Siemens Gamesa, the Spanish renewable energy company, recently posted strong financial results with solid wind turbine sales in Q1 2019, but before considering the highlights from the company report, it is worth putting these results in the broader context of the global wind energy market.
Siemens Gamesa Q1 2019 results in a global context
In 2018, global installed wind capacity stood at 595 GW where onshore capacity alone accounted for 96% and is expected to increase at a compound annual growth rate of 8% to reach 1018 GW by 2025, according to GlobalData.
It is further estimated that by 2025, the global offshore market will cross 72 GW while the onshore market will be around 946 GW, compared to 23.3 GW and 571 GW in the respective wind segments in 2018.
Furthermore, during 2018-2025, annual installed offshore capacity is projected to increase at 12% compound annual growth rate to reach 9.6 GW in 2025 from 4.3 GW in 2018, while annual installed onshore capacity is slated to increase at 3% compound annual growth rate over the given period.
In terms of geographic diversity, the Asia-Pacific region recorded the highest wind capacity addition in 2018 with a 47.8% share, followed by Europe (26.04%) and North America (16.5%). South and Central America and the Middle East and Africa accounted for 6.8% and 2.7% of the total wind capacity addition in 2018, according to GlobalData.
It was against this backdrop that Siemens Gamesa announced its first-quarter result for 2019.
Siemens Gamesa Q1 2019 results: what the report says
The company reported a net profit of $20.5 million (EUR 18 million) in Q1 2019 from a loss of over $40 million (EUR 35 million) over the same period in the last fiscal year, while revenue increased by 4% from $2.48 billion (EUR 2.12 billion) to $2.57 billion (EUR 2.26 billion) on a year-on-year basis.
The increase in revenue is attributed to the strong project execution in the offshore segment and high overall volume of activity planned for the year along with increased service revenue in Q1 2019.
The revenue from offshore WTG segment recorded an increase of 21% in Q1 2019 to reach $ 913 million (EUR 801 million) from $752 million (EUR 643 million) on a year-on-year basis, while service revenue increased by 22% over the same time period.
The onshore revenue however declined by 10% from Q1 2018 to Q1 2019, due to lower onshore turbine sales volume resulting from lower pricing and planned back-end loaded project execution.
Siemens announced an order intake of $13 billion (EUR 11.5 billion) over the last 12 months (FY 2018) while Q1 2019 recorded an order intake of $2.89 billion (EUR 2.54 billion). Onshore order intake accounted for $2.0 billion (EUR 1.8 billion), a 5.2% increase on a year-on-year basis reflecting a continuous sound performance of this segment.
Furthermore, onshore order intake in the last 12 months totalled 9.1 GW, a 37% increase on a year-on-year basis, while Q1 2019 recorded an order intake of 2.4 GW. India accounted for 25% of total order in Q1 2019, followed by Spain (16%), the US (12%) and Mexico (11%) making up the majority of the orders.
The company also announced an order backlog to the tune of $26 million (EUR 23 million) in Q1 2019 providing 92% revenue coverage for FY 2019. Onshore backlog increased by 47% on a year-on-year basis following strong order intake recovery, while a 12% decline in the offshore segment over the projected period reflects on the volatility of offshore order intake. Service sector comprised 47% of total order backlog in Q1 2019, indicating a solid source of revenue generation for the days to come.
Overall wind turbine sales increased by 7% to reach 2.1 GW in Q1 2019 (on a year-on-year basis), of which onshore wind turbine sales accounted for 70%. However, onshore wind turbine sales recorded an 8% decline from 1.6 GW to 1.5 GW over the given period while offshore turbine sales increased by 76% to reach 609 MW (Q1 2019) from 346 MW (Q1 2018).
With an objective to play a dominant role in the offshore wind generation segment, Siemens Gamesa introduced its 10 MW offshore wind turbine called the SG10.0-193DD. With serial production to start from 2022, it is said to have 30% more annual energy production than its predecessor the SG8.0-167DD.
Siemens Gamesa Q1 2019 results: in rude health
The Q1 2019 result reflects a healthy financial and operational state of affairs for Siemens Gamesa, reflected in its profit of $20.5 million and a 4% increase in revenue on a year-on-year basis.
The solid commercial activity in the given period with an order backlog providing 92% revenue coverage for FY 2019 coupled with a stable average selling price on onshore turbine order intake is indicative of company’s continued growth beyond FY 2019. The financial performance with increased revenue (on a year-on-year basis) and earnings before interest and taxes (EBIT) margin is in line with FY 2019 guidance.
The slight year-on-year decrease in EBIT margin in Q1 2019 was offset by productivity boost coupled with strong activity in offshore and service segments. In addition, the $1.3 billion (EUR 900 million) deal with Banco Bilbao Vizcaya Argentaria (BBVA) for green guarantee line will be helpful in supporting the company’s global onshore and offshore wind turbine manufacturing and selling process along with other sustainable development endeavours.
This deal will also help realise the company’s projected target of installing 72 GW wind capacity globally by 2025 with 5% compounded annual growth rate, while offshore installation is expected to reach 12 GW in 2025 from 2 GW (2018) at 27% annual growth rate.