Siemens Energy Shares Slump After Inflation Hits Wind-Power Unit
Wind Giant Siemens Gamesa Cuts Profit Outlook as Inflation Bites
(Bloomberg) -- Siemens Energy AG fell the most in six months in Frankfurt after slashing its outlook due to mounting losses at its wind-turbine business, which warned that the soaring cost of raw materials would squeeze margins in 2022.
The German engineering firm said its revenue could slip by as much as 2% this financial year after previously seeing at worst a 1% drop. It also trimmed its operating profit margin forecast to a range of 2% to 4%, from 3% to 5% previously.
The downgrade comes after its Siemens Gamesa Renewable Energy subsidiary reported a loss of 309 million euros ($350 million) for the first quarter of its 2022 fiscal year and warned that inflation will continue to weigh on margins.
Siemens Energy declined as much as 10% in Frankfurt, while Siemens Gamesa plunged as much as 16% in Madrid, its steepest intraday decline since July. Denmark’s Vestas Wind Systems A/S, one of Siemns Gamesa’s main rivals, slumped as much as 7.8% in Copenhagen.
Turbine makers are grappling with rising commodity costs and pandemic-related disruptions to supply chains. Surging prices for energy, steel and copper have squeezed profits for Siemens Gamesa and its rivals. That’s leading to difficult conversations with customers, who may not be able to cope with higher costs.
“We are increasing prices. The whole industry is increasing prices,” Siemens Gamesa Chief Executive Officer Andreas Nauen said during a call with analysts on Friday. “That brings business cases for customers to the limit or over the cliff.”
Project Delays
The renewable-energy firm also said it’s facing difficulties scaling up one of its new turbine models, known as the 5.X platform. Volatile markets have impacted investment decisions by some of its customers, resulting in project delays.
The issues at Madrid-based Siemens Gamesa already weighed on Siemens Energy’s results last year, frustrating the German firm’s management and fueling speculation the parent might try to buy out other investors to seize full operational control of the struggling unit.
“It would be nice to believe this is the ‘final’ writedown,” Berstein analysts led by Nicholas Green said in a note late Thursday. “Siemens Energy is trapped in a narrative it cannot control, and this makes it uninvestible.”
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