Siemens Gamesa struck by supply chain struggles

4C Offshore | Tom Russell
By: 21/01/2022 SGRE
Siemens Gamesa Renewable Energy (SGRE) has published it preliminary results for the first quarter of 2022 (Q1 2022) and updated its guidance for the financial year of 2022.

SGRE's preliminary earnings for Q1 2022 saw revenue of €1.8 billion. EBIT pre PPA and I&R costs were down by €309 million. It also reported a net financial debt of -€1.1 billion with available facilities of €3.2 billion (out of which, €2.0 billion maturing in financial year 2027).

Order intake of €2.5 billion including the Offshore contract for the Gode Wind farm in Germany. Total order backlog amounted to €33.6 billion at the end of the quarter.

SGRE stated that in Q1 2022 performance was negatively impacted by supply chain related disruptions, which are now expected to last longer than previously anticipated, further affected by the continued impact of the COVID-19 pandemic. SGRE outlined that these supply chain tensions have resulted in higher than expected cost inflation, mainly affecting its Wind Turbine (WTG) segment. Also, volatile market conditions have impacted some of its customers’ investment decisions and, as a consequence, resulted in delays to some of our projects.

SGRE also revealed that it is facing ramp-up challenges for its Siemens Gamesa 5.X platform, including some necessary design changes, which have affected its production and project execution schedule. The negative impact of these delays and changes in production plans has been exacerbated by the existing bottlenecks in the supply chain.

The consideration of these higher costs and the update of the assumptions for market and production conditions in the evaluation of the total WTG Onshore order backlog, has led to a negative EBIT impact in the amount of €289 million in Q1 2022, mainly due to cost estimate deviations in onerous contracts.

Despite this, SGRE WTG Offshore contribution remained positive, and Service delivered more than 20% profitability (EBIT pre PPA and I&R costs) in the quarter, despite supply chain disruptions, and its negative impact on its operations.

Based on the first quarter performance and the outlook for the remainder of the year, SGRE is adjusting its guidance for financial year 2022. Group comparable revenue growth in financial year 2022 versus financial year 2021 is expected to range between -9% and -2% (previously revenue decline between -7% and - 2%).

Group EBIT margin pre PPA and I&R costs is expected to range between -4.0% and +1.0% (previously between +1% and +4%). Despite the complex near-term environment, SGRE maintains its long-term vision for the business aiming for an EBIT margin pre PPA and I&R costs of +8% to +10%.