Rising demand for wind power as a response to the transition towards non-polluting energies drove Siemens Gamesa's commercial activity in 1Q of the fiscal year 2020. The company experienced an 82% increase in order intake, with firm orders rising to €4628 million, raising the order book to a record €28089 million, underlining solid long-term growth prospects.
Rising demand for wind power as a response to the transition towards non-polluting energies drove Siemens Gamesa's commercial activity in 1Q of the fiscal year 2020. The company experienced an 82% increase in order intake, with firm orders rising to €4628 million, raising the order book to a record €28 089 million, underlining solid long-term growth prospects.
As announced in a regulatory disclosure on 29 January 2020, the company experienced an unforeseen €150 million impact from costs on five onshore projects in northern Europe, mainly Norway, caused by adverse road conditions and the unusual early arrival of winter weather, which delayed project execution substantially. As a result, Siemens Gamesa adjusted its profitability target by one percentage point and expects to end the fiscal year with an EBIT margin before PPA, integration and restructuring costs of between 4.5% and 6%.
"This was not an easy quarter for Siemens Gamesa. 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. 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," said Markus Tacke, Chief Executive Officer of Siemens Gamesa.
"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. Moreover, the acquisition of strategic assets from Senvion will boost our service business, where margins are higher," added Tacke.
Commercial activity increased significantly in the offshore segment, with order intake in the last twelve months doubling to 3343 MW. Of that figure, 1279 MW were signed in 1Q2020. Siemens Gamesa is the clear leader in this segment, with a pipeline of projects totalling 9.6 GW.
Onshore also registered very positive commercial activity, with order intake up 8.1% to 2.6 GW. China (18%) and Canada (16%) were the main sources of orders in the quarter. Moreover, almost half of orders were for the new models of turbines over 4 MW.
Service attained an extraordinary level of commercial activity, with order intake reaching €1470 million in 1Q2020 of the fiscal year, four times the figure in Q12019 of the fiscal year. This business unit, which has very profitable contracts, accounts for 46% of the company's order book.
Between October and December, Siemens Gamesa booked €2001 million in revenue (-12%), in line with the full-year guidance (€10 200 million – €10 600 million). The low end of the revenue guidance has already been booked in orders.
The company remains focused on retaining a sound balance sheet. As of 31 December, it had a net cash position of €175 million. Moreover, Siemens Gamesa has introduced sustainability criteria throughout its funding chain.
As evidenced by the order intake and backlog figures, demand for wind power is higher than ever. The GWEC estimates that global wind power installations will rise from 51 GW per year in 2018 to 130 GW per year in 2040.
Despite the current situation, Siemens Gamesa is solidly positioned to benefit from wind power's potential and to ensure success in the long term. It has scheduled a Capital Markets Day for 6 May 2020, when it will give more details of the company's strategy for the coming years.
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