Siemens Gamesa Shares Plunge on Missed Targets, Planned Job Cuts
November 07 2017 - 5:02AM
Dow Jones News
By Nathan Allen
Shares in Siemens Gamesa Renewable Energy SA (SGRE.MC) dropped
sharply Tuesday morning after the company reported weak fiscal 2017
results and said it could reduce its workforce by more than a
fifth.
The maker of wind turbines said late Monday that it had missed
its earnings target for the fiscal year and may cut up to 6,000
jobs worldwide--700 of which had already been announced--from its
27,000-strong workforce.
At 0855 GMT, shares traded at EUR11.11, down 7.3%.
Underlying earnings before interest and taxes, or Ebit, for
fiscal 2017 were 774 million euros ($898 million).
Siemens Gamesa had previously cut its underlying Ebit forecast
for the fiscal year ended Sept. 30 to EUR790 million from EUR900
million, adding that performance was hit by a downturn in the
Indian market, as well as impairment charges in the U.S. and South
Africa.
Siemens Gamesa, formed this year through the merger of Spain's
Gamesa and Siemens Wind Power, also forecast that sales in the
current fiscal year would fall to between EUR9 billion and EUR9.6
billion. For fiscal 2018, Siemens Gamesa expects an underlying Ebit
margin of 7% to 8%.
JP Morgan said it thinks the lower end of both the sales and
margin guidance are realistic, in part due to intense price
pressure.
Despite the weak results, Goldman Sachs said it remains positive
on the company and maintained its buy rating on the stock, mostly
due to margin stability.
"We believe that the 2018 Ebit margin represents a good base for
the company on what we consider a trough year driven by weakness of
the Indian market," it said.
Goldman added that margins should expand in the 2019 to 2020
period as volumes recover, while planned synergies and layoffs
begin exerting a positive effect on Siemens Gamesa's balance
sheet.
However, the bank noted that cash-flow generation and pricing
pressures remain areas of concern that should be monitored.
Write to Nathan Allen at nathan.allen@dowjones.com
(END) Dow Jones Newswires
November 07, 2017 04:47 ET (09:47 GMT)
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