Siemens Energy sees break-even at stricken Gamesa in 2026 as turbine quality probe nears end

Losses have ballooned at Siemens Energy in its full fiscal year of 2023, as expected, but the energy technology giant now said it sees a break-even at its troubled wind turbine unit Siemens Gamesa in the fiscal year 2026 and claims the technical analysis on quality issues at the 4 and 5MW platform is almost complete.

“The results so far confirm what was communicated in August 2023,” the company said, adding that no further provisions have been made since the third quarter announcement.

“We are seeing progress in dealing with the issues at Siemens Gamesa, and I am encouraged that the data from the installed onshore turbines confirm our previous findings,” Siemens Energy CEO Christian Bruch said today (Wednesday).

“Our strong balance sheet remains a top priority, and Siemens Energy's vital role in the energy transition will continue to drive our growth and success in the years ahead."

Siemens Energy reported a net loss of €4.59bn ($4.99bn) for its fiscal year 2023 which ended in September, compared to a net profit of €712m a year earlier.

The company released its results a day after Germany’s economics and climate ministry announced a massive state aid deal in the form of guarantees to support the execution of Siemens Energy’s €112bn order backlog.

Another €1bn will be provided by an additional consortium led by Deutsche Bank, while the energy tech firm’s former parent Siemens AG will cover part of the theoretical default risk of the guarantees by providing access to a first loss amount of up to €1bn which is covered by a share collateral and payment deferrals. The German industrial conglomerate will also buy 18% of Siemens Ltd. India from Siemens Energy for €2.1bn in cash.

Scope of Siemens Gamesa activities being reviewed

Siemens Energy said remedial actions have been defined and mitigation and corrective actions are under development at Siemens Gamesa's troubled onshore unit.

The OEM has still suspended the commercial activities on its 5.X turbine platform and is defining a timeline and approach to set out how and when to resume sales with a design incorporating the respective corrective measures, the company said.

In the offshore wind sector, Siemens Gamesa is focusing on ramping up its factories and new product generation as well as executing its order backlog.

The sluggish ramp-up in offshore has also contributed to the dire results at the turbine manufacturing unit, which saw revenues decline by 5.1% in fiscal 2023 to €9.81bn.

Siemens Gamesa alone posted a loss before special items of €4.35bn in the full-year period, compared to a loss before special items of €617m in fiscal 2022.

To help achieve the turnaround, and return Siemens Gamesa to profitability, the scope of Siemens Gamesa’s activities is currently being reviewed, which should lead to a reduction in turbine variants and a focus on core markets, Siemens Energy said.

"In onshore, we will focus on key markets and serve those with a much smaller number of turbine variants, and offshore we will focus on our flagship, the SG 14-236 (model)," CEO Bruch said at a call with analysts.

The company added more details will be revealed on its capital market day on November 21.

Siemens Energy stressed that its business areas Gas Services, Grid Technologies and Transformation of Industry exceeded their fiscal 2023 revenue forecasts and achieved profit margins before special items in line with or above guidance.

For its fiscal year 2024, Siemens Energy expects revenue growth of 3 to 7% for the group, and a profit margin before special items of negative 2% to positive 1%, compared to a negative profit margin of 8.9%. The company expects to reach a return to a net profit of up to €1bn in fiscal 2024. The outlook figure includes impacts from disposals and the acceleration of portfolio transformation,

For Siemens Gamesa alone, the company however still assumes a loss before special items of around €2bn.