power sector and the company could play in the ongoing energy transition and post-pandemic economic recovery.

Nauen added: “As an industry, we have proven we are very resilient in the Covid-19 pandemic. We have seen strong investor interest due to strong decarbonisation pledges worldwide and the role green energy plays in the recovery programmes. That is positive for our demand prospects.”

The CEO also shrugged off concerns about a lawsuit from rival manufacturer GE in the UK, which analysts had warned might delay installation of nearly 2.6GW of offshore wind capacity.

Nauen told reporters that the company was convinced the company has “solid legal grounds” to defend itself in court, and that the case would not prevent it from continuing its business operations – whether producing turbines or securing supply contracts – in the UK.

“It has not slowed down our activities in the UK or in other countries,” he added.

Siemens Gamesa is also considering its options for opening a blade factory in Virginia to create local jobs and meet local demand, Nauen told investors.

The manufacturer is the preferred supplier for Dominion Energy’s 2.46GW Coastal Virginia Offshore Wind project off the US’ east coast, and may commit to building a blade factory if this order is finalised.

It is also looking at the potential for producing other turbine components – including towers – in the US to meet demand as other states auction offshore wind capacity.

“We are currently exploring how we can best localise certain equipment, because in the end we have to strike the right balance between being very competitive and creating local jobs,” Nauen told investors.

Financial results

The manufacturer also sounded an optimistic note about its prospects in the coming months due to a 7% year-on-year increase in the value of its order book to €30.1 billion as of 31 December. It claimed this order book meant it was “well placed to capture the potential of the wind industry”.

This increase came despite Siemens Gamesa not receiving any orders in its offshore division – which had been its strongest segment in recent years – between 1 October and 31 December.

However as of 31 December, Siemens Gamesa had an offshore order backlog of 6.1GW and pipeline of 9.3GW, and was actively working with customers participating in offshore auctions amounting to 25GW, it stated.

Knock-on effect

It received onshore orders for 2.3GW in Q1 – down 8%, and worth €1.6 billion. This decrease reflects a lower contribution from China, the weakness of the Indian market and the company’s commercial strategy to prioritise returns over volume, it explained.

Meanwhile, the overall value of orders in its service division in Q1 declined 65% year on year to €505 million, possibly linked to the lack of offshore orders in the quarter.

However, the company recorded increases in revenue, operating profit and Ebit margin in the first quarter of its 2021 fiscal year, driven by strong performance in its offshore and service divisions on outstanding orders.

Its revenue increased 15% to €2.3 billion in Q1, primarily due to its offshore and service units, though the manufacturer was also hit by currency depreciation.

The European manufacturer’s operating profit (Ebit before PPA amortisation and integration and restructuring costs) rose to €121 million in Q1, up from a €136 million loss one year earlier.

This gave it an Ebit margin of 5.3%, up from minus 6.8% one year earlier. The company explained that its operating profit was due to a strong product portfolio and improved productivity in the quarter.

It also pointed to a strong funding position with total liquidity of about €4.6 billion, including cash. The manufacturer also has €4.4 billion in committed funding lines, against which it has already drawn about €1.3 billion. However, its net debt stood at €476 million at the end of December – down from being €175 million in the black one year earlier.

Siemens Gamesa has maintained its outlook for the 2021 financial year: revenues of €10.2-11.2 billion and an Ebit margin before PPA and integration and restructuring costs of 3-5%.

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