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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 Matt 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.

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Wind Power Market seeing increased risk and disruption

The wind power market has grown at a CAGR of 14% between 2010 and 2021 to reach 830 GW by end of 2021. This has largely been possible due to favourable government policies that have provided incentives to the sector. This has led to an increase in the share of wind in the capacity mix, going from a miniscule 4% in 2010 to 10% in 2021. This is further set to rise to 15% by 2030. However, the recent commodity price increase has hit the sector hard, increasing risks for wind turbine manufacturers and project developers, and the Russia-Ukraine crisis has caused further price increase and supply chain disruption. In light of this, GlobalData has identified which countries are expected to add the majority of wind power capacity out to 2030. Get ahead and download this whitepaper for more details on the current state of the Wind Power Market.
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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.

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.

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Free Report
img

Wind Power Market seeing increased risk and disruption

The wind power market has grown at a CAGR of 14% between 2010 and 2021 to reach 830 GW by end of 2021. This has largely been possible due to favourable government policies that have provided incentives to the sector. This has led to an increase in the share of wind in the capacity mix, going from a miniscule 4% in 2010 to 10% in 2021. This is further set to rise to 15% by 2030. However, the recent commodity price increase has hit the sector hard, increasing risks for wind turbine manufacturers and project developers, and the Russia-Ukraine crisis has caused further price increase and supply chain disruption. In light of this, GlobalData has identified which countries are expected to add the majority of wind power capacity out to 2030. Get ahead and download this whitepaper for more details on the current state of the Wind Power Market.
by GlobalData
Enter your details here to receive your free Report.

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