Siemens Energy raises mid-term outlook as turnaround gathers pace
5:27 pm Tuesday, November 12th, 2024
By Christoph Steitz and Tom Käckenhoff
MUNICH/DUESSELDORF (Reuters) -Siemens Energy raised its midterm outlook on Tuesday as it reported a new record for its order book and a narrower fourth-quarter loss, boosted by rising demand for power equipment and an ongoing turnaround at its wind turbine unit.
Like key rival GE Vernova, the group is benefiting from a strong expansion of wind power, the need to upgrade dated energy grids, and a push to keep gas-fired power plants running until enough renewable capacity is available globally.
While those fundamentals have been fairly stable in recent years, quality issues at some of its wind turbines threw Siemens Energy into its biggest-ever crisis last year, causing it to rely on the state for vital project guarantees.
Since then, the company has sold assets, narrowed losses at its wind division Siemens Gamesa, and grown its order book substantially, causing shares to more than triple year-to-date and making it the best performer among German blue chips so far in 2024.
“In a pivotal fiscal year 2024, we achieved all our goals, driven by strong orders and project execution across all our businesses. Our focus remains on profitable growth, supported by highly favourable market conditions,” CEO Christian Bruch said.
Frankfurt-listed shares in Siemens Energy turned sharply higher following the news, which included a 123 billion-euro ($131 billion) order backlog, and were up 6.1% at 2110 GMT.
GAMESA OVERHAUL
Due to the favourable demand for wind turbines, transmission network equipment and gas turbines, the group upgraded its 2028 targets, forecasting a profit margin of 10% to 12%, up from at least 8% previously.
Siemens Gamesa is forecast to narrow its loss before special items to 1.3 billion euros in 2025, compared with a loss of 1.78 billion this year. The division’s fourth-quarter sales rose 19.7% as offshore wind capacity ramped up.
The business, which has been a burden on Siemens Energy’s finances for years, is aiming to break even in 2026, with hopes partly resting on the successful relaunch of onshore turbine models at the heart of the quality crisis.
For 2025, the group as a whole expects sales to grow 8% to 10%, compared with 10.8% in 2024 and higher than the 6.4% analysts expected in an LSEG poll. The group’s profit margin before special items is expected to improve to a range of 3% to 5%, up from 1% this year.
The improved outlook reflected Siemens Energy’s “leading role in the energy transition,” Bruch said, along with a 1.3 billion-euro net profit for 2024, the first annual profit the group has turned since it was spun off from former parent Siemens in 2020.
The group’s fourth-quarter loss before special items narrowed to 83 million euros, compared with 487 million in the year-ago period.
($1 = 0.9420 euros)
(Reporting by Christoph Steitz and Tom Kaeckenhoff; Editing by Tomasz Janowski, Leslie Adler, Jonathan Oatis and Richard Chang)
