January 30, 2018 / 11:55 AM / 10 months ago

Siemens Gamesa posts strong new orders as key markets recover

FRANKFURT (Reuters) - Siemens Gamesa (SGREN.MC), the world’s No.2 maker of wind turbines, on Tuesday reported a strong increase in new orders in the first quarter, helped by a pickup in demand in key markets such as India and the United States.

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

The news pushed shares in the company 5.8 percent higher to the top of Spain's key IBEX index .IBEX, a much needed-jolt after a switch to market-based auctions has put immense pressure on equipment makers to rein in on costs and slash prices.

Since the completion of the merger of Siemens’s (SIEGn.DE) wind power business with Gamesa in April last year, shares in Siemens Gamesa have lost 38 percent, raising doubt over whether the tie-up will protect it against the industry’s changes.

Siemens Gamesa has responded by cutting more than a fifth of its jobs, closing production sites and consolidating its product offering, something Chief Executive Markus Tacke said was now paying off.

“We are very confident that the challenge of integration is coming to an end,” he told analysts during a conference call, shortly after the group reported a 29 percent rise in first-quarter order intake to 2.78 gigawatts.

Tacke said that prices in the United States, the world’s second-largest market for wind turbines after China, had stabilized, adding that the Indian market was also recovering after introducing an auction-model.

Wind turbine makers have been hit hard by the introduction of tenders, but Tacke said the resulting price erosion that had affected everyone in the industry was now easing somewhat to reach what he called “a new normal”.

“The disruption in Q1 ... had a significantly reduced dynamic,” he said, adding the group would unveil additional cost cutting measures at its capital market day on Feb. 15, a week after Danish market leader Vestas (VWS.CO) will report results.

Siemens Gamesa’s first-quarter sales fell 23 percent to 2.1 billion euros ($2.6 billion), it said, citing falling prices. It still kept it outlook for sales of 9-9.6 billion euros, pointing to stronger business in the second half of the year.

Siemens, which retains a 59 percent in Siemens Gamesa, will report first-quarter results on Jan. 31.

($1 = 0.8079 euros)

Editing by Maria Sheahan and Alison Williams

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