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Service boost aids Siemens Gamesa amid turbine price squeeze

Turbine-maker boosts second-quarter revenue and net profits but margin remains under pressure

Siemens Gamesa Renewable Energy (SGRE) said increased business in its service and offshore segments helped offset “declining prices in the order book” as profit margins remained under pressure at the wind turbine OEM in its latest financial results.

The Spanish-German company posted increased revenue and net profits for the January-March period, €2.4bn ($2.7bn) and €49m, up 7% and 40% respectively year-on-year.

But the company’s pre-tax profit margin, before PPA, integration and restructuring costs, fell by one percentage point to 7.5% in the quarter, the second of Siemens Gamesa’s financial year.

SGRE said the result “was reached against a background of declining prices in the order book, partly offset by improvements in productivity, synergies and fixed costs as a result of the L3AD2020 transformation program and the higher volume of activity in Offshore and Service”.

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Service grew faster than turbines in SGRE’s Q2 revenues, expanding by 23% to account for €330m of the total.

SGRE said the results are in line with its guidance for the current financial year, “considering that Onshore activity is back-end loaded, concentrated in the fourth quarter”.

Turbine pricing has emerged as a key pressure on the world’s wind OEMs in the last 18 months as the industry transfers to a competitive, rather than subsidy-driven sales environment in major markets.

SGRE, along with Vestas and GE, appears to be among the best placed to thrive in the tough market and reported a record order backlog of €23.6bn, which it said” fully covers the low end of the FY 2019 revenue guidance range, providing enhanced visibility for following years”.

Service was again a strong driver of the €2.5bn of orders booked in the second quarter, said the company.

Rechargerevealed this week that SGRE is best placed with pre-tender orders ahead of Brazil's next round of auctions.

The first half of 2019 has been a busy one for SGRE on the technology front, with the launch of its 10MW offshore and 5MW onshore platforms.

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