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 firstname.lastname@example.org
(END) Dow Jones Newswires
November 07, 2017 04:47 ET (09:47 GMT)