Rarely has a security appreciated or depreciated in financial markets above 15%, as it is an exceptional event. Well, this is what has happened these days with Siemens Gamesa that a little more than 15% has been left in a single trading session. Precisely at a time when it was one of the most bullish values in the selective index of Spanish equities, the Ibex 35. To the point that its comparative pressure was one of the strongest in the market. Being almost every day leading the gains in the national squares.
But the trigger for this total disaster has to be found in business results that have really disappointed the agents of the equity markets. They have not picked up what they expected and for this reason the reaction of Siemens Gamesa has been so violent. An investor who has invested 10.000 euros will have seen how in just one day he they have evaporated more than 1.500 euros which means a lot of money for this kind of operation. Although the worst may be to come at the beginning of the August holidays.
While on the other hand, Siemens Gamesa was being one of the securities with greater number of recommendations by analysts in equity markets. It was a fixture in all pools and now comes this new scenario that can change the perception of small and medium investors. But the truth is that things are not looking very good for the interests of the listed company. If not, on the contrary, new and intense declines in the price of shares can be generated.
Siemens Gamesa: at 12 euros
Siemens Gamesa Renewable Energy, formerly Gamesa Corporación Tecnológica y Grupo Auxiliar Metalúrgico, is a Spanish multinational of new technologies dedicated to wind energy. After the publication of its business results, its shares have plummeted to reach levels around the 12 euros. But the most important thing is that it has knocked down important supports that can change its trend, at least with respect to the short and long term. To go from bullish to bearish in a very few days. Being a real surprise for a good part of the small and medium investors.
It cannot be forgotten that just a few days ago, Siemens Gamesa's target was 18 or even 20 euros per share. And it seemed very feasible that he could get it before the end of the current year. Where purchases were being imposed with crystal clear sales. With a very high recruitment volume for this special class of stock. With a very notable foreseeable revaluation potential but which has been out of date with the company's new prospects for wind energy.
Lower the order book
Its most negative element that has been taken into account by investors is the derivative of its persistent decrease in prices in the order book. It has come as a surprise to a large part of the agents in the equity markets. To the extent that Siemens Gamesa's business results have deeply disappointed all investors. Although with an intensity rarely seen in the selective index of Spanish equities, the Ibex 35. We are talking about nothing more and nothing less than a 16% depreciation in prices.
Another aspect that has been able to influence this situation is the one regarding the expectations that had been created within the company and which, after all, were many. In this sense, it cannot be forgotten that Siemens Gamesa is one of those national equities that are listed, more because of its future expectations than because of the reality of its business lines. And therefore the volatility makes a bigger presence in setting your prices. Something very common in this class of companies of these characteristics and that can lead to you losing a lot of money along the way.
New contracts abroad
After Siemens Gamesa has signed its first contract with Brennand Investimentos for the supply of 27 wind turbines of different kinds of models in the Arizona and Honorato wind farms, located in the Brazilian state of Bahia. Since 2012, Siemens Gamesa has supplied more than 3,1 GW (more than 1.500 units) for about 60 projects in Brazil. The company has a solid presence in the country, where it has offices and a nacelle assembly plant, as well as offering operation and maintenance services.
This was just news that spurred a good part of the small and medium-sized companies to make purchases at this value in order to make their operations profitable. But they have seen how in a very short space of time their positions have changed significantly. Until they are considering selling their shares. Although the wisest course of action at the moment is keep calm and wait to see what happens in the next few days to make the right decision in each case. In any case, one thing is clear and that is that the outlook for Siemens Gamesa has changed and in which case there will be no choice but to develop a change in investment strategy.
Linked to business cycles
This is a class of values that is characterized because they are closely linked to economic cycles. In other words, they are very bullish in expansive periods while, on the contrary, their greatest corrections take place in times of economic recession. For this reason it can be said that they are companies considered as temporary since they depend on the state of international economies. Beyond other considerations of a technical nature and perhaps also from the point of view of its fundamentals. To the point that it is very complex to operate with this class of securities on the stock market.
Another aspect that must be addressed is the fact that they are not intended for medium and long-term investments. If not, on the contrary, they are more aimed at very short operations in equity markets. Taking advantage of the upward movements to finalize the positions under any strategy carried out in the investment. Being one of their most relevant common denominators and that differentiates them from other securities or sectors in the financial markets. Where you can obtain large revaluations, but also lose a lot of money in the operations of taking positions.
Disappointment in results
Siemens Gamesa Renewable Energy (SGRE) today presented the results for the first nine months (October-June) and the third quarter (April-June) of its fiscal year (FY) 2019. In the first nine months of fiscal year 2019, sales amounted to 7.283 million euros (+ 12% y / y). In the third quarter they increased by 23%, reaching 2.632 million euros, driven by the strong contribution of all business units, especially the record offshore activity.
The company ended the first nine months of FY 2019 with a pre-PPA Ebit, integration and restructuring costs of € 475 million, equivalent to a pre-PPA Ebit margin, integration and restructuring costs of 6,5%. In the third quarter, it registered a pre-PPA Ebit, integration and restructuring costs of 159 million euros, with a pre-PPA Ebit margin, integration and restructuring costs of 6,1%. The persistent decline in prices in the order book It has been the main impact on profitability, along with volatility in emerging markets and challenges in the execution of some onshore projects, partially offset by synergies, productivity improvements and higher sales volume.
Net debt of 191 million euros
The company doubled your net profit up to 88 million of euros during the first nine months of fiscal year 2019, while in the third quarter it was 21 million euros. Net debt stood at 191 million euros as of June 30, driven by the increase in working capital in the face of a peak of activity in the wind turbine business in the fourth quarter. The financial performance is in line with the guidelines presented for fiscal year 2019 (sales of 10.000-11.000 million euros and Ebit margin pre PPA, integration and restructuring costs of 7% and 8,5%), despite the fact that the The third quarter has been affected by volatility in emerging markets and challenges in the execution of some onshore projects.
Although short-term headwinds impact margins, Siemens Gamesa's long-term outlook remains strong, driven by a record order book, geographic and business diversification, as well as one of the most competitive product portfolios in both onshore and offshore. The persistent decline in prices in the order book has been the main impact on profitability, along with volatility in emerging markets and challenges in the execution of some onshore projects