Siemens Gamesa Set to Reduce Costs by Approximately 2 billion Euros by 2020

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On Thursday, the No.2 maker of wind turbines in the world, Siemens Gamesa, said that it would reduce costs by approximately 2 billion euros (£1.78 billion) by 2020, hoping that this will help it close down a margin gap with Vestas, its larger rival.

Showing the new three-year business plan of the company at a capital markets day, Siemens Gamesa said that it would increase its margin on earnings before interest and tax (EBIT) to around 8-10 percent by 2020, an increase from the 7-8 percent that it expects for 2018.

The announcement of the group comes a week after the Vestas of Denmark revealed its ambitious vision, forecasting a 9-11 percent EBIT margin for this year, with a 10 percent mid-term target.

Markus Tacke, the Chief Executive of the company, said that the three-year plan was setting it on track to improve the profitability of the group, “fully bearing out the merger rationale and positioning us as leaders in an increasingly competitive environment.”

The shares in Siemens Gamesa were up by 2.7 percent following the announcement.

Siemens Gamesa is the result of a tie-up between the wind power business of Siemens and Gamesa that was finished in 2018. Along with its rivals, it is experiencing major pricing pressure as some governments across the globe are reining in on subsidies.

The group said that the cost reductions amounting to 2 billion euros included restructuring efforts, a quicker delivery of merger synergies, and the fine-tuning of the product portfolio of the group as well as its procurement.