Siemens Energy shares plunge as wind turbine problems deepen
Receive free Siemens Energy updates
We’ll send you one myFT Daily Digest e-mail rounded up Siemens energy news every morning.
Shares in Siemens Energy, one of the world̵[ads1]7;s biggest wind turbine makers, plunged 30 percent on Friday after the company warned it may have to spend more than €1 billion to fix a series of technical glitches.
As a result of the mounting challenges at its wind turbine business, Siemens Energy scrapped its profit outlook for the year, alarming investors who were assured by the company last month that the outlook for the unit would improve in the second half.
CEO Christian Bruch said that “although it should be clear to everyone, I want to emphasize again how bitter this is for all of us”.
The scale of the problems at Siemens Gamesa, the group’s wind turbine business, is a blow to an industry that has been plagued by rising costs and supply chain disruptions over the past 18 months.
Analysts at JPMorgan said the warning came at a time when “expectations were building that the worst for the wind industry is now behind us”, but added that technical issues were a concern for others as well.
In a statement late on Thursday, Frankfurt-listed Siemens Energy said it expected “significantly higher costs”, potentially in excess of 1 billion euros, following a review of the “failure rate of wind turbine components”.
It also highlighted challenges in increasing productivity at the unit and increasing offshore wind capacity.
Siemens Energy on May 15 had said the outlook for Siemens Gamesa was “volatile” with a weak first half, but it expected a stronger second half performance.
Jochen Eickholt, CEO of Siemens Gamesa, spoke to reporters on Friday, highlighting problems with rotor blades and bearings, and said the turnaround could take longer than expected. The company had reported problems with components in January.
“This is a disappointing, bitter setback,” Eickholt said. “The quality problems go far beyond what was known, especially in the land area.”
“The failure rate affects certain components just like [previously]but they are also different because they are new forms of error.”
He added: “We are dealing with the issue, but it is time-consuming and it costs something.”
The expected more than €1 billion costs are set to be staggered over “a number of years”.
It comes less than two weeks after Siemens Energy took full control of Siemens Gamesa to try to turn around the business following a series of profit warnings.
Bruch described the announcement as a “major setback” and said he still believed the new corporate structure would help resolve the issues. “I remain convinced that the energy transition can only be handled with the help of wind energy,” he added.
In its February quarterly results, Siemens Gamesa reported €1.6 billion in new orders, boosted by projects in Canada, India and Germany.
Siemens Energy, which was spun out of the German conglomerate Siemens, also makes turbines for, among other things, gas power plants and electricity stations.
It plans to provide further details at its next scheduled trading update. Siemens Energy is sticking to its overall revenue guidance.
Shares in Siemens Energy fell 30 percent to €16.16 on Friday.
