By Isla Binnie and Christoph Steitz
MADRID/FRANKFURT (Reuters) - Shares in wind turbine maker Siemens Gamesa tumbled on Friday after it cut its financial outlook for the third time in nine months, dragging down the market value of its rivals as well as German parent Siemens Energy.
Siemens Gamesa shares slumped as much as 16.2% to their lowest since July 2020, while Siemens Energy fell as much 17.4%, its biggest intraday loss ever, wiping out 4.6 billion euros ($5.2 billion) in market value between them.
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 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 and smaller German rival Nordex both fell 8% on Friday.
Siemens Gamesa's warning also forced Siemens Energy to cut its outlook https://reut.rs/3FT1jbP on Thursday, raising the pressure on its Chief Executive Christian Bruch to buy the 33% of the wind business it does not own so it can get a better grip on the problems.
Bruch said last year it was too early to talk about buying the remaining shares but it would become an issue at some point.
Factoring in Friday's share price slide, the 33% stake is now worth about 3.8 billion euros, roughly half a billion less than on Thursday and down from 6.1 billion euros when Bruch made the comments in May.
'A BIT OPTIMISTIC'
Reporting a first-quarter loss of 309 million euros, 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, which makes turbines for gas-fired power plants, heat pumps as well as power transmission equipment, 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.
($1 = 0.8814 euros)