Due to the massive problems in the wind business, Siemens Energy is assuming an annual loss of several billion euros. Defects in the onshore wind turbines and the start-up of the offshore systems are responsible for the high costs.
The profound problems at the Spanish wind power subsidiary Siemens Gamesa put Siemens Energy in the red with around 4.5 billion euros in the current fiscal year. The energy technology group announced this today. This was preceded by an in-depth analysis of the quality defects in Siemens Gamesa wind turbines for use on land and the problems encountered when ramping up the production of wind turbines on the high seas.
“Our results for the third quarter show the challenges in the turnaround of Siemens Gamesa,” said CEO Christian Bruch. Now the board of directors wants to put the overall strategy in the wind business to the test, which has been producing negative surprises and losses for years.
1.6 billion euros for damage to rotor blades
“Due to the developments at Siemens Gamesa, we are reviewing the current strategy and action plan in the wind business,” the statement said. Bruch plans to present details of this at a capital market day in November. The Spanish Siemens Gamesa alone is likely to accumulate a loss of 4.3 billion euros.
So far, Siemens Energy had already expected a minus of more than 800 million euros. At the end of June, however, Siemens Energy already suspected that the extent of the damage would be greater than expected and warned of additional burdens in the billions for the wind power subsidiary.
CEO Christian Bruch now sees it more clearly: It will cost around 1.6 billion euros to repair the damage to rotor blades and bearings on Siemens Gamesa’s 4.X and 5.X onshore platforms. The turbines were running, however, and most of the repairs should take place in 2024 and 2025. As a consequence, Siemens Gamesa wants to part with some suppliers.
Steel and energy costs run away
Siemens Energy estimates 600 million euros for the material and procurement costs for offshore wind turbines that are getting out of hand and the bumpy ramp-up, during which factories have to be converted to larger turbines and employees have to be trained. Like the competition, Gamesa has agreed fixed prices with customers. But now many orders turn out to be loss-making because the manufacturers are running away from the costs for steel and energy.
There are also negative tax effects: Siemens Energy can no longer use loss carryforwards of 700 million euros for the time being, as long as it is not foreseeable when the group will be back in the black. In the fourth quarter, the Executive Board is arithmetically assuming operating losses of at least EUR 600 million.
Loss multiplied in third quarter
Despite a huge order intake, Siemens Gamesa expects sales to stagnate at best in the 2022/23 fiscal year. In the third quarter, it collapsed by twelve percent, although incoming orders more than doubled to 7.4 billion euros, partly because of large orders for offshore plants. This pushes the expected sales growth in the group to nine to eleven (previously ten to twelve) percent. Siemens Energy’s earnings before special items should now also be deep in the red; so far, the group had at least expected a margin of one percent.
The bottom line is that the loss in the third quarter (as of the end of June) multiplied to 2.9 billion euros, after a minus of 564 million euros in the same quarter of the previous year.
In contrast, the rest of the energy technology business proved to be robust. The operating results increased both in the business with gas turbines, energy networks and in the area of transformation of industry. Sales in the group rose by eight percent to 7.5 billion euros. Incoming orders increased by more than half to 14.9 billion euros. “The strong performance of the other business areas gives me confidence in our company’s ability to make businesses economically successful again,” said Bruch.