EUR 100.00 For Business Accounts Only

SIEMENS GAMESA: 3Q’20 RESULTS (ANÁLISIS BANCO SABADELL)

3Q'20 vs. 3Q'19 Results
Sales: € 6.616 Bn (-9.2% vs. -6.9% BS(e) and -8.5% consensus);
EBIT: € -161.0 M (€ 159.0 M in 3Q'19 vs. € -130. M BS(e) and € -110.0 M consensus);
Net Profit: € -466.0 M (€ 21.0 M in 3Q'19 vs. € -181.0 M BS(e) and € -233.0 M consensus).

Poor 3Q’20 results below expectations in sales (-6.3% vs. BS(e) and -2.0% vs. consensus) and in adjusted EBIT (€-161 M vs. €-130 M BS(e) and €-110 M consensus), although better in NFD (€ 90 M vs. € 627 M BS(e) and € 527 M consensus). Thus, the adjusted EBIT margin stood at -6.7% (vs. 6.1% in 3Q’19). Reported Net Profit fell to €-466 M (vs. €-189 M BS(e) and €-165 M consensus) impacted by higher restructuring and integration costs than expected (€ 243 M vs. € 82 M BS(e)), apparently due to India (€ -157 M), which has adapted to the new market outlook (delay in the recovery of the market). Adjusted Net Profit came in at €-130 M BS(e) vs. €-107 M BS(e) and €-132 M consensus.
The company has announced a new guidance for 2020 of sales between € 9.5 Bn and € 10 Bn (vs. € 9.71 Bn BS(e) and € 9.97 Bn consensus) and an adjusted EBIT margin of between -3% and -1% (vs. 3.4% BS(e) and -0.4% consensus). Note that the company recently announced that it expects adjusted EBIT to be negative in 3Q’20, and that the 4Q’20 results will most likely not be able to offset the accumulated adjusted EBIT losses in 9M’20. On 27/08 the company will hold its CMD in which we expect the long-term strategy and guidance to be updated, and thus we will wait for this CMD before revising our estimates.
The backlog stands at € 31.46 Bn (+25% vs. 3Q’19), with order intake rising +24% vs. 3Q’19 to € 5.34 Bn (2.2x BtB), thanks especially to the offshore division (€ 3.36 Bn) and in spite of the onshore division (€ 872 M vs. € 1.70 Bn in 3Q’19). As for prices, the onshore ASP fell to € 0.73 M/MW vs. € 0.78 M/MW the previous quarter), although the company talks of stable prices.
NFD came in at € 90M, better than expected (€ 627 M BS(e) and € 527 M consensus; vs. € 295 M in 2Q’20) thanks to the better-than-expected performance of working capital, we assume it is explained by upfront payments from the contracts signed. In this regard, the company stresses its liquidity position, as it has around € 2.8 Bn in undrawn lines.
As results in adjusted EBIT came in below expectations, and despite performing better in NFD, we could see a negative market reaction, especially as the share price has outperformed the IBEX by +47% since the IBEX highs seen in Feb’20, when the impact from Covid-19 started. SELL, T.P. € 12.54/sh. (-33.97% potential).