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Siemens Energy is projected to face a €4.5bn loss this year due to challenges in its wind turbine business.
In an announcement to investors, the Dax-listed company revealed that resolving issues in the wind turbine division, which has been grappling with technical problems and industry-wide inflationary pressures, will be costlier than initially anticipated.
Siemens Energy reported a net loss of €2.9bn for the third quarter and revised its annual revenue outlook downward. Previous estimates indicated that losses for 2023 would surpass last year’s €712mn loss by a low triple-digit million amount.
The company acknowledged the difficulties faced by its turbine business Siemens Gamesa and referred to them as indicative of the larger challenges associated with reviving a division that had already caused a decline of over €6bn in the company’s value.
Since June, Siemens Energy’s stock has plummeted approximately 30% upon disclosing technical problems and rising costs related to its leading 5.X onshore wind turbine.
By mid-morning, shares in the company fell 3% to €15.08.
In June, Siemens Energy estimated the cost of fixing the issues to be around €1bn. CEO Christian Bruch admitted that the faults were more severe than anticipated.
While announcing the latest results, Bruch expressed confidence in the company’s ability to restore businesses to a strong position and acknowledged the setbacks caused by the current problems.
Siemens Energy stated that the problems with Siemens Gamesa’s onshore wind turbines impacted the rotor blades and main bearings in the 4.X and 5.X platforms, which are their newest onshore models.
Jochen Eickholt, CEO of Siemens Gamesa, cited instances of “wrinkles” in some of the layers of the turbine’s rotor blades.
Eickholt emphasized the implementation of a more stringent process for suppliers, resulting in the exclusion of some.
The company stated that the problems could be resolved during routine maintenance. However, Eickholt acknowledged that turbines had been sold too quickly without sufficient testing.
In an effort to address numerous profit warnings, Siemens Energy assumed full control of Siemens Gamesa in June.
In addition to the challenges faced by its onshore wind turbines, Siemens Energy mentioned the struggle of Siemens Gamesa in expanding its offshore wind turbine business. Eickholt remarked that the company had become “a victim of our own ambitions.”
The company’s executives also highlighted cost pressures within the European wind industry and intense competition from China.
Maria Ferraro, Chief Financial Officer of Siemens Energy, asserted that additional equity would not be raised and emphasized the company’s strong balance sheet, low debt, robust cash flow, and investment-grade rating from S&P.
Regarding a review of its wind business strategy, company executives evaded questions regarding potential asset disposals.
Analysts viewed the struggles faced by Siemens Gamesa as representative of the broader challenges across the renewable energy sector, including escalating costs and intense competition on pricing.
The surge in demand for wind turbines driven by clean energy goals has strained supply chains.
William Mackie, Head of Capital Goods Research at brokerage firm Kepler Cheuvreux, indicated that investors are seeking greater transparency regarding the root causes of the problems at Siemens.
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