Munich, Madrid With a consistent restructuring of the wind power subsidiary Siemens Gamesa, leaner structures and more transparency, the Siemens Energy Group wants to win back the trust of investors. “We want to become faster, more flexible and more customer-oriented,” CEO Christian Bruch told investors on Tuesday.
Specifically, Siemens Energy plans to cut 30 percent of the previous management positions. In business areas that used to have up to eleven hierarchical levels, there will only be a maximum of six in the future. “A reduction in employment is not the aim of the reorganization,” it said.
Nevertheless, the announcement is likely to cause unrest among executives. According to information from the Handelsblatt from business circles, a three-digit number of management positions are to be eliminated.
At the weekend, Bruch announced a cash offer for the complete takeover of the loss-making subsidiary Siemens Gamesa. With a full integration of the specialist for renewable energies, its renovation should make better progress. So far, all efforts to do so have failed. Within three years, cost synergies of around 300 million euros are to be leveraged with the integration.
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Price losses due to problems at Siemens Gamesa
Siemens Energy holds two-thirds of the shares in the listed Gamesa. The acquisition of the remaining shares can cost the parent company more than four billion euros. Bruch had already warned that it would take several years for all the problems to be resolved.
So far, Siemens Energy has not been a success story on the stock exchange. Since the high of 33 euros a year and a half ago, the price has almost halved. The problems at Siemens Gamesa are primarily responsible for this. The traditional business with power plants, which used to be considered a problem child, is developing very well. On Wednesday, the stock market was rather unimpressed by the announcements, the course meanwhile only increased by 0.4 percent to almost 17 euros.
Siemens Energy is still in the red
In order to better highlight progress in other areas, Bruch is now creating more transparency in the figures. Up to now, the Group has reported on the course of business in the “Gas and Power” power plant division and the business with renewable energies when it presented quarterly results.
In the future, “Gas and Power” will be divided into the business units “Gas Services” with gas and steam turbines, “Network Technologies” with electricity transmission and storage, and “Transformation of Industry”. The latter includes, for example, the hydrogen activities, digitization technologies and compressors. “With our new reporting structure, we are meeting the capital market’s expectations for more transparency in the business areas,” said CFO Maria Ferraro on the occasion of the Capital Markets Day.
The business figures for the new areas were presented for the first time at the event. According to this, “Gas Services” achieved sales of around nine billion euros and an operating margin (EBITA before special items) of seven percent in the past 2020/21 financial year. Network technologies were similarly profitable with sales of 5.8 billion euros. The new “Transformation of Industry” division was in the red with a return on sales of minus 2.5 percent and sales of 3.9 billion euros.
The young company Siemens Energy emerged from the spin-off of Siemens energy technology. The product portfolio ranges from power generation with renewable and conventional energies to power transmission and new hydrogen technologies.
So far, Siemens Energy was still in the red. In the past financial year, the bottom line was a net loss of 560 million euros. Sales increased slightly to 28.5 billion euros.
In the new fiscal year, too, Siemens Energy is making a loss due to problems in the renewable energy business. In the first half of the 2022/23 financial year, which ends on September 30, the group made a loss of 492 million euros.
“It is clear that jobs will also be lost”
In order to become profitable, the trend reversal at Siemens Gamesa must succeed. Even after a complete takeover, the operational problems have not yet been solved, the supervisory board of Siemens Energy warns.
Gamesa employees in Spain fear the planned complete takeover. “The fear here is great,” says Francisco Méndez from the Spanish trade union CCOO. “The group wants to save 300 million euros a year – it’s clear that jobs will also be lost.”
In addition, the employees are skeptical that the takeover makes strategic sense. “Since Siemens got involved, many people have come across the group as a headless chicken,” says Méndez. “One wrong decision follows the next, and no one knows where the group is actually headed.”
As an example, he cites the closure of the rotor blade factory in As Somozas, Galicia, last year. Part of the production was transferred to India and another part to Portugal. “Subsequently, transport costs for an order from India to Egypt skyrocketed, and there were quality problems in Portugal – which we had already warned about before the closure of As Somozas,” said the trade unionist.
The Spanish industry journal “El Periódico de la Energía” also criticizes the German leadership. According to an article, the onshore wind business, in which the Spanish Gamesa had been very successful, is now more complex. The article says that the profitability is now zero because the Germans have never relied on it. “You let it die.”
More: Siemens Energy must solve these three problems at Siemens Gamesa.
This article first appeared on May 24th, 2022 at 8:45 am.