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Siemens Energy AG (ETR:ENR) said today it is reviewing the strategy at its wind subsidiary Siemens Gamesa in response to challenges at the business that led the German group to project an annual net loss of around EUR 4.5 billion (USD 4.93bn).
Siemens Energy in June withdrew its profit guidance due to potential costs related to product quality at its wind turbine manufacturing subsidiary.
On Monday, the company reported its third-quarter results that were hit by EUR 2.2 billion in charges at Siemens Gamesa, stemming from quality issues of certain onshore platforms, as well higher product costs and ramp-up difficulties in the offshore business.
THE PROBLEMS
Siemens Energy said that most of the quality problems are related to certain rotor blades and main bearings in the 4.X and 5.X onshore platforms that are not installed in all turbines on these platforms, meaning that a limited number of the onshore turbines are affected.
The problems can occur after a given turbine runtime. The turbines can still be used, but to ensure a long-term runtime, the company will seek to resolve the problems within the normal service intervals. This is expected to cost EUR 1.6 billion. The amount was booked in the third quarter, with most of it expected to be spent in the 2024 and 2025 fiscal years.
In addition, Siemens Energy recorded charges of EUR 600 million due to higher product costs in offshore for projects already committed to contractually and also challenges in the ramp-up of offshore activities, exacerbated by ongoing challenges in procurement and labour markets.
The company’s net result will be further hurt by the writedown of deferred tax assets of EUR 700 million.
Because of these challenges, Siemens Energy is reviewing the current strategy in the wind business and will announce details at its Capital Markets Day in November.
The company is still confident it will manage to carry out a turnaround. “Our third-quarter results demonstrate the challenges in turning around Siemens Gamesa. The strong performance of our other business areas gives me confidence in our company’s ability to put businesses back on a strong footing,” said Siemens Energy president and chief executive Christian Bruch.
In its third quarter through June, Siemens Energy saw its net loss balloon to EUR 2.93 billion from EUR 564 million.
Siemens Gamesa’s performance is in the table below:
| in millions of EUR | Q3 FY 2023 | Q3 FY 2022 |
| Orders | 7,359 | 3,523 |
| Revenue | 2,054 | 2,436 |
| Profit (Loss) | (2,561) | (405) |
| Profit margin | (124.7)% | (16.6)% |
OUTLOOK
For the fiscal year through September, Siemens Energy now expects a net loss of around EUR 4.5 billion, compared to previous projections for the net loss to exceed the prior year’s level of EUR 712 million by up to a low-triple-digit million. Comparable revenue growth is now seen in a range of 9% to 11%, compared to 10% to 12% previously, while profit margin before special items is expected to be between negative 10% and negative 8%, compared to an earlier forecast of around the low end of the guidance range of positive 1% to positive 3%.
(EUR 1 = USD 1.095)
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