Problems with Spanish subsidiary: Siemens Energy shares in free fall

Problems with Spanish daughter
Siemens Energy shares in free fall

The energy technology group has to cash in its full-year targets because of problems at the wind power subsidiary Siemens Gamesa. The disappointment weighs heavily, comments one stock trader. After all, Gamesa should be a growth driver. Investors penalize the share in double digits.

Again problems with the Spanish wind power subsidiary Siemens Gamesa thwart Siemens Energy’s profit plans. Because the wind turbine manufacturer has to reckon with operating red numbers in the current 2020/21 financial year (end of September), the parent company will not achieve its return target either. The operating return on sales before special items will probably be below the targeted range of three to five percent in 2020/21, admitted the energy technology group. As planned, sales should increase by three to eight percent; Siemens Energy had already made cuts in this area three months ago.

Siemens Energy 23.03

Siemens Gamesa is plagued by high raw material prices and difficulties in ramping up the new generation of onshore wind turbines, 5.X. In Brazil in particular, the corona pandemic is causing supply and execution problems, which are driving up costs. The subsidiary of Siemens Energy therefore had to lower the expectations for the return on sales before taxes and interest (EBIT) – already adjusted for special effects – to zero to minus one percent.

So far, Siemens Gamesa had assumed a positive EBIT margin of three to five percent. Siemens Gamesa is writing off 229 million euros on unprofitable projects such as in Brazil. In the previous year, the Siemens Energy subsidiary had also been in the red with a return of minus 2.5 percent.

Siemens Gamesa’s sales will be at the lower end of the forecast range of 10.2 to 10.5 billion euros in 2020/21. Siemens Gamesa had already revised its sales expectations downwards three months ago. In the third quarter, sales were 2.7 billion euros and the adjusted EBIT was minus 150 million euros. In view of these figures, Siemens Energy will not meet the analysts’ expectations in the third quarter, the German mother warned.

Price slump among wind turbine manufacturers

The news did not go down well with stockbrokers. The shares of Siemens Energy gave at times more than ten percent. That is the biggest daily loss since the IPO in autumn 2020.

Siemens Gamesa
Siemens Gamesa 22.68

Siemens Gamesa was the bearer of hope in the restructuring of the company, which so far has mainly earned its money with turbines for gas and coal-fired power plants. In May, the rising number of incoming orders and government infrastructure programs had given Siemens Energy a confident vote in favor of the renewable energies business. In the traditional business (gas and power) everything is going according to plan, announced Siemens Energy.

The disappointment about missing the profit forecast therefore weighs heavily, commented one stock trader. After all, Gamesa should be a growth driver. But “the classic gas-and-power sector is weakening, and renewables are not really getting off the ground,” said another dealer. The analysts of the Bank of America already lowered the Gamesa target price. In Spain the shares collapsed after a temporary suspension of trading by 16 percent. The industry stocks Vestas and Nordex also get caught up in the vortex and are dragged down by 7 percent.