Siemens Energy CEO Acknowledges $2.4 Billion Wind Turbine Setback Due to Rapid Product Expansion
CEO Christian Bruch stated on Monday that the company must delay the launch of new products after incurring 2.2 billion euros ($2.4 billion) in costs due to wind turbine quality issues.
Siemens Energy cancelled its profit forecast in June and warned that costly failures at its wind turbine subsidiary Siemens Gamesa could stretch on for years, causing a precipitous decline in the company’s stock price.
The Siemens Gamesa board is presently conducting a review of the quality issues, which some industry analysts have speculated may be pervasive.
Monday on CNBC’s “Squawk Box Europe,” Bruch stated, ““The quality problems really result from the past, but I think we have too fast rolled out platforms into the market.”
“That is not a cost issue per se, that is really a quality issue in terms of going too fast with new products into the market. The other thing is obviously now stabilizing the business in terms of ramping up new factories.”
Despite falling well short of the worst-case scenario, Siemens Energy said the 2.2 billion euro loss will increase its net loss for the year to approximately 4.5 billion euros, which is markedly worse than anticipated.
When markets opened in Frankfurt, shares of the company fell approximately 5%, but quickly recovered to trade 2.6% higher.
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Siemens Energy Thrives with Impressive Growth in Orders, Revenue, and Record Backlog
On a positive note, Siemens Energy, which was spun off from the former gas and power division of German conglomerate Siemens, reported Monday significant growth in orders and revenue, as well as a record order backlog of 109 billion euros.
Siemens Energy stated that a “favorable market environment” resulted in orders of 14.9 billion euros for the quarter, representing a 54.2% year-over-year increase. Large orders at Siemens Gamesa and Grid Technologies were primarily responsible for this growth.
On a comparable basis, revenues increased by 8% to 7.5 billion euros, but the company recorded a net loss of 2.93 billion euros for the third quarter, compared to a net loss of 564 million euros for the same quarter in 2022.
Siemens Energy plans to shift its focus to fewer product platforms and target specific regions for development, according to Bruch, who added that the company’s November capital markets day will feature a comprehensive strategy.
Deutsche Bank reaffirmed its “hold” rating on Siemens Energy stock on Monday, citing the company’s robust commercial dynamics.
Siemens Energy reported a negative free cash flow of 55 million euros for the fiscal third quarter, which included a lower-than-anticipated pre-tax discharge at Gamesa of 393 million euros.
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Source: CNBC
