Receive our newsletter – data, insights and analysis delivered to you
  1. News
  2. Company News
July 15, 2021updated 08 Nov 2021 6:00am

Material costs hurt Siemens Gamesa Renewable Energy profits

Siemens Gamesa Renewable Energy also announced that its new line of wind turbines would prove less profitable than expected.

By Matthew Farmer

Material costs and production of a new line of wind turbines have hurt the profits of Siemens Gamesa Renewable Energy (SGRE), the company announced in its preliminary results for the second quarter of 2021.

A statement by the company advised of lower financial goals in 2021 because of “increased estimates of ramp-up costs for the Siemens Gamesa 5.X platform, especially in Brazil”. The company’s reassessment of the profitability of its new turbines has decreased expected earnings by approximately $271m (€229m). According to the statement, most of these changes come from orders in Brazil expected between 2022 and 2023.

The statement also blamed a “sharp” a rise in material prices, given the increase in steel costs in recent months. In a conference call, CEO Andreas Nauen told analysts that the company passed the rising cost of steel onto consumers.

He said: “[Customers] do not happily discuss that, it’s clear, but it’s also clear that in light of the size of the increases, the cost cannot stay with us.” Nauen also said that he remained confident of SGRE’s profit margin target of 8-10%. However, this may now arrive later than expected, in 2024.

As a result, the company’s board advised that annual pre-tax earnings will likely move into negative figures. The board also said that annual revenue will fall to the low end of estimates, at approximately $12bn (€10.2bn). Long term guidance remains unchanged.

This marks the second lowering of profit ambitions this year, after SGRE made a similar statement about material costs and delays.

Content from our partners
How Hengst helped to keep Germany’s charity “star singers” shining
How one power station prevented frequent shutdowns with three-stage air filtration
Reimagining the carbon problem

The announcement caused shares to lose nearly 20% of their value on Spanish markets on Thursday. Markets in the US have not yet seen a fall. As a result, SGRE has now lost approximately one-third of its market value since the start of the year.

The company will give its full quarterly results on July 30.

Related Companies

NEWSLETTER Sign up Tick the boxes of the newsletters you would like to receive. The top stories of the day delivered to you every weekday. A weekly roundup of the latest news and analysis, sent every Wednesday. The power industry's most comprehensive news and information delivered every month.
I consent to GlobalData UK Limited collecting my details provided via this form in accordance with the Privacy Policy