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Rising sales of wind turbines lift Siemens Gamesa shares to five-week high

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Rising sales of wind turbines lift Siemens Gamesa shares to five-week high
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   -   Copyright  Vincent West(Reuters)
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By Isla Binnie

MADRID (Reuters) – Shares in Siemens Gamesa <SGREN.MC> rose 9 percent on Tuesday after it said it sold more wind turbines in the fourth quarter, boosted by demand in the United States and a recovery in the volatile Indian market.

The industry faces pressure on margins as markets around the world phase out subsidies and governments opt for more competitive contract tenders.

Further pressure has been piled on the price of steel, the main raw material for wind turbine parts, as the United States and China imposed tariffs on each other’s imports worth tens of billions of dollars.

But healthy demand pushed Siemens Gamesa’s fourth-quarter sales up 12 percent to 2.62 billion euros ($2.99 billion), while the margin on earnings before interest and tax (EBIT) came in at 8.2 percent, exceeding its 2018 target.

Order intake in the quarter was up by a fifth, led by the United States and India, where favourable legislative conditions drove demand for wind turbines, a technology that still depends on government support in many parts of the world.

Shares in Siemens Gamesa, formed by the merger of Spain’s Gamesa with the wind power business of Siemens <SIEGn.DE>, rose 9.2 percent to their highest level since Sept. 28.

The results set a high bar for Siemens Gamesa’s main rival Vestas <VWS.CO>, which is due to report results on Wednesday and fights with the German-Spanish group for dominance of the global $50 billion wind turbine industry.

Siemens Gamesa said average selling prices had fallen by 9 percent year-on-year.

In a sign of ongoing pressure, the group said its EBIT margin in 2019 would come in between 7-8.5 percent, compared with 7.6 percent in the previous year.

“The second half of the year is projected to be much stronger than the first,” the company said in a statement.

The group, which counts Spain’s Iberdrola <IBE.MC> as a major shareholder, also said it signed its first contract in Russia. Strong demand boosted order backlog to 22.8 billion euros, a 10 percent increase on September 2017.

(Additional reporting by Christoph Steitz in Frankfurt and Jose Elias Rodriguez in Madrid; Editing by Paul Day and Louise Heavens)

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