Siemens Energy cuts profit outlook on wind turbine woes

By Christoph Steitz and Inti Landauro

FRANKFURT/MADRID (Reuters) -Siemens Energy has slashed its 2023 profit outlook after faulty components at the wind turbine fleet of its Siemens Gamesa business raised warranty and maintenance costs, marking the latest setback in their troubled relationship.

Problems have occurred in a broad mix of components, affecting a variety of platforms, Siemens Gamesa Chief Executive Jochen Eickholt told analysts on Friday.

Both onshore and offshore turbine components are affected, said Eickholt, who joined the Spanish-listed company from its parent last year after quality issues at its 5.X onshore platform caused a string of profit warnings.

The various issues resulted in a 472 million euro ($512 million) hit to Siemens Gamesa's first-quarter operating profit, with finance chief Beatriz Puente saying that the negative impact on cash flow would last up to eight years.

The company is confident, however, that it has the problems under control.

"Regarding those components and those phenomena we identified, my judgment is that, yes, this is it," Eickholt said, adding that he expects fewer problems to be found in future quality checks.

Siemens Energy, the supplier of equipment to the power sector that was spun off from Siemens AG in 2020, said late on Thursday that it expects a profit margin before special items of 1-3% in the year through September, down from a previous forecast of 2-4%.

HIGH PROVISIONS

Siemens Energy owns 92.7% of Siemens Gamesa and is aiming to take full ownership to get a better handle on operating issues that have become a drag on group performance.

Shares in Siemens Energy were little changed after recovering early losses that reached as high as 3.4%.

AlsterResearch analyst Oliver Wojahn said the provisions had been set at a high level that reduced the likelihood of future negative surprises.

Overall, Siemens Gamesa reported a 760 million euro first-quarter loss before interest and tax pre-purchase price allocation and before integration and restructuring costs.

As a result, Siemens Energy expects its net loss in 2023 to be on par with last year's 647 million euro loss, having previously expected its full-year loss to narrow sharply.

Eickholt, a Siemens veteran, has already announced far-reaching job cuts and pledged to turn around the world's biggest manufacturer of offshore wind turbines.

Siemens Gamesa is scheduled to hold an extraordinary general meeting on Jan. 25, when shareholders will vote on a planned delisting of its shares from the Spanish stock market as part of Siemens Energy's plan to integrate the struggling division.

Siemens Energy maintained its outlook for sales excluding currency translation and portfolio effects, still expecting them to grow by 3-7%. It also raised its forecast for pretax free cash flow, expecting it to turn positive, having previously expected a negative in triple-digit millions of euros.

($1 = 0.9216 euros)

(Reporting by Christoph Steitz and Inti LandauroEditing by Leslie Adler, Nick Zieminski and David Goodman)