Munich A year after the independent IPO, Siemens Energy continues to go up and down. Above all, the problems at the wind power subsidiary Siemens Gamesa keep pushing the course – and with it the mood of the investors.
You are now putting pressure on the leadership of the newcomer to the Dax. “The operational performance must be increased as quickly as possible in order to achieve a comfortable level of profitability and then align the portfolio to growth areas,” said Ingo Speich, Head of Sustainability and Corporate Governance at Deka Investment, the Handelsblatt.
They demand that Siemens Energy finally gets the problems in the business with renewable energies under control – and integrates Gamesa as far as possible into the group.
The share started in September 2020 at a price of 22 euros and quickly rose to over 34 euros. But after that it went downhill. The rate has leveled off between 21 and 25 euros in the past few months. “With regard to the share price development, the advantages of independence have not yet been exploited,” says Speich.
It has been shown that a spin-off is “not necessarily a short-term value driver for the spin-off company”. So far, Siemens AG in particular has benefited.
Harald Smolak, ex-Siemens manager and now partner at management consultancy Atreus, also says: “While the split was a blessing for today’s core business, the first year of independence for Siemens Energy was very bumpy.” Siemens Energy CEO Christian Bruch has a “Herculean task” ahead of him.
The challenges for Siemens Energy are great. In the 2020/21 financial year (as of September 30), sales rose by almost four percent to EUR 28.5 billion. The bottom line was a net loss of 560 million euros.
The wind power subsidiary Gamesa is looking for stability
The biggest problems are, of all things, the business with renewable energies – actually the great hope for the future. Above all, the onshore wind power business, which the Spaniards from Siemens Gamesa contributed to a large extent, is not going well.
Therefore, the management of Gamesa has now been completely replaced. Siemens Energy boss Christian Bruch was confident that improvement is now in sight. “The measures introduced are having an effect.”
That is also urgently needed. “Gamesa is undoubtedly the biggest construction site that needs to be solved,” says consultant Smolak. There is an urgent need for “operational stability”. The new management of Siemens Gamesa must prove that “they can set the right course for tight project management”.
In the 2020/21 financial year there was a net loss of 560 million euros.
(Photo: unsplash)
The problem remains with the structure that Bruch found when he took office: Siemens Gamesa is an independent, listed company. Siemens Energy does not have full access, can only control via the supervisory board.
The solution is obvious for the investor representatives. “With full integration, Siemens Energy could govern more easily, break up structures and streamline decision-making processes,” says Speich from Deka Investment.
Siemens Energy cannot pay for the integration
Vera Diehl from Union Investment is also convinced: “Of course, full integration of Siemens Gamesa would be the best solution.” In the short term, however, Siemens Energy does not have the financial leeway. “This is why the Siemens Energy management team has to monitor Gamesa’s processes very closely.”
Siemens Energy could not afford a cash-financed takeover. A share swap offer remains a more likely variant. Energy boss Bruch has so far at least not ruled out a complete takeover.
Siemens Energy Board Member Jochen Eickholt explained in an interview with Handelsblatt: “Everything has already been said: Siemens Gamesa is great at offshore and service, onshore causes problems. Problems with projects and new developments are not due to the ownership structure. “
These are operational issues. “It is very important to us that the homework is done at Siemens Gamesa now.” A change in the ownership structure only makes sense if you have “a clear plan on how it can create added value for the company and shareholders”.
Experts expect long-term success
In the longer term, the experts and analysts are quite confident for the wind power division and Siemens Energy as a whole. “Overall, we see the company on the right track,” says Vera Diehl from Union Investment.
Siemens Energy has good market positions, a lot of technological know-how and the strong Siemens brand in its segments. “Siemens Energy covers important megatrends, such as the increasing energy demand in the next few years,” continues Diehl.
Atreus partner Smolak also believes in Siemens Energy: “Alternative, green energy is the central topic for almost all industries, and Siemens Energy has the basic technology to be at the forefront in this market.” Supervisory Board Chairman Joe Kaeser could play an important role in this play. “In the past, he has often succeeded in pushing through uncomfortable decisions against traditional stakeholders – such as with the split.”
The analysts are less optimistic about the other segments. “In the future, there will not be much to be made in the classic oil and gas industry,” says Speich from Deka. That is why Siemens Energy has to quickly reorganize its business model. “In addition to expanding the service business with stable margins, the electricity transmission business, electricity storage and the green hydrogen economy must be further developed.”
Fund manager Diehl believes that the management can succeed. The management is “very visible and accessible to investors”. Since the spin-off from the main group, greater transparency has been created in the figures. If the concentrated work is continued, investors would soon react too. “The stock is way too cheap for the potential it offers.”
If the group management now continues to save costs, optimize the portfolio and get the problems at Siemens Gamesa under control, the Dax group will have good future prospects. In the medium term, the topic of hydrogen will arouse even more growth fantasies.
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