May 4, 2018 / 9:43 AM / 2 months ago

Global wind turbine makers hit by subsidy squeeze

COPENHAGEN/MADRID (Reuters) - Shares in rival wind turbine makers Siemens Gamesa (SGREN.MC) and Vestas (VWS.CO) fell on Friday as a squeeze on prices caused by reduced state subsidies took its toll on quarterly profits.

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

The wind power industry is undergoing a period of painful readjustment as governments from Europe to Latin America rein in subsidies and turn to competitive tenders, putting pressure on prices throughout the supply chain.

“It’s challenging across the board, it’s very competitive,” Vestas’ Chief Financial Officer Marika Fredriksson told Reuters.

Vestas’ operating profit for the January-March period of 126 million euros (111.2 million pounds) was a decline of 40 percent and also lagged analysts’ forecast of 137 million euros.

Majority owned by Germany’s Siemens (SIEGn.DE) following a merger of its wind power business with Spain’s Gamesa last year, Siemens Gamesa said adjusted operating earnings for the same period fell 40 percent to 189 million euros.

Shares in Denmark’s Vestas fell 4.4 percent by 0925 GMT while Siemens Gamesa traded down 3.4 percent.

Vestas’ average selling price per megawatt came in at around 740,000 per megawatt, which was flat from the previous quarter.

However, both companies cautioned it was still too early to say if prices had stabilised after a double-digit decline seen last year.

“It could appear so, but we still want to have more sustainable and long-term view on the stabilisation of the market,” Vestas’ Fredriksson said.

That caution was echoed by Siemens Gamesa.

“It’s the second quarter of stable average selling price of the order intake ... (but) we’re not able to determine if this is already a trend,” Siemens Gamesa CFO Miguel Angel Lopez, told a conference call.

Most recent rankings by consultancy firms GlobalData and MAKE show Siemens Gamesa claiming the top spot in terms of sold turbine capacity last year, overtaking Vestas in a race to cater the competitive wind power sector.

Vestas is still a market leader in terms of total installed capacity, said Vestas citing MAKE.

Siemens Gamesa, which counts Spanish energy group Iberdrola (IBE.MC) among its key shareholders, kept its target for an EBIT margin of 7-8 percent this year.

Vestas still targets an EBIT margin of 9-11 percent this year.

Siemens Gamesa in February unveiled 2 billion euros in cost cuts by 2020 to close a margin gap to Vestas, both facing margin pressure as government cuts support for renewables to force them into competition with conventional energy sources.

Siemens Gamesa more than doubled its quarterly order intake to 2.5 GW, while Vestas order intake came in at 1.6 GW.

Reporting by Stine Jacobsen in Copenhagen, Paul Day and Jose Elias Rodriguez in Madrif; additional reporting by Chris Steitz in Frankfurt; Editing by Jacob Gronholt-Pedersen/David Evans

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