Siemens Energy AG expects a significant net loss this year after discovering mounting quality issues at its Siemens Gamesa unit, dealing a blow to turnaround efforts of the Spanish wind-turbine manufacturer.
(Bloomberg) — Siemens Energy AG expects a significant net loss this year after discovering mounting quality issues at its Siemens Gamesa unit, dealing a blow to turnaround efforts of the Spanish wind-turbine manufacturer.
The German company now sees a fiscal 2023 net loss — the fourth annual in a row — around last year’s level of €647 million ($701 million). Earlier, Gamesa reported an operating loss on flawed components that may drive up future costs.
Siemens Energy recently boosted its stake in Gamesa to 93%, with a plan to fix the business, move to full ownership and de-list the manufacturer. Gamesa is facing daunting hurdles from homegrown problems and an onshore wind industry in crisis due to crippling supply-chain issues, raw material cost increases and regulatory pressures.
“We see an improvement in the situation in the operating areas,” a spokesperson for Siemens Energy said. “However, the legacy contracts in particular require the full attention of management in the still difficult conditions on the procurement market.”
Earlier Thursday, Gamesa said it recorded a preliminary loss of around €760 million before interest and taxes in the first quarter. The turbine maker took a €472 million hit after an evaluation of its installed fleet found deficiencies that resulted in expected higher warranty and service maintenance costs.
Siemens Energy declined as much as 3.4% in Frankfurt. The stock is up around 5% since the start of the year.
Operating Improvements
The issues at Gamesa “more than offset” improvements at Siemens Energy’s gas service, grid technology and industry transformation businesses, the German company said in a filing. The company earlier this month secured a €4 billion contract to help link offshore wind farms in the North Sea to Germany’s mainland power grid.
Siemens Energy now expects its margin before special items for the fiscal year ending Sept. 30 to come in at 1% to 3%. That’s down from a prior range of 2% to 4%.
Problems at the wind business have weighed on Siemens Energy before. Early last year, Siemens Gamesa replaced its chief executive officer after a run of profit warnings, and mounting issues in the unit led Siemens Energy to lower its outlook in August.
–With assistance from Vanessa Dezem.
(Updates with shares in sixth paragraph.)
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