Siemens Energy has downgraded its financial projections for 2021 due to a drop in onshore wind orders in the recent quarter and significantly lower profit expectations for the fiscal year in its renewable energy business.
President and chief executive of Siemens Energy Christian Bruch said: “Our activities at gas and power are fully on track and the segment delivered as planned.
“At the same time, we are not satisfied with the performance of Siemens Gamesa Renewable Energy (SGRE) which suffered a significant setback in the turnaround of the onshore business.
“This does not change the attractive market fundamentals for Siemens Energy, however due to the headwinds at SGRE we do not expect to reach the low end of the group margin guidance for the full year.”
Its directors are now assuming adjusted EBITA margin before special items for Siemens Energy in fiscal year 2021 not to reach the low end of the original guidance of 3% to 5%.
The turbine manufacturer now expects achieve a margin in the range of 2% to below 3%.
For SGRE, it now expects nominal revenue growth at the low end of the range of 8% to 11%.
Adjusted EBITA margin before special items is now expected to be in a range of negative 1% to 0% (previously 3% to 5%) in fiscal year 2021.
Adjusted EBITA was affected by provisions for onerous contracts of €229m due to the impact of raw material price increases and higher than expected ramp-up costs for the SGRE 5.X platform.
Both factors have been exacerbated by the COVID-19 pandemic, especially regarding projects in Brazil for delivery in FY 2022 and FY 2023.
Q3 FY 2020 was negatively affected by project delays and the slow-down of the Indian market as well as charges with regard to a restructuring plan for India (reported as special items).
Orders sharply declined in comparison to an especially strong prior year quarter due to a sharply reduced volume from large orders and reflects expected volatility in the offshore market.
Q3 FY 2020 included very large orders, which comprised among others, large orders for offshore wind farms including service in the Netherlands and France.
The significant revenue increase was supported by growth of the onshore and service businesses.
Book-to-bill ratio of SGRE came in at 0.56, leading to an order backlog of €32.6bn.
The board still expects the nominal revenue growth rate to be in the range of 3% to 8% and a sharp increase in net income and a sharp decrease of free cash flow pre tax.