Revenue fell but orders rose at Siemens Gamesa Renewable Energy in its 2018 financial year, as the German-Spanish wind OEM digested massive merger costs and continued price declines for wind turbines.
Revenues fell by 17% in the full year ending September to €9.12bn ($10.41bn), with wind turbine revenue down 20% to €7.85bn amid a 9%-decline in the average selling price of ordered wind turbines to €0.73 per megawatt. A bright spot was O&M revenues, which rose 6% in the year to €1.28bn.
Earnings before interest and taxes (pre PPA, integration and restructuring costs) fell by 11% to €693m.
The company reached a net income of €70m, including a €176m impact of integration and restructuring costs in the full year of 2019. No comparable figure for the previous fiscal year was available for net income, as the merger between Siemens Wind and Gamesa only took place in April 2017.
The turbine maker was upbeat that business will improve, setting guidance for the full year of 2019 of €10-11bn in revenues as turbine orders are on the rise.
The optimism about a better business in part came as SGRE expects additonal synergies from the merger, adding up to 1.2% of revenue, chief executive Markus Tacke said during a conference call with analysts.
"We are well positioned to benefit from long term prospects of our industry, particularly in offshore," he said.
Synergies from the Siemens Wind merger with Gamesa during the full year of 2018 had added up to €175m, but Tacke was confident they would still reach the €400m full potential announced at the company's last capital markets day.
Some headwinds come from rising commodity prices and steel tariffs in the US, though.
"We're always talking about a 2% to 4% impact based on the US cost base," outgoing chief financial officer Miguel Ángel López specified, referring to the effect of those factors in the full years of 2018 and 2019.
In 2018, SGRE had an order intake of €11.87bn, a 9%-rise against comparable year-earlier figures.
Orders were mainly boosted by a recovery in onshore order intake, up 30% to €6.68bn, and offshore wind orders that reached €2.8bn, a 31%-increase compared to pro-forma offshore orders for the fully year 2017.
During the period, the company signed its largest-ever offshore order – an agreement to supply 165 turbines to Hornsea 2 off the UK coast, the world’s largest offshore wind project to date. Within services, the company signed contracts worth €2.4bn during FY 2018.
"The offshore wind market has seen an increase of market volume of significant size, driven by significant cost reduction of the offshore LCOE," Tacke said, adding that the company expects a continued and strong growth in offshore wind going forward as more European countries venture into the sector, as well as Taiwan and the US.
Low pricing for onshore wind turbines in some countries such as India could also somewhat improve, Tacke said.
After a low point at the end of 2017, prices at Indian onshore auctions have recovered to around 2.8 rupees per kilowatt hour.
"There might be still some room for upwards corrections," Tacke reckons.
The Indian market is also likely to recover in terms of volumes after grid bottlenecks are removed, the CEO added, rising to 4-6GW a year or more – not as much as the Indian government would like to see, but "a good base".
SGRE is taking around a third of that market, Tacke said.
Siemens Gamesa also announced today that it has appointed Christoph Wollny as chief operating officer (COO). This newly-created function will support to better address current and future market dynamics and further strengthen cost-cutting efforts, the company said.
UPDATES to add detail throughout
