Siemens Gamesa Sinks Further Into Red, Takes Action to Stabilize Business – Offshore WIND

Wind turbine manufacturer Siemens Gamesa has reported a loss of EUR 343 million pre PPA and before integration and restructuring costs recorded in the third quarter of the Fiscal Year 2022.

The company reported revenue of EUR 2.436 billion in the three months up to 30 June, a ten per cent decrease year-on-year.

The reported net income attributable to Siemens Gamesa equity holders amounted to EUR 446 million between April and June 2022.

In the first nine months of fiscal year 2022, the companys revenue amounted to EUR 6.442 billion, a 12 per cent decrease year-over-year. The loss pre PPA and before integration and restructuring costs for the period stood at EUR 957 million, with an EBIT margin of -14.8 per cent.

The reported net income attributable to Siemens Gamesa shareholders in the first nine months of fiscal year 2022 amounted to -EUR 1.226 billion.

The turbine manufacturer said that its performance continued to be negatively affected by volatile market dynamics such as the inflation of energy, raw material and logistics costs, non-availability of key wind turbine components, port congestion, and supply delays.

All these factors impacted manufacturing, project execution, and delivery, the company said.

There were also internal challenges, including a difficult ramp-up of the Siemens Gamesa 5.X onshore platform and higher costs driven mainly by failure of components and repairs in legacy onshore platforms.

Consequently, the company has adjusted its target for EBIT margin pre-PPA and before integration and restructuring costs for FY 2022 to -5.5 per cent after previously announcing -4 per cent.

The company maintains its expectation that it will achieve revenue growth in line with the lower end of the previous range of -2 per cent to -9 per cent.

Record Backlog, Strong Offshore Order Intake

In an extremely challenging situation, the strong momentum in renewables boosted the companys backlog to a record EUR 33.98 billion, Siemens Gamesa said.

Siemens Gamesas order intake from April to June amounted to EUR 3.523 billion, EUR 2.094 billion of which was in Offshore, a 14.3-fold increase year-over-year. Order intake during this quarter was 2.3 times the figure registered in the third quarter of fiscal year 2021.

Mistral Strategy Program

In response to this situation, Siemens Gamesa said it is taking decisive steps for long-term value creation under the recently launched Mistral strategy program, which aims to overhaul the current operating model, making the organization simpler and leaner. The strategy is also expected to improve organizational efficiency and effectiveness.

The company will maintain a business-focused setup while strengthening the Chief Operating Officer (COO) and Chief Technology Officer (CTO) teams to accelerate harmonization and standardization across Siemens Gamesa. Businesses will focus on sales, projects and product roadmap, and keep full P&L responsibility.

Details of the new operating model will be finalized by 1 October, Siemens Gamesa said.

Under the new structure, which will go into effect on 1 January 2023, Siemens Gamesa will create a single technology roadmap across the businesses, making cross-company platform solutions scalable and reducing non-conformance costs (NCCs) through harmonized processes and by focusing on key competencies across Siemens Gamesa.

Now is the time to take decisive action and sustainably shape our future. Under our new operating model, we will be able to support our customers faster and with greater expertise, said Siemens Gamesa CEO Jochen Eickholt.

By setting up simpler processes, we will empower our people, teams and organizations to take responsibility and enable faster learning cycles. As for investors, Eickholt emphasized that, The new setup will accelerate our companys turnaround. It will provide a very clear picture of business activities and greater transparency overall regarding the trajectory that Siemens Gamesa will take as a global leader in the green energy transition.

In the new operating model, the COO will be responsible for manufacturing across the entire Siemens Gamesa portfolio. In addition, all supply-chain- and production-related activities globally will be combined under the COOs scope, enabling production standardization with the support of a qualified supplier network. The new setup is expected to unlock significant value and enable a transition to mid- to long-term procurement contracts of direct materials. Overall, the strategy is expected to ensure competitive high-quality products across businesses and provide greater transparency for the capital market.

Additionally, there will be a single technology development team spanning Offshore, Onshore, and Service, led by the newly created CTO position, summarizing all product-development-related activities globally. Integrating the teams under a global function at the corporate level is a prerequisite to accelerating the harmonization and standardization of technologies across the company, providing overall stability to the development process and product quality, Siemens Gamesa said. The new CTO will be announced in due time.

Three-Phased Approach

The Mistral strategy program will be deployed in three phases, spanning short-term to long-term timelines, from 2022 to 2025 and beyond.

The immediate goals are to achieve product maturity in the Siemens Gamesa 5.X onshore platform coupled with cost assurance.

In the medium term, the team will achieve a lean structure in all target markets, while improving competitiveness and profitability, and growing the top line.

By 2025, Siemens Gamesa aims to have streamlined its platform strategy and achieved a scalable, cross-application operating model for Offshore, Onshore, and Service combined with a highly commoditized supply chain that is robust against market disruptions.

Under the new operating model, Siemens Gamesa is preparing to reap significant cost synergies through the potential integration into Siemens Energy, the company said.

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Siemens Gamesa Sinks Further Into Red, Takes Action to Stabilize Business - Offshore WIND