Siemens Gamesa’s new management is reviewing the company’s financial guidance as it battles both internal and external challenges, including ramping up its 5.X turbine platform and cost inflation.
The turbine manufacturer provisionally reported losses (Ebit excluding purchase price allocation and integrating and restructuring and I&R costs) of €304 million for the second quarter of its fiscal year (1 January-31 March), down from a €111 million profit in the same period one year earlier.
It also expects to see net debt rising to €1.7 billion, up from €875 million at the end of the first quarter of its fiscal year. The company also reported an order intake of €1.2 billion in the quarter – a figure it described as “very low”.
Siemens Gamesa explained that energy, commodities and transportation costs continue to hit production and profitability. Meanwhile, the availability of key turbine components, harbour congestion and customers’ delayed investment decisions are temporarily affecting onshore commercial activity, Siemens Gamesa added.
The company explained that ramping up its 5.X onshore wind platform to serial production is proving “more complex than previously understood” – with expected milestones not being met and these delays then creating additional costs and unspecified challenges related to the design process, CEO Jochen Eickholt told reporters. He added that he will need more time to further assess internal challenges behind ramping up the platform.
The turbine maker stated that it now expects to see revenue decrease year on year and to make a loss in its 2022 fiscal year – having previously foreseen a profit-making year.
It expects revenue to drop by 2-9% year on year and to achieve an Ebit margin of around -4%. These estimates include the impacts of it selling an onshore wind development pipeline in southern Europe to SSE Renewables.
Siemens Gamesa stated that the financial guidance it had issued in Janaury is no longer valid. Its management team is reassessing its expectations for group performance for the fiscal year due to uncertainty surrounding challenges with ramping up the 5.X platform, the potential impact of Russia’s invasion of Ukraine, global supply chain disruptions, cost inflation and developments of Covid-19, the company explained.
Jochen Eickholt, who replaced Andreas Nauen as CEO on 1 March, said that the company's “performance is clearly lagging behind my expectations”.
“I spent my first two months [in the job] listening to our business units, to our colleagues, to our product development people, to our procurement teams. I was visiting many of the European facilities talking to clients and suppliers,” he explained. “And my first assessment is that most of the impacts or those impacts we see are driven by internal challenges.
“As a management team, we are now turning these insights into a program that can quickly get us back on track towards profitability and industry leadership.”
Eickholt is a board member of parent company Siemens Energy, and has previously worked in the German giant’s portfolio companies across energy, rail and communications. He added that he has never worked in a business space “with such positive overall outlooks, mid- to long-term,” citing renewables expansion programmes recently announced at EU and national level in Europe.
Eickholt added that there was an increasing awareness of the effects of inflation from both customers and supply chain companies.
He suggested that companies like his could include inflation in supply contracts and use price indexation to shield turbine makers from rising costs – though conceded that this would not be easy for customers. And he suggested that a “partnership-related approach” to supply chain companies could enable long-term contracts that provide more certainty for both parties.
Siemens Gamesa is due to publish its full first-half results on 5 May.
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