By Jeff St. John
The smart grid industry’s malaise so far this year has a decidedly international flavor to it. Along with the post-stimulus slowdown in the United States and Europe’s ongoing economic crisis, we’ve apparently got slowdowns in orders from would-be next-generation growth markets like China and India to deal with.
Those are some conclusions to draw from a flurry of bad first-quarter financial news for the smart grid this week. One of the biggest came from Siemens, which lowered its 2012 profit guidance on Wednesday from 6 billion euros ($7.95 billion) to between 5.2 billion and 5.4 billion euros ($6.9 billion to $7.1 billion), based on slowdowns both in European offshore wind power and in Chinese grid equipment.
The biggest hit was Siemens’ (SI) 278-million-euro charge for delays in North Sea wind power transmission projects, which came on top of a 203 million euro ($266.4 million) charge earlier in the year. But it was China that drove the company’s only regional revenue decline, with a 6 percent drop in revenues compared to a global increase of 9 percent.
A report from Standard Chartered bank says that Siemens’ orders from China fell 12 percent in the first quarter. Nor is Siemens the only grid giant finding China a tougher market -- rival grid giant ABB (ABB) saw a 35-percent decline in Chinese sales in March, the report stated.
ABB managed to exceed analysts expectations slightly by reporting $1.05 billion in first-quarter earnings on Wednesday, but still saw its stock fall by as much as 4 percent after reporting the bad news from China.
Nor is China the only emerging smart grid market seeing signs of a slowdown. Siemens also saw a whopping 58-percent drop in orders to India, which is a much less mature, but still massive, market behind China, Standard Chartered reported.
China and India are also very competitive in terms of pricing, a factor which could have driven Siemens’ revenue decline in China. Likewise, ABB’s first-quarter revenue growth was driven by cost cutting to make up for weaker pricing, the company reported.
China is, of course, the single biggest future smart grid market in the world, with hundreds of billions of dollars going into high-voltage DC and AC transmission lines to carry wind power from west to east, hundreds of millions of smart meters to be deployed over the next decade, and scores of integrated smart grid-smart city projects underway, featuring partners like GE, IBM, Cisco, Intel and the three aforementioned grid companies, testing energy storage, plug-in electric vehicles, solar panels and other stuff.
But China’s economy has also shown increasing signs of strain. China reported economic growth of 8.9 percent in the fourth quarter of 2011 -- a figure to be envied by most, but a two-year low. Signs of a bursting bubble in real estate have analysts worried that a broader contraction may only be beginning.
In other international smart grid news, Schneider Electric reported last week that first-quarter sales grew 9.4 percent to 5.41 billion euros ($7.12 billion), though that was almost entirely driven by revenues from acquisitions. ABB has been matching Schneider’s appetite for smart grid companies, and Siemens is catching up.
And smart meter giant Itron (ITRI) posted first-quarter earnings Wednesday that missed analysts’ expectations, driven by growing costs for R&D and international development. The news led to some analyst downgrades on Itron’s stock, though those analysts agreed that Itron’s biggest test will come later this year, when it becomes clear just how much of Europe’s mandate-driven smart meter business it can expect to secure.