Siemens Energy cuts profit outlook as Siemens Gamesa woes continue

(Reuters) – Siemens Energy on Thursday slashed its 2023 profit outlook after faulty components at the wind turbine fleet of its Siemens Gamesa unit led to higher warranty and maintenance costs, marking the latest setback in the group’s troubled relationship.

The German supplier of equipment to the power sector, which was spun off from Siemens AG (SIEGn.DE) in 2020, now expects a profit margin before special items of 1%-3% in the year through September, down from the 2%-4% previously forecast.

Siemens Energy <ENR1n.DE> owns 92.7% of Siemens Gamesa <SGREN.MC> and is currently aiming to buy the rest of the division to get a better handle on operating issues that have caused a string of profit warnings and become a drag on performance.

Siemens Energy shares were down 4.8% in late Frankfurt trade.

Siemens Gamesa earlier reported a 760 million euro ($823 million) loss before interest and tax pre-purchase price allocation and before integration and restructuring costs for the first quarter, including a 472 million euro charge.

“These charges were triggered by an evaluation of the failure rate of the installed fleet, during which Siemens Gamesa detected a negative development of failure rates in specific components resulting in higher warranty and service maintenance costs than previously estimated,” Siemens Energy said.

As a result, Siemens Energy expects a net loss in 2023 on the prior year-level, which stood at 647 million euros, having previously expected it to narrow sharply.

Siemens Gamesa Chief Executive Jochen Eickholt, who joined the Spanish-listed firm from Siemens Energy last year, has already announced far-reaching job cuts and pledged to turn around the loss-making firm, the world’s top maker of offshore wind turbines.

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

Siemens Energy kept its outlook for sales excluding currency translation and portfolio effects, still expecting them to grow by 3%-7%. It also raised its forecast for free cash flow pre tax, now expecting it to be positive.

It was previously expected to be negative in a low- to mid-triple-digit million euro range.

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