February 4, 2020 / 8:32 AM / 6 months ago

Siemens Gamesa boosting risk management to fend off project delays: CEO

MADRID (Reuters) - Wind turbine maker Siemens Gamesa is acting fast to manage risks on its projects around the world to avoid a repeat of the delays that dragged it to a loss at the beginning of this year, Chief Executive Marcus Tacke said on Tuesday.

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

“We do not take this setback lightly,” Tacke said on a conference call with analysts, adding the company was also working to guard against challenges in a sector squeezed by falling margins as governments phase out subsidies.

“We are working on improving project execution,” he later said on a conference call with reporters. “We need to strengthen our risk management to be very sure we are in good control of our projects around the world.”

Last week, the company formed in 2017 by a merger between Spain’s Gamesa and the wind business of Germany’s Siemens cut its profitability target for the financial year 2020 for a second time in three months.

It reported a net loss of 174 million euros ($192.34 million) in the three months to December, down from an 18 million euro net profit in the same period a year earlier, blaming project delays caused by the early onset of wintry weather in northern Europe.

“The northern pipeline, at the very far end of Norway, the weather conditions can be very harsh,” Tacke said.

Chief Financial Officer David Mesonero said the company’s profitability should start improving in the second quarter of the year, after a sharp reduction in its core earnings (EBIT) margin to -6.8% in the first quarter.

“We are nearly done with our less profitable onshore contracts and we see better margins in our order intake,” Mesonero said.

Mesonero said the prospect of an orderly Brexit, which affects the company partly because it owns a factory in northern England, could prompt it to plan for slightly better profitability than it foresaw at the end of 2019.

“We consider now we could benefit slightly from this new kind of Brexit scenario, so in that regard we confirm the mid-point of the guidance as the most likely scenario but also with a potential positive outcome compared with what we were seeing three months ago,” he said.

(Corrects paragraph 7 to show EBIT margin was -6.8%, did not fall 6.8%)

Reporting by Isla Binnie, Editing by Inti Landauro, Louise Heavens and Peter Graff

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