Siemens Energy with a loss: why the share price is still rising

by Stephan Bauer, Euro on Sunday

WWhen bad news is out, the stock market sometimes reacts more graciously. This is also the case according to the figures from Siemens Energy (SE): The share rose, while the Berliners just presented big losses in the first quarter of the financial year at the end of September. A few days earlier, however, the DAX member had already shocked with another profit warning. CEO Christian Bruch now reported a loss of 240 million euros after taxes to the shareholders, compared to a profit of 99 million euros in the previous year. Sales shrank by around eleven percent to six billion euros. After all, incoming orders climbed by ten percent to 8.3 billion.

The fall into the red is due to the earnings disaster at the wind power subsidiary Siemens Gamesa Renewable Energy, in which Siemens Energy holds 67 percent of the shares. The Spaniards, the world’s number 1 in offshore wind power, are having persistent difficulties with a new onshore turbine, i.e. for use on land. “We need a lot of expensive steel in the wind sector, and the logistics costs are also very high because of the global bottlenecks,” explained Bruch. In addition, however, there are also home-made problems, for example in technical development and project management by Gamesa. The result: The operating profit (EBITA) of the Spaniards deteriorated by 430 million euros to over 300 million euros in the quarter. Gamesa’s sales collapsed by around 20 percent to 1.8 billion euros due to delivery problems, with a net loss of 400 million euros.

“Cost inflation and internal issues have a roughly equal impact,” explained Bruch. Jochen Eickoldt should now fix the home-made issues. Before that, the manager mainly took care of the second major SE division, Gas & Power. Fireman Eickoldt should now avoid further profit warnings. Gamesa produced three of them in a year and a half under its predecessor Andreas Nauen.

On Bruch’s credit side is the development of the Gas & Power (GP) division, whose main business is gas turbines and fossil power plants and the associated service. In addition, GP also offers energy transmission technology and, with the New Energy division, hydrogen technologies. The operating result also fell slightly here due to cost inflation. However, incoming orders increased by twelve percent in the quarter. At almost 54 billion euros, the order backlog reached a record level, which accounts for the bulk of the total of 87.1 billion orders from SE. “The demand for gas turbines and distribution network technology is increasing,” reported the boss.

limit losses

Nevertheless, SE can only contain the loss in the financial year, according to CFO Maria Ferraro, net profits are not possible. When it comes to sales, everything is possible from a two percent minus to three percent compared to the previous year. SE had lowered the operating margin target to two to four percent. The profitability of 6.5 to 8.5 percent envisaged for 2023 is under scrutiny. The development at Gamesa will be crucial. Bruch: “We are working on better predictability. But the environment remains difficult.”

Penalized: The stock is trading near its all-time low. The repair work at Gamesa could continue. Wait.

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Image sources: Siemens Energy AG