Siemens Energy has released its third-quarter earnings and has reported a 37% decrease in Q3 orders, as well as a lowered target range for its key profit margin.
The blame for the lack of performance is being laid on the wind turbine unit, Siemens Gamesa Renewable Energy (SGRE), of which Siemens Energy owns 67%.
At SGRE orders dropped by 36.8% to €5.9 billion against a strong order intake in Q3 FY 2020. The order backlog at quarter-end amounted to €82.6 billion.
Siemens Energy has pulled its margin outlook as a result, and now expects an adjusted margin on earnings before interest, tax and amortisation in a range of 2% to below 3% before special items.
According to Siemens Energy Chief Executive Christian Bruch, the gas and power segment was fully on track and demonstrated strong order development. However, it’s the financial performance at SGRE’s onshore business in the recent quarter that is disappointing.
Christian Bruch, said: “Our activities at Gas and Power are fully on track and the segment delivered as planned. At the same time, we are not satisfied with the performance of SGRE which suffered a significant setback in the turnaround
of the onshore business. This does not change the attractive market fundamentals for Siemens Energy, however, due to the headwinds at SGRE we do not expect to reach the low end of the group margin guidance for the full year.”
Madrid-listed SGRE suggests the decreased performance is due to the impact on backlog profitability of rising commodity prices and the higher-than-expected ramp-up costs for the 5.X platform. Furthermore, the impact was exacerbated by the pandemic, especially in Brazil, and “resulted in a provision for onerous contracts related to projects to be executed in FY22 and FY23,” stated the SGRE release.
Andreas Nauen, Siemens Gamesa’s Chief Executive Officer, said: “We are operating in what is currently a very difficult environment and have taken additional steps to balance our risk profile as we focus on delivering long-term sustainable profitability.
“Despite current challenges, the company is soundly placed to take advantage of the huge potential of wind energy, which is reflected in our strong order backlog. Our industry has bright prospects ahead, supported by a growing political and public commitment to fighting climate change by moving to a zero carbon emission future.”
Siemens Energy Earnings Release Q3 FY 2021 can be viewed online.