November 6, 2018 / 9:51 AM / a year ago

Siemens Gamesa shares hit six-week high as turbine sales rise

MADRID/FRANKFURT (Reuters) - Siemens Gamesa (SGREN.MC) sold more turbines in the fourth quarter and said sales would rise by at least 10 percent next year, setting a high bar for main rival Vestas (VWS.CO) who is due to report quarterly results on Wednesday.

FILE PHOTO: A model of a wind turbine with the Siemens Gamesa logo is displayed outside the annual general shareholders meeting in Zamudio, Spain, June 20, 2017. REUTERS/Vincent West/File Photo

Strong demand in the United States, the world’s second-largest wind market after China, and a recovery in the volatile Indian market lifted sales in the period by 12 percent to 2.62 billion euros (2.29 billion pounds).

Shares in Siemens Gamesa, formed by the merger of Spain’s Gamesa with the wind power business of Siemens (SIEGn.DE), rose as much as 13 percent to their highest level since Sept. 25, out-shining Vestas which was up 5 percent. Siemens shares were flat.

Brokerage Renta4banco pointed to Siemens Gamesa’s strong order intake, which was up 9 percent in 2018 at 11.87 billion euros, adding this already secured 80 percent of 2019 sales.

Chief Executive Markus Tacke told Reuters that while the group had done its fair share of consolidation activity, it was still on the lookout for bolt-on acquisitions in the technology space.

The wind industry faces pressure on margins as markets around the world phase out subsidies and governments opt for more competitive contract tenders, favouring project developers that submit the lowest bids.

Siemens Gamesa, which counts Iberdrola (IBE.MC) among its shareholders, said average selling prices had fallen by 9 percent year-on-year.

Further pressure has been piled on the price of steel, the main raw material for wind turbine parts, as the United States and China imposed tariffs on each other’s imports worth tens of billions of dollars.

But healthy demand pushed Siemens Gamesa’s fourth-quarter margin on earnings before interest and tax (EBIT) to 8.2 percent, exceeding its 2018 target. It expects sales of 10-11 billion euros in 2019, up from 9.1 billion this year.

Order intake in the quarter was up by a fifth, led by the United States and India, where favourable legislative conditions drove demand for wind turbines, a technology that still depends on government support in many parts of the world.

Denmark’s Vestas (VWS.CO), which is due to report results on Wednesday, fights with the German-Spanish group for dominance of the global $50 billion wind turbine industry. Refinitiv estimates put Vestas third-quarter revenue growth at 2 percent.

In a sign of ongoing cost pressure, Siemens Gamesa said its EBIT margin in 2019 would come in between 7-8.5 percent, compared with 7.6 percent in the previous year.

Additional reporting by Jose Elias Rodriguez in Madrid; Editing by Paul Day/Louise Heavens and Emelia Sithole-Matarise

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