Siemens Gamesa Posts Lackluster Earnings Within Guidance
Siemens Gamesa Renewable Energy posted its most-recent quarterly earnings towards the end of July, reporting revenue in line with its 2018 guidance but nevertheless down on both the previous quarter and the same quarter a year earlier.
While Siemens Gamesa has risen to the top of the world’s wind energy manufacturers since completing its merger between Spanish wind energy group Gamesa and Siemens’ wind energy division last year, it has nevertheless been a time of readjustment and consolidation, resulting in quarterly earnings reports which don’t necessarily reflect the company’s increasing dominance, and thus revealing tiny potential cracks in the foundations.
On July 27 the company posted its third-quarter earnings — Siemens Gamesa runs on a financial year which runs from October to September, making April to June its third quarter. The company reported revenue of €2,135 million ($2,479 million) for the quarter, down 21% year-over-year and down 4% from the previous quarter. This brings earnings for the first nine months up to €6,504 million ($7,553 million), down 25% year-over-year.
The company’s order backlog increased to a new record high of €23,226 million ($26,980 million), increasing by 14% and, according to Siemens Gamesa, “increasing visibility of future growth.” The backlog was supported by €3,292 million ($3,823 million) worth of new and firm orders in the quarter.
Onshore wind intake during the third quarter amounted to 1,660 megawatts (MW) and stemmed from projects all around the world, including Brazil, Spain, South Africa, Ireland, and the US. Offshore order intake hit a new record high of 1,368 MW thanks in part to the agreement confirmed on June 29 which will see Siemens Gamesa provide 165 of its 8 MW wind turbines to the 1,386 MW Hornsea Project Two offshore wind farm, as well as an agreement to supply 120 MW to the second phase of Taiwan’s first offshore wind project.
The real issue, as Tom Harries from Bloomberg New Energy Finance (BNEF) explains it, is the issue of “falling turbine pricing,” specifically, “equipment revenues are a function of the number of turbines times price per turbine,” so if turbine pricing is falling — which is a good thing, and something we need to see for the industry to reach parity and dominance — then revenue will decrease.
As such, according to Harries, “To beef up the order book, SGRE is pushing into emerging markets such as Turkey. There alone they have a 1 GW order book.” Additionally, “Ultimately, auctions are putting pricing and margin pressure on turbine suppliers. So all manufacturers are now trying to squeeze more cash from maintenance services.”
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