Siemens Gamesa has announced decisive steps under the Mistral strategy program to accelerate the company’s turnaround after ending a challenging third quarter marked by ongoing difficulties in the wind energy industry as well as internal challenges mainly impacting the onshore pipeline.
The company reported revenue of €2,436 million (-10% year-over-year) in the three months up to June 30, 2022. EBIT pre PPA and before integration and restructuring costs stood at -€343 million, equivalent to an EBIT margin of -14.1%. Reported net income attributable to Siemens Gamesa equity holders amounted to -€446 million between April and June 2022.
In the first nine months of fiscal year 2022, revenue amounted to €6,442 million (-12% year-over-year) and EBIT pre PPA and before integration and restructuring costs to -€957 million, with an EBIT margin of -14.8%. Reported net income attributable to Siemens Gamesa shareholders in the first nine months of fiscal year 2022 amounted to -€1,226 million.
As of June 30, 2022, net debt totaled -€2,275 million. Siemens Gamesa has €4,450 million in committed funding lines, against which it has drawn €2,651 million, and total liquidity amounts to €3,036 million, including cash on the balance sheet at the end of the third quarter of fiscal year 2022 (€1,237 million).
Siemens Gamesa’s performance continued to be negatively affected by volatile market dynamics – inflation of energy, raw material and logistics costs, non-availability of key wind turbine components, port congestion, and supply delays. All these factors impacted manufacturing, project execution and delivery. There were also internal challenges, including a difficult ramp-up of the Siemens Gamesa 5.X onshore platform and higher costs driven mainly by failure of components and repairs in legacy onshore platforms.
Consequently, the company has adjusted its target for EBIT margin pre PPA and before integration and restructuring costs for fiscal year 2022 to -5.5% after previously announcing -4%. The company maintains its expectation that it will achieve revenue growth in line with the lower end of the previous range of -2% to -9%.
In an extremely challenging situation, the strong momentum in renewables boosted the company’s backlog to a record €33,980 million. Siemens Gamesa’s order intake from April to June amounted to €3,523 million: €2,094 million in Offshore (up 14.3-fold year-over-year), €1,068 million in new orders in Onshore (+27% year-over-year), and €361 million in Service (-32% year-over-year).
In response to this situation, Siemens Gamesa is taking decisive steps for long-term value creation under the recently launched Mistral strategy program, which aims to overhaul the current operating model, making the organization simpler and leaner. It will also improve organizational efficiency and effectiveness. The company will maintain a business-focused setup while strengthening the COO (Chief Operating Officer) and CTO (Chief Technology Officer) teams to accelerate harmonization and standardization across Siemens Gamesa. Businesses will focus on sales, projects and product roadmap, and keep full P&L responsibility.
Under the new structure, which will go into effect on January 1, 2023, Siemens Gamesa will create a single technology roadmap across the businesses, making cross-company platform solutions scalable and reducing non-conformance costs (NCCs) through harmonized processes and by focusing on key competencies across Siemens Gamesa. In the new operating model, the COO will be responsible for manufacturing across the entire Siemens Gamesa portfolio. In addition, all supply-chain- and production-related activities globally will be combined under the COO’s scope, enabling production standardization with the support of a qualified supplier network.
Additionally, there will be a single technology development team spanning Offshore, Onshore and Service, led by the newly created Chief Technology Officer (CTO) position, summarizing all product-development-related activities globally. Integrating the teams under a global function at the corporate level is a prerequisite to accelerating the harmonization and standardization of technologies across the company. The new CTO will be announced in due time.
The Mistral strategy program will be deployed in three phases, spanning short-term to long-term timelines, from 2022 to 2025 and beyond. The immediate goals are to achieve product maturity in the Siemens Gamesa 5.X onshore platform coupled with cost assurance. In the medium term, the team will achieve a lean structure in all target markets, while improving competitiveness and profitability, and growing the top line. By 2025, Siemens Gamesa aims to have streamlined its platform strategy and achieved a scalable, cross-application operating model for Offshore, Onshore and Service combined with a highly commoditized supply chain that is robust against market disruptions. Under the new operating model, Siemens Gamesa is preparing to reap significant cost synergies through the potential integration into Siemens Energy.
Details of the new operating model will be finalized by October 1, 2022.