Offshore Wind Drives Siemens Gamesa First Quarter Profit

Siemens Gamesa Renewable Energy published its first-quarter financial results last week revealing increased profit, revenue, and earnings driven primarily through growth in its offshore wind business.

The result of a merger between Spanish wind giant Gamesa and the wind division of German manufacturing giant Siemens, Siemens Gamesa’s financial year runs from October to September, making its first quarter October to December. The company published its first-quarter financial results on January 29 revealing increased revenue of  €2,262 million, up 6% year-to-year but down 13% on the €2,619 million in the company’s fourth quarter. The company’s year-on-year growth was driven primarily by its Offshore and Service businesses. Specifically, wind turbine volume increased by 7% to 2,129 MW, with 609 MW sold by the offshore segment, up 76% year-over-year.

The company’s EBIT before PPA and integration & restructuring costs reached €138 million, up 4% year-over-year while reported EBIT was €40 million, up 13% year-over-year. EBIT margin was 6.1% due to lower prices in the company’s order book throughout 2018 and lower onshore wind turbine sales activity. Net profit amounted to €18 million, strong growth on the net loss of €35 million reported in the first quarter of 2018.

“Siemens Gamesa’s sales grew by 6% vs. the prior year, slightly above consensus expectations, yet weaker onshore-wind activity squeezed the overall 1Q Ebit margin,” said James Evans, Global Clean Energy Analyst for Bloomberg Intelligence. “The operations and maintenance unit is the mainstay of profit, given the shift to higher value-added services.”

Over the past 12 months, Siemens Gamesa has taken in orders worth €11.5 billion, an increase of 3% to the same period a year earlier, driven by a 28% increase in onshore orders worth €6.8 billion. Order intake for the company’s first quarter sat at €2.5 billion with €1.8 billion coming from onshore wind orders.

“New sales growth will emerge at Siemens Gamesa on a return to stable onshore turbine-order prices after a global transition toward auctions for new capacity shocked industry prices lower,” said Evans. “Increased volume is emerging, in particular from the U.S., driving order backlog to new highs.”

The company’s total order book sits at €23 billion, an increase of 8% year-over-year and including €15.7 billion worth of orders expected to be filled after the 2019 financial year.

Looking forward, Siemens Gamesa is banking on the continued global expansion of wind energy, which it believes is expected to reach 72 GW per year by 2025, with the company’s own offshore wind business projected to see 27% annual growth, growing from 2 GW of installations in 2018 to 12 GW in 2025.

“The diversified nature of Siemens Gamesa’s product and geographic exposure affords stability in sales and profitability, with growth in offshore and service activity in fiscal 1Q ended December, offsetting weaker onshore wind performance,” said James Evans. “Lower auction prices are feeding into curbed onshore sales, yet we expect volume to build toward year-end. The company’s diverse product portfolio is continuing to drive order intake, with 92% of orders achieved or realized, to meet the midpoint of 2019 sales guidance.”