Siemens Gamesa pledges profitability resurgence by 2023

Credit: REUTERS/Vincent West

By Isla Binnie

MADRID, Aug 27 (Reuters) - German-Spanish wind turbine maker Siemens Gamesa SGREN.MC said on Thursday it would return to profit margin growth by 2023, pledging to emerge from a slump that has been exacerbated by supply chain disruptions during the coronavirus pandemic.

Despite increased demand for renewable energy infrastructure to curb climate change, a shift to competitive auctions for new generation capacity has squeezed turbine suppliers, driving down the price they can command from wind farm developers whose budgets are no longer fattened by subsidies.

Siemens Gamesa forecast a return to an operating margin of 3-5% in 2021 and 8-10% in 2023, after that metric fell to a negative 6.7% in the third quarter of this year.

The company, formed by a merger between the wind business of Germany's Siemens SIEGn.DE and Spain's Gamesa in 2017, said this would be on the back of 10.2 billion euros to 11.2 billion euros ($12.07 billion-$13.25 billion) in revenue in 2021.

As part of a turnaround plan, Chief Executive Andreas Nauen - who took over in June - named former NH Hotels executive Beatriz Puente as CFO and two wind industry veterans to head two other key units in July.

Before the coronavirus outbreak, the industry was already facing high steel costs, partly due to trade battles between the United States and China. The company said on Thursday that commodity prices had "relaxed" over the last quarters.

It also said it expected to increase profitability by introducing new leading technology -- another sticky issue for manufacturers of a product which analysts say can be hard to differentiate from competitors, lessening bargaining power.

This near-term recovery forecast assumes there is no second wave or significant prolongation of COVID-19, which snarled the global movement of goods and parts and prompted Siemens Gamesa along with peers Vestas VWS.CO and Nordex NDGX.DE to suspend production in Spain.

($1 = 0.8450 euros)

(Reporting by Isla Binnie; Editnig by Kim Coghill)

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