May 7, 2019 / 6:54 AM / 5 months ago

Siemens Gamesa sees busy summer boosting squeezed margins

MADRID (Reuters) - Siemens Gamesa expects its project pipeline for building more windfarms in the second half of the year to bolster faltering profitability, the chief executive of the Spain-based turbine maker said on Tuesday.

FILE PHOTO: The Siemens Gamesa logo is displayed outside the company headquarters in Zumudio, near Bilbao, Spain, November 28, 2017. REUTERS/Vincent West

Builders of wind energy converters have seen margins squeezed as governments cut subsidies and suppliers have had to lower prices to win contracts.

The company’s earnings before interest and tax (EBIT) margin slipped nearly one percentage point to 7.5 percent in January to March, but CEO Marcus Tacke said investors should expect the firm to meet the mid-point of its guidance of between 7 and 8.5 percent for the full year.

The company sees “a significant amount of activity going on in the second half of the year, during the summer campaign, and that will push revenue,” Tacke told Reuters.

“If we execute flawlessly, finding improvements during execution that we need to find, that gives us certainly some tailwinds also in terms of margin,” he added.

Tacke said the company would be working in the second half on six offshore projects, as well as 24 onshore projects in Spain alone.

Revenue rose slightly in the second quarter, beating a Refinitiv Eikon SmartEstimate, and the company said market prices were stabilising after a 9 percent fall in 2018.

Discussion of new tariffs on steel, the main raw material for wind turbine parts, contributed to raising costs, but Siemens Gamesa has worked on re-routing supply chains and other measures to deal with that, Tacke said.

“The biggest implication right now is an uncertainty for the market, which is not helpful for long-term prospects and developing our industry,” he said.

Shares rose as much as 3 percent after results were published, but fell below their opening price later in the morning.

Siemens Gamesa ranked third globally for wind turbine installation in 2018, according to consultancy Wood Mackenzie, with its generators accounting for 14.2 percent of capacity connected to grids around the world during the year.

Danish rival Vestas hooked up the most generators, and China’s Xinjiang Goldwind took second place in a global industry that the International Energy Agency calculates will expand by 60 percent between 2018 and 2023.

While these heavyweight firms have shouldered the price pressure, competition helped push smaller German peer Senvion to file for insolvency last month.

Reporting by Isla Binnie; Editing by Georgina Prodhan and Edmund Blair

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