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Siemens Energy issues Q1 results and announces job cuts

By: Tom Russell 02/02/2021 Siemens Energy

Corporate General

Siemens Energy has announced its results for the first quarter of fiscal 2021, which ended 31st December 2020.

Orders were substantially down on reported and comparable bases. Order intake at Siemens Gamesa Renewable Energy (SGRE) was more than half below the prior-year quarter, due to a sharply lower volume from large orders. Gas and Power (GP) was a stable sector on the prior-year quarter’s level on a comparable basis.

Revenue was moderately up on a reported basis. SGRE achieved an increase, while GP posted a moderate decline. Excluding currency translation and portfolio effects, total revenue rose by 7.7%. Service revenue came in slightly below the prior-year quarter, due to a moderate decrease at GP.

Book-to-bill ratio was 1.14. The order backlog was impacted by currency translation effects but came in at €79bn, close to prior fiscal year-end.

Adjusted EBITA was positively impacted due to revenue growth and operational improvements, including lower costs year-over-year. Both segments showed an increased profit, with SGRE posting stronger improvements.

Special items increased compared to prior-year quarter mainly due to stand-alone costs (expenses associated with the set-up of the standalone company) and SGRE restructuring and integration costs.

Adjusted EBITA margin before special items of Siemens Energy increased by 6.8 percentage points.

Net income sharply improved and was back in a positive range. The corresponding basic EPS was €0.09.

Free cash flow pre-tax was negative. The improvements at GP were more than offset by a strong decrease at SGRE.

Christian Bruch, President and Chief Executive Officer of Siemens Energy AG, said "The first quarter proves that we are on the right path to reach our annual targets. The Siemens Energy team achieved a solid start into the new fiscal year even under difficult circumstances.”

SGRE's order intake sharply declined in comparison to Q1 FY 2020, due to very large orders in the prior year, which included, among others, large orders for offshore wind farms including service in Taiwan, the U.K. and the Netherlands. The compnay's revenue growth was driven by offshore and service businesses. On a comparable basis, revenue increased by 18.9%.

Siemens Energy noted that SGRE's adjusted EBITA was sharply higher compared to the prior-year quarter, which was impacted by substantial negative effects totalling approximately €150m related to project delays in Northern Europe. The recent quarter benefited from volume effects and the reversal of ordinary provisions associated with a lower rate of product failure and lower maintenance costs. Special items rose year-over-year due to increased restructuring and integration costs. Adjusted EBITA margin before special items climbed by 12.1 percentage points.

Siemens Energy stated that orders in the GP segment were moderately down compared to the prior-year quarter, only due to headwinds from currency translation. The order development was supported by a higher volume from large orders including an Industrial Applications project in Brazil and a Generation project in Libya totalling more than half a billion euro combined. All three businesses posted a reported order decrease with the strongest decline at Transmission given a high basis of comparison in the prior-year quarter. On a comparable basis, orders at GP increased by 0.3%.

GP revenue was moderately down year-over-year, as a slight increase at Generation could not offset decreases at the two other businesses. It was impacted by negative currency translation effects of 5.5 percentage points, leading to a revenue growth on a comparable basis of 2.6%.

Service revenue for GP was moderately down year-over-year, but increased slightly, excluding negative currency translation effects.

Adjusted EBITA sharply increased, benefitting from operational improvements which resulted in lower costs, but including positive temporary effects. Such effects result from hedging transactions and a lower discretionary spend as well as positive customer settlements. These impacts resulted in increases of adjusted EBITA across all three businesses.

The Executive Board of Siemens Energy has also announced plans to reduce costs by a minimum of €300 million in its Gas and Power segment. These measures include the reduction of approximately 7,800 jobs around the world in the Gas and Power segment – around three-quarters of which will be made in management, administration and sales. The proposed measures impact approximately 3,000 in Germany, 1,700 in the United States and 3,100 at other locations around the world.

The reductions are planned by the end of the 2025 financial year, with a large number to be implemented by the end of the 2023 financial year. In negotiations with the employee representatives in geographies under co-determination, the company aims at reaching an agreement on the proposed measures as soon as possible.

“The energy market is significantly changing which offers us opportunities but at the same time presents us with great challenges,” said Christian Bruch, Chief Executive Officer of Siemens Energy AG. “With this program we want to regain our competitiveness and financial strength to shape the energy world of tomorrow. We are fully aware that this is a challenging program for our employees. Hence, we will undertake these measures in the most socially responsible way possible.”

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Siemens Energy issues Q1 results and announces job cuts

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