Siemens Gamesa shares slide after latest profit warning

The Siemens Gamesa logo is displayed outside the company headquarters in Zumudio, near Bilbao, Spain, November 28, 2017. REUTERS/Vincent West

MADRID/FRANKFURT, Jan 21 (Reuters) – Shares in wind turbine maker Siemens Gamesa (SGREN.MC) tumbled on Friday after it cut its financial outlook for the third time in less than nine months, news that also hit the market value of its rivals and parent company.

Siemens Gamesa shares listed in Spain where the company is based slumped as much as 16% to their lowest since July 2020 after its profit warning while German parent, Siemens Energy (ENR1n.DE), plummeted 14%.

Profit margins at wind turbine makers have been squeezed by a surge in costs for vital materials such as steel, forcing companies such as Siemens Gamesa and Danish rival Vestas (VWS.CO) to increase their prices.

The companies face a perfect storm, said Sydbank analyst Jacob Pedersen. “Their costs have sky-rocketed for the wind turbines they were paid for a few quarters ago and this is a huge challenge.”

Shares in Vestas fell 8% on Friday while smaller German rival Nordex (NDXG.DE) declined 7%.

Siemens Energy cut its outlook on Thursday after Siemens Gamesa warned of prolonged supply chain issues, putting renewed pressure on the German firm to buy the 33% of its subsidiary it does not own so it can get a better grip on the problems.

Reporting a first-quarter loss of 309 million euros ($350 million), Siemens Gamesa executives said supply chain glitches due to the pandemic would last longer than previously expected, and that they had reconsidered how to decide on projects.

“Our development timeline was maybe here and there a bit optimistic,” Chief Executive Andreas Nauen said. “Logistics costs have also been kind of exploding in recent months.”

Siemens Gamesa said its core profit margin this year might now slump to minus 4% and would only reach 1% at best, whereas previously it had been expecting a margin of 1% to 4%.

Siemens Energy trimmed one point off the top of its own margin forecast, saying it would not go above 4%.

Nauen said negotiations with clients about increasing prices were difficult because customers also had their own limits.

“Some customers originally say (that) doesn’t fly … when we push back they finally sign because the project is approved with our turbine and they have little choice,” he said.

Siemens Gamesa’s order book was worth 33.6 billion euros at the end of December but 2 billion euros of those orders did not have a positive margin, Siemens Gamesa Chief Financial Officer Beatriz Puente said.

Siemens Energy Chief Executive Christian Bruch said last year that buying out the remaining stake in Siemens Gamesa, which before Friday’s collapse was worth about 4.3 billion euros, might become an issue at some point.

($1 = 0.8821 euros)

Reporting by Isla Binnie in Madrid and Christoph Steitz in Frankfurt; Additional reporting by Stine Jacobsen in Copenhagen; Editing by David Clarke

Our Standards: The Thomson Reuters Trust Principles.