Siemens Gamesa lowers business outlook again significantly

Dusseldorf The ailing wind company Siemens Gamesa has to lower its targets again – even though the company had previously expected a significant loss. Instead of minus four percent, the return could even drop to minus 5.5 percent, the German-Spanish turbine manufacturer announced on Tuesday when it published its quarterly figures. The return will also be negative in 2023.

“The situation remains tense. We see that material costs continue to go up, and at the same time we have long-term contracts that were concluded in 2021 with significantly lower prices,” said CEO Jochen Eickholt. The Siemens Energy subsidiary has been in the red for years.

However, with record raw material prices, supply chain chaos and internal problems, the situation is now getting worse. According to a report by the Reuters news agency, Siemens Gamesa is considering cutting around 2,500 jobs to get the losses under control. It is still unclear which divisions and regions are affected, said two people familiar with the process.

Siemens Gamesa boss Eickholt did not want to comment on this on Tuesday. In an interview with the Handelsblatt, however, he explained that in the current situation he could neither rule out job cuts nor the closure of further plants. “We have a number of problems. On the one hand the ramp-up of the 5X generation of turbines, on the other hand supply chain problems and raw material prices, which the rest of the industry also has, and that we are not profitable,” said Eickholt.

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Although Siemens Gamesa is one of the largest wind companies in the world and even market leader on the sea, business is anything but smooth: several profit warnings, red numbers and four bosses within six years. Most recently, the renovation specialist Eickholt replaced Andreas Nauen in March.

In the past quarter, however, sales continued to shrink, even under hopeful Eickholt, to 2.44 billion euros from 2.7 billion in the previous year. The net loss widened to 446 million euros from 314 million euros.

Part of the problems is the situation on the world market. Wind power is in crisis. Market leader Vestas and competitors such as Nordex, Enercon and GE Renewables have also been making losses for months. And not just since record raw material prices, supply chain problems and the Ukraine war have been affecting business. For the first time in 20 years, prices are not going down but up again, sometimes by up to 20 percent.

>> Read here: 235 wind turbines new in Germany set up – there should be more than three times as many

Because the price of raw materials such as steel and copper has also risen massively, the corona-related project delays due to supply chain problems in China are now exacerbating the situation. There has been a tough price war on the market for years. Above all, the switch from fixed state remuneration to free tendering systems, in which only the cheapest gets the contract, has driven the turbine manufacturers into ruinous competition.

At the same time, the German market, one of the main sales markets, has collapsed in recent years. In addition, Donald Trump caused a great deal of uncertainty in the US market during his time as President. More and more plants were closed and tens of thousands of employees were laid off. Nordex recently caused a stir when it closed one of the last rotor blade factories in Germany.

Nordex and Siemens Gamesa are fighting legacy issues

Nordex and Siemens Gamesa are particularly concerned that they cannot process their bulging order books quickly enough and, above all, at current costs. While raw material and logistics costs have increased massively, turbines have to be delivered at the contractually agreed price. Although the industry is renegotiating current contracts, it still has to shoulder the legacy of the past few years.

“We have to see a different price level, otherwise the energy transition will be pushed back further,” said Eickholt on Tuesday. The prices for wind turbines should therefore continue to rise for the time being. However, that is only one reason for Siemens Gamesa’s bad numbers.

In addition, there are now missing components and delivery bottlenecks, which in turn delay production and projects. At Siemens Gamesa, massive problems with the 5X generation of turbines are making the situation even more difficult. Two-thirds of the problems at Siemens Gamesa are homemade, admits CEO Eickholt.

In the first nine months of the financial year, the wind turbine manufacturer’s turnover fell by more than twelve percent to 6.4 billion euros. The adjusted margin (EBIT) is a disastrous minus 14.8 percent. “With our new business model, we will get back into the profit zone more quickly,” Eickholt promised on Tuesday.

The 60-year-old wants to completely overhaul the working methods of the wind group, processes are to be simplified and streamlined. Above all, however, Eickholt wants to concentrate competencies on two core positions: the Chief Operating Officer (COO) and the post of Chief Technology Officer (CTO). Until now, the turbine manufacturer has not had a CTO for the entire business. However, it is still unclear who will take on the job.

Siemens Energy in particular should be interested in getting the results of the troubled wind company under control again. The technology group already holds almost 77 percent of the shares. So far, the subsidiary’s losses have also caused poor results for the parent company every quarter. For the 33 percent of Siemens Gamesa that it does not yet hold, Siemens Energy is offering a good four billion euros and then wants to take the wind turbine manufacturer off the stock exchange.

More: “Especially internally something went wrong,” said the new Siemens Gamesa boss Eickholt.

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