COVID Impact: Siemens Gamesa Incurs Loss; Challenges in India Business

Siemens Gamesa has said its performance in the second quarter of FY 2020 reflected the impact of COVID-19 pandemic on its operations and commercial activity

Siemens Gamesa Renewable Energy has reported that its performance in the second quarter of FY 2020 (January-March) reflected the unexpected effect of the COVID-19 pandemic on its operations and commercial activity, with a direct impact of EUR 56 million on the company’s profitability. Furthermore, the complicated situation further intensified the challenges in its onshore business, mainly in the Indian market and the execution of projects in Northern Europe.

Although the lack of short-term predictability has led the company to withdraw the guidance it issued in the first quarter of 2020, the long-term prospects for the industry and Siemens Gamesa remain sound. The company registered a record order backlog of EUR 28.6 billion (+21 percent YoY) and believes it is well-positioned to take advantage of sector growth outlook thanks to its geographical diversification and leadership in technology.

In this context, Markus Tacke, CEO of Siemens Gamesa, called for a green recovery, “we are experiencing a situation without precedent that has changed our lives in just weeks. Siemens Gamesa considers that the renewables industry must play a key role in the economic recovery to move towards a sustainable energy model that generates quality jobs. It is in our hands to avoid another crisis: the climate crisis.”

The firm ended the first half of its fiscal year (October 2019 – March 2020) with a record order book: EUR 28.6 billion (+21 percent YoY), which sustains good long-term prospects. This figure was achieved after signing EUR 6,830 million (+36 percent YoY) in the first half and integrating the Service assets acquired from Senvion. Order intake between January and March amounted to EUR 2,203 million (-11 percent YoY), reflecting the normal volatility of the Offshore market and the impact of COVID-19 on the signing of Onshore contracts, some of which were deferred to subsequent quarters.

Further, the firm reported that its onshore order intake in the last twelve months increased to 9,485 MW (13 percent YoY) despite the 6 percent YoY reduction in the second quarter to 1,645 MW. Offshore order intake in the last twelve months increased by 56 percent YoY to 2,879 MW. In the second quarter, the company signed a preferred supplier agreement with Ørsted for the Borkum Riffgrund 3 (900 MW) and Gode Wind 3 (242 MW) wind farms, raising the conditional pipeline to 10.7 GW.

The firm further stated that despite the strong commercial activity in the quarter, the expansion of the coronavirus was reflected in the company’s revenues and returns. Revenues fell by 8 percent between January and March, to EUR 2,204 million, affected by lower sales of wind turbine generators. Revenues in the first half amounted to EUR 4,204 million (-9.6 percent YoY).

“The decline in profitability includes the EUR 56 million direct impacts of the coronavirus (equivalent to 2.5 percent of revenues in the quarter) as well as additional costs derived from the slowdown in the Indian market and in the execution of projects in Northern Europe, partially offset by the agreement between Areva and Adwen to resolve all disputes, obligations and liabilities and any past, present and future claims between them. EBIT pre-PPA and before integration and restructuring costs amounted to – EUR 103 million in the first half, equivalent to a margin of -2.5 percent of revenues. In this context, the company booked losses of EUR 165 million in the second quarter and EUR 339 million in the first half,” the firm stated.