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Shares of Siemens Energy, a major wind turbine manufacturer, plummeted 30% on Friday. The company issued a warning stating that it may need to allocate €1 billion towards resolving a range of technical issues.
This announcement led Siemens Energy to abandon its profit forecast for the year, causing concern among investors. Last month, the company had reassured investors that the outlook for its wind turbine unit would improve in the second half of the year.
Christian Bruch, the CEO, expressed his disappointment, saying, “Even though it should be clear to everyone, I would like to emphasize again how bitter this is for all of us.”
The problems at Siemens Gamesa, the group’s wind turbine business, have significant implications for an industry that has already faced rising costs and disruptions in the supply chain over the past 18 months.
Analysts at JPMorgan noted that this warning comes at a time when expectations were rising that the worst was over for the wind industry but pointed out that technical problems are affecting others as well.
In a statement, Siemens Energy stated that it anticipates “significantly higher costs,” potentially exceeding €1 billion, due to increased failure rates of wind turbine components. The company also highlighted challenges in improving productivity and scaling up offshore wind capacity.
On May 15, Siemens Energy had acknowledged the volatile outlook for Siemens Gamesa, with a weak first half of the year but expected a stronger performance in the second half.
Jochen Eickholt, CEO of Siemens Gamesa, cited issues with rotor blades and bearings and suggested that the turnaround process may take longer than initially anticipated. Component problems had already been identified in January.
Eickholt expressed disappointment, stating, “This is a disappointing, bitter setback. The quality problems surpass what was previously known, particularly in the onshore area.” He added that resolving these issues requires significant time and financial resources.
The expected costs of over €1 billion will be spread out over several years.
This development follows Siemens Energy’s recent acquisition of full control over Siemens Gamesa in an effort to revitalize the business following multiple profit warnings.
Describing the announcement as a “huge setback,” Bruch affirmed his belief that the new corporate structure would help resolve the problems. He added, “I am still convinced that the energy transition can only be managed with the help of wind energy.”
In February, Siemens Gamesa reported €1.6 billion of new orders, driven by projects in Canada, India, and Germany.
Aside from wind turbines, Siemens Energy also manufactures turbines for gas-fired power stations and electricity substations, among other products.
Siemens Energy will provide additional details in its next scheduled trading update and maintains its overall revenue guidance.
Shares of Siemens Energy plummeted 30% to €16.16 on Friday.
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