Munich, Düsseldorf The red numbers in the business with renewable energies brought the DAX newcomer Siemens Energy losses in its first year as an independent company. In fiscal year 2020/21 (September 30), the Siemens spin-off posted a net loss of 560 million euros. Sales rose by almost four percent to 28.5 billion euros.
CEO Christian Bruch was overall satisfied despite the problems at the wind power subsidiary Siemens Gamesa. “The team did an excellent job and laid the foundation for our transformation in a difficult market environment,” he said.
It is gratifying that the power plant division has made operational progress. “In the end there is still a loss at Siemens Energy, which is due to the well-known problems in Siemens Gamesa’s onshore business, but above all to the restructuring measures and was therefore planned.”
There were some bright spots. In the year of the spin-off in 2019/20, Siemens Energy made even higher losses with a loss of 1.9 billion euros – also due to special effects. In addition, with an adjusted Ebita of minus twelve million euros, the group almost made the leap into the profit zone.
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Siemens spun off its energy technology last year and listed it on the stock exchange. The new company quickly rose to the Dax. Analysts had expected an average of 28.5 billion euros in sales and a net loss of around 750 million euros.
In the current financial year 2021/22, Bruch expects stable sales in a range of minus one to plus three percent. The adjusted operating return on sales (Ebita) before special items should increase from 2.3 to three to five percent.
Growth should come from renewable energies
At first glance, Siemens Energy’s portfolio is well balanced: The business with large turbines, for example for gas-fired power plants, is declining – but the company is still making good money, at least with the service.
In the 2020/21 financial year, Gas and Power was even able to increase sales slightly to 18.4 billion euros. In addition, the division made the leap into profitability operationally.
But future growth should primarily be driven by the renewable energies business. There is also the topic of green hydrogen as a hope for the more distant future.
However, Siemens Gamesa, of all people, has been causing anger and disappointment for years. Things went badly there again in the 2020/21 financial year. Although sales rose from 9.5 to 10.2 billion euros, the turbine manufacturer made an operating loss of 93 million euros (operating Ebita).
The bottom line was that Siemens Gamesa’s deficit even totaled 627 million euros – after a loss of 918 million euros in the previous year. The share has been on the downside for weeks. It has fallen in value by almost half since the beginning of the year.
“We are operating in a very difficult environment with challenging short-term market dynamics and little visibility of the normalization of the supply chain,” said Siemens Gamesa CEO Andreas Nauen.
In fact, high raw material prices and tight supply chains have also resulted in poor results for the competition. Not only Siemens Gamesa, but also the Danish wind giant Vestas and the Hamburg manufacturer Nordex had to cut their forecasts.
The prices for wind power on the world market have been falling for years, but corporations are finding it difficult to reduce their costs, as it were. In addition, there are currently record prices for raw materials such as steel, copper and aluminum.
This is countered by the increasing decarbonization of the world economy and thus a massive increase in demand for wind turbines. Siemens Gamesa expects the market to grow by 33 percent between 2025 and 2030 alone. For next year, however, the market leader for offshore wind power is initially assuming a drop in sales of between two and seven percent.
Ex-Siemens boss Joe Kaeser once merged Siemens wind power with its competitor Gamesa. The division got access to the stock exchange and was able to participate in the consolidation without having to spend a lot of money on a multi-billion dollar takeover.
Speculation about takeover
But the disadvantages of the design quickly became apparent. Siemens had no direct access, and there was always trouble with the co-partner Iberdrola.
Above all, Siemens Gamesa was unable to get a grip on the problems with the onshore wind turbines on land, which were mainly contributed by Gamesa. The result was a series of profit warnings.
In view of the ongoing problems, there is always speculation about a complete takeover. However, in terms of the balance sheet, Siemens Energy can currently hardly afford to buy out the remaining shareholders of Siemens Gamesa with a billion-dollar takeover offer. Therefore, a takeover attempt with a share swap is currently considered the most likely.
The exchange of executives has not yet brought about a breakthrough either. “We will continue our efforts to get the company back on the path to sustainable profitability,” said Siemens Gamesa boss Nauen last week when the figures were presented.
This is a problem for Siemens Energy because Gamesa is not the only construction site. As expected, the power plant division is a permanent restructuring case. The regular downsizing leads to conflicts over and over again. Most recently there was a dispute about the reduction of ultimately 2,600 jobs in Germany.
The challenges are great for Christian Bruch. “He has to get the problems under control, otherwise he too will come under pressure,” says an insider.
The ex-Linde board member got off to a good start at Siemens Energy. As a process fanatic, he dismantled hierarchies and cut costs. The interaction with his chairman of the supervisory board, Joe Kaeser, has also gone well so far.
Siemens Energy shares recently lost value
Siemens Energy has so far delivered a mixed performance on the stock exchange. The spin-off made its debut a good year ago at a price of 22 euros. Before it was included in the Dax, the price peaked at around 33 euros. Since the spring, however, it has crumbled to around 24.50 euros.
The CEO is confident that things will continue to improve. “In the current fiscal year, we will continue to focus on our plan to increase profitability. We are thus on track to achieve our medium-term goals, ”he said.
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