Siemens Energy shares, the world’s biggest wind turbine manufacturer, fell 30 percent on Friday, after the company said it could have to spend over €1bn to fix a variety of technical problems.
Siemens Energy has canceled its profit forecast for the year due to the increasing challenges in its wind turbine unit. This alarms investors who had been reassured last month by the company that the outlook would improve for the unit in the second half.
Christian Bruch, the chief executive of the company, said: “Even though it should have been obvious to all, I want to emphasize again how bitterly this is for us all.”
The problems that have been affecting Siemens Gamesa – the group’s wind power business – are a major blow to an industry which has seen its costs rise and its supply chain disrupted over the last 18 months.
JPMorgan analysts said that the warning was issued at a moment when “expectations are building that the worst is behind us for the wind sector”, but they added that other companies were also experiencing technical issues.
Siemens Energy, a Frankfurt-listed company, said in a late Thursday statement that it expected “significantly higher costs”, possibly above €1bn. This was after a review of “failure rate of wind turbine component”.
The report also highlighted challenges to boosting the productivity of the unit as well as increasing offshore wind capacity.
Siemens Energy said on May 15, that the outlook for Siemens Gamesa is “volatile”, with a weak performance in the first half. However, it expects a better performance in the second.
Jochen Eickholt – the chief executive officer of Siemens Gamesa – spoke to reporters Friday and highlighted problems with rotors blades and bearings. He also said that it could take longer than expected for the problem to be resolved. The company flagged component problems in January.
Eickholt stated, “This is a bitter disappointment.” “The quality issues go beyond what was known, especially in the onshore region.”
The failure rates are similar to [previously], yet they are different, because there are new types of failures.
He said: “We’re tackling this topic, but it takes time and costs money.”
The cost of the expected over €1bn will be spread out “over a number of years”.
This comes less than two week after Siemens Energy assumed full control of Siemens Gamesa in an attempt to turn around the business, following a series of profit warnings.
Bruch described the announcement as “a huge setback” but said that he believed the new corporate structure could help solve problems. He added, “I’m still convinced that the energy transition will only be possible with wind energy.”
Siemens Gamesa’s quarterly results for February showed new orders of €1.6bn, driven by projects in Canada and Germany.
Siemens Energy is a spin-off of the German conglomerate Siemens. It also produces turbines for power plants that burn gas and electricity substations.
The company will provide more details in its next scheduled trading report. Siemens Energy has not changed its revenue forecast.
Siemens Energy shares fell 30 percent to €16.16 last Friday.
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