The first quarter 2020 in Siemens Gamesa’s financial year was “not easy”, but project execution delays of onshore wind project in Nordic countries that led to a net loss and a lower guidance for the whole year won’t repeat themselves, chief executive Markus Tacke said.
An 82% jump in orders during the quarter resulting in a record order backlog of €28.09bn ($31.06bn) also boded well for a return to a more solid growth path at the German-Spanish wind turbine manufacturer that is increasingly relying on services and offshore wind.
“The company's financial performance fell short of the expectations we had when we set our targets for the year. However, this was a one-off impact and we do not expect it to recur in future quarters as we are taking the necessary measures,” Tacke said.
“We have stepped up risk analysis to ensure project execution is on track and we will also strengthen our internal control system to avoid a recurrence.”
The company’s financial year 2020 started on Oct. 1, 2019, and will end on Sep. 31, 2020.
Siemens Gamesa last week had already lowered its profit margin guidance for the full year, and anticipated that it incurred a net loss of €174m during the first quarter due to €150m in unforeseen charges relating to a portfolio of five onshore wind projects in Northern Europe, mainly in Norway.
But Tacke stressed: “The results also underlined the long-term opportunities for wind energy and Siemens Gamesa. We are in an industry with huge potential and we are taking advantage of this with intense commercial activity that resulted in a record order book.”
The OEM’s overall order intake soared by 82.1% to €4.63bn in the first quarter of 2020 from the year-ago quarter, driven by much higher offshore wind turbine and service orders.
Offshore turbine orders jumped to a value of €1.55bn during the first quarter, thanks to contract signings of orders as diverse as the 376MW Formosa 2 project in the Taiwan Strat, via the 88MW order for the floating Hywind Tampen array in Norway’s part of the North Sea, to the 383MW Fryslan project in the Ijsselmeer artificial lake in the Netherlands.
Onshore wind order fell slightly to €1.61bn in the first quarter of 2020, from €1.8bn a year earlier, as the average selling price decreased to €0.63m per megawatt in the first quarter, from still €0.76m/MW a year earlier. Remarkably, out of the 2.56GW in onshore wind orders, 18%, or 464MW came from China, making it the biggest market for the OEM, followed by Canada with 16%.
Service orders also increasingly underpin Siemens Gamesa’s finances, rising to a value of €1.47bn in the first quarter of 2020, compared to just €346m a year earlier.
Services now already account for 46% of the company’s order backlog, or €13.02bn – underlining the importance of the company’s recent acquisition of insolvent Senvion’s European service assets.
In total, offshore turbine orders with €7.9bn exceed those of onshore turbine orders that reach €7.48bn of the order backlog.
The ranking of services, offshore and onshore order also is in line with where the company expects future growth.
"The three pockets of growth in my view are: number one is offshore, number two is service," Tacke said during a conference call.
"The number three growth opportunity is in emerging markets in onshore."
Mature markets, such as Germany, have fallen from their peaks, but "will continue to exist," Tacke added. "But growth in onshore comes from emerging markets."
Revenue at the manufacturer fell by 12% to €2.00bn during the first quarter, while earnings before interest and taxes (Ebit) - before PPA and integration and restructuring cost – turned into a loss of €136m, compared to an Ebit of €138m a year earlier.
Interest in no-tariff environment
Asked about a future post-Brexit trade deal between the UK and the European Union, Tacke stressed that his company has quite an interest on a good cooperation.
"Now it is time to see how this future agreement between the UK and the EU will look like, having in mind that this factory in Hull is also designed to be export factory from the UK to the EU, and also outside the EU," Tacke said.
"So we have quite an interest on continuing in a no-tariff environment."
The possible imposition of tariffs in case no wide-ranging deal can be achieved, is a "key topic," the CEO said, but stressed that cross-border logistics and the free movement of labour are also key to Siemens Gamesa's success.
"We are working in a global economy. Our teams installing offshore wind farms are teams put together for their competences from the UK, Denmark of Germany. These are mixed teams. If the new regulations would limit us to build those teams - if UK people have adverse conditions to work in the EU or vice versa - we need to review the implications of this."
UPDATED with CEO comments on future growth markets, Brexit