Siemens Gamesa's Turnaround Plan Underwhelms, Shares Fall

Christoph Steitz and Tom Käckenhoff
Wednesday, November 22, 2023

Struggling wind turbine maker Siemens Gamesa said on Tuesday it would cut costs and capacity on its long path towards profit, sending shares in parent Siemens Energy sharply lower as investors had hoped for more radical steps.

The move, announced at Siemens Energy's capital markets day, caps weeks of turmoil for the German energy equipment maker, including a landmark agreement last week for 15 billion euros ($16.4 billion) in guarantees it needed to secure its 112 billion order book.

Shares in Siemens Energy have recovered strongly since then but fell as much as 11.7% on Tuesday after focus shifted again to Siemens Gamesa, the world's largest maker of offshore wind turbines, where quality issues and ramp-up problems caused a 4.6 billion euro annual net loss.

One Frankfurt-based trader said the investor event, where Siemens Gamesa disclosed around 400 million euros in cost cuts by 2026, was bringing "no new insights".

At 1610 GMT, shares in Siemens Energy, in which Siemens AG SIEGn.DE owns a direct 25.1% stake, were still down 6.3%.

"The turnaround of Siemens Gamesa remains our highest priority and we now have a defined path and action plan to reach break-even for the wind business in fiscal year 2026 and to return to profitability thereafter," Siemens Energy CEO Christian Bruch said.

"We will be very strict with capital allocation."

Siemens Gamesa will likely cut onshore turbine capacity outside Europe and outsource the production of some components, the division's Chief Executive Jochen Eickholt said, outlining the group's restructuring roadmap.

Reuters last month reported that Siemens Gamesa was considering shutting plants and sales offices as well as outsourcing some production.

Measures will include a review of its onshore product offering as well as the markets it is catering to, streamlining its service organisation as well as looking into supply chain partnerships, the company said.

Siemens Gamesa will also reduce the number of turbine variants it sells and pause any wind product initiatives in what it says are "adjacent fields", singling out hydrogen.

At the root of the problem are quality issues at Siemens Gamesa's two newest onshore turbine models, 4.X and 5.X, which it currently is taking no orders for from clients.

Eickholt said he hoped that would soon change, confirming Siemens Gamesa was still carrying out onshore repowering projects where it is upgrading older turbine models.

($1 = 0.9168 euros)

Siemens Energy share price

(Reuters - Reporting by Christoph Steitz and Tom Kaeckenhoff; Additional reporting by Danilo Masoni; Editing by Madeline Chambers, Miranda Murray and David Evans)

Categories: Energy Renewable Energy Industry News Activity Renewables

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