Siemens Energy – Earnings Release Q1 FY 2023

Munich, Germany, February 7, 2023 – Siemens Energy today announced its results for the first quarter of fiscal year 2023 that ended December 31, 2022.

 

Strong underlying performance notwithstanding charges at SGRE – outlook for fiscal
year 2023 adjusted

“Our order growth demonstrates that we have the right portfolio to capitalize on the energy transition. Notwithstanding the charges at Siemens Gamesa, Jochen Eickholt and his team are making progress in improving the sustainability of the company. The intended delisting of Siemens Gamesa will further support the team to focus on solving the operational problems and the turnaround”, says Christian Bruch, President and CEO of Siemens Energy AG.

 

• Despite the subdued overall economic development, Siemens Energy’s market environment remained favorable. During the quarter, Grid Technologies (GT) was awarded the largest offshore grid connection order in Siemens Energy’s history. The platforms will connect several offshore wind farms in the (German) North Sea to the onshore grid.
• Siemens Energy delivered strong order and revenue growth and better than expected cash flow. A strongly improved operational performance at Gas Services (GS), GT, and Transformation of Industry (TI) was more than offset by charges of €0.5bn at Siemens Gamesa Renewable Energy (SGRE). During an evaluation of the installed fleet, SGRE detected a negative development of failure rates in specific components resulting in higher warranty and service maintenance cost assumptions.
• Orders continued to be very strong. Comparable growth (excluding currency translation and portfolio effects) was 49.2% despite a high basis of comparison, resulting in orders of €12.7bn, supported by large orders especially at GT. The Book-to-bill ratio (ratio of orders to revenue) was 1.80 and the order backlog rose to €98.8bn despite material negative currency translation effects.
• Revenue came in at €7.1bn reflecting a 16.0% increase on a comparable basis. All segments contributed to this growth.
• Siemens Energy’s Profit before Special items was negative €282m (Q1 FY 2022: negative €69m) due to the charges at SGRE. GS and GT reported sharp improvements year-over-year and TI delivered a positive result. Special items were negative with €103m (Q1 FY 2022: positive €6m) mainly driven by restructuring costs at SGRE. As a result, Profit for Siemens Energy was negative €384m (Q1 FY 2022: negative €64m).
• Accordingly, Siemens Energy reported a Net loss of €598m (Q1 FY 2022: Net loss €246m). Corresponding basic earnings per share (EPS) were negative €0.60 (Q1 FY 2022: negative €0.18).
• Free cash flow pre tax was negative with €58m (Q1 FY 2022: negative €69m), mainly driven by cash outflows at SGRE. Overall, the development was better than expected, supported by advance payments from customers in relation to the strong order development.
• Due to the aforementioned charges at SGRE, Siemens Energy had to adjust its outlook for fiscal year 2023. Management now expects Siemens Energy Group’s Profit margin before Special items between 1% and 3% and Net loss of Siemens Energy Group to be on prior fiscal year’s reported level. Due to the better than expected cash flow development during the quarter, management now expects Free cash flow pre tax for fiscal year 2023 to be positive.

 

Beginning with fiscal year 2023, Siemens Energy changed its reporting structure: The former Gas and Power segment was replaced by the segments GS, GT and TI (voluntarily reported as segment). Central items previously reported under Gas and Power are now presented in Reconciliation to Consolidated Financial Statements. Also starting with fiscal year 2023, Adjusted EBITA was replaced by Profit which definition now excludes the financial result from operations. For more information see Siemens Energy’s Annual Report 2022. Prior-year figures are presented on a comparable basis. In addition, prior-year figures have been adjusted due to a change in accounting policies regarding derivative financial instruments.

 

Siemens Energy

• Continued strong order development with sharp growth year-over-year primarily driven by the large GT grid connection order in Germany and strong demand in the USA. Overall, volume from large orders sharply increased compared to prior-year’s quarter.
• Book-to-bill ratio came in at 1.80. Order backlog rose to a new record of €98.8bn (September 30, 2022: €97.4bn) despite material negative currency translation effects.
• Year-over-year increase in revenue driven by growth in all segments.
• Strong service revenue was in line with overall revenue growth.
• Profit before Special items sharply decreased due to the loss at SGRE. Strong progress in other three segments was driven by higher revenue and operational improvements.
• Negative impact from Special items mainly due to increased restructuring costs at SGRE. Prior-year quarter included a positive effect related to strategic portfolio decisions.
• Free cash flow pre tax overall above expectations and nearly on prior-year quarter’s level. The development benefited from advance payments from customers which sharply exceeded the already high basis of comparison of prior-year quarter.

 

Gas Services

• Substantial order growth driven by large orders in the reporting region Americas, especially from the USA and Brazil, accompanied by continued strong development of service business.
• Book-to-bill ratio was 1.47. Order backlog of €41.0bn was below past fiscal year-end (€42.3bn) due to negative currency translation effects.
• Revenue also grew substantially mainly in the service business.
• Sharp increase of Profit before Special items and corresponding margin driven by higher revenue, an improved cost structure, as well as a higher service contribution.
• Special items in prior-year quarter included a positive one-time effect related to aeroderivative gas turbines previously written-off.

 

Grid Technologies

• Outstanding order development driven by a large grid connection order in Germany, further supported by strong markets for GT’s product business as well as strong demand in the USA.
• GT reported a Book-to-bill ratio of 3.96 with order backlog rising to €18.7bn (September 30, 2022: €14.7bn) despite negative currency translation effects.
• Revenue grew significantly mainly based on increases in the product and solution businesses supported by strong order intake of prior fiscal year.
• Profit before Special items and corresponding margin sharply increased mainly resulting from higher revenue, while prior-year quarter was burdened by impacts related to higher material and logistic costs.

 

Transformation of Industry

• Significant decrease of orders due to a large project in the first quarter of the prior year creating a high basis for comparison, particularly in the Compression business.
• Book-to-bill ratio was 1.21. Order backlog came in at €6.1bn below past fiscal year-end (€6.4bn) due to negative currency translation effects.
• Revenue grew in all four independent businesses.
• Profit before Special items and corresponding margin continued the positive trend from prior fiscal year contributing to the ongoing turnaround. This was based on progress across the businesses due to higher revenue, improved business mix with a higher service share and operational improvements.

 

Siemens Gamesa Renewable Energy

• Orders substantially decreased year-over-year mainly due to lower volume in Northern Europe.
• Book-to-bill ratio came in at 0.80 leading to an order backlog of €33.7bn (September 30, 2022: €35.1bn) including negative currency translation effects.
• Revenue growth was driven by a significant increase in the wind turbines business.
• Profit before Special items was burdened by charges of €472m which were triggered by a detected negative development of failure rates in specific components resulting in higher warranty and service maintenance costs, impacting mainly the service business. Excluding these negative charges, result of SGRE continued to reflect the impact of inflationary pressures and supply chain challenges as well as effects from executing legacy onerous projects.
• Increased negative impact from special items was due to higher restructuring costs year-over-year mainly in connection with the “Mistral” program.

 

Reconciliation to Consolidated Financial Statements

Reconciliation to Consolidated Financial Statements includes items which management does not consider to be indicative of the segments’ performance – mainly group management costs (management and corporate functions) and other central items, Treasury activities as well as eliminations. Other central items include Siemens brand fees, corporate services (e.g. management of the Group’s real estate portfolio (except SGRE’s), which was allocated to the Gas and Power segment in the prior year), corporate projects, centrally held equity interests and other items.

The negative change year-over-year in Reconciliation to Consolidated Financial Statements was mainly due to increased costs for corporate functions.

 

Outlook

Assumptions for the segments GS, GT and TI in respect to revenue growth and Profit margins before Special items remain unchanged and we continue to expect for Siemens Energy comparable revenue growth (excluding currency translation and portfolio effects) in fiscal year 2023 in a range of 3% to 7% (unchanged).

Due to the aforementioned charges on the result, SGRE’s management no longer expects SGRE’s profitability to be in line with its business plan for fiscal year 2023. Accordingly, we had to adjust our outlook for Siemens Energy for fiscal year 2023.

We now expect Siemens Energy Group’s Profit margin before Special items between 1% and 3% (previously in a range of 2% to 4%) and, accordingly, Net loss of Siemens Energy Group to be on prior fiscal year’s reported level (previously a sharp reduction of Net loss compared to fiscal year 2022).

Due to the better than expected cash flow development during the quarter, we now expect Free cash flow pre tax for fiscal year 2023 to be positive (previously in a negative range of low- to mid-triple-digit million).

The outlook for Siemens Energy assumes no major negative financial impacts from COVID-19 or other pandemic related events, no further deterioration in the supply chain and raw material cost environment, and excludes charges related to legal and regulatory matters.

 

Notes and forward-looking statements

The press conference call on Siemens Energy’s financial results of the first quarter of fiscal year 2023 will be broadcasted live for journalists at https://www.siemens-energy.com/pressconference starting at 7:15 a.m. CET today.

You can also follow the conference call for analysts and investors live at www.siemens-energy.com/analystcall starting at 08:30 a.m. CET today.

Recordings of both conference calls will be made available afterwards.

The financial publications can be downloaded at: www.siemens-energy.com/q1-fy2023.

 

This document contains statements related to our future business and financial performance, and future events or developments involving Siemens Energy that may constitute forward-looking statements. These statements may be identified by words such as “expect,” “look forward to,” “anticipate” “intend,” “plan,” “believe,” “seek,” “estimate,” “will,” “project,” or words of similar meaning. We may also make forward-looking statements in other reports, prospectuses, in presentations, in material delivered to shareholders, and in press releases. In addition, our representatives may from time to time make oral forward-looking statements. Such statements are based on the current expectations and certain assumptions of Siemens Energy´s management, of which many are beyond Siemens Energy´s control. These are subject to a number of risks, uncertainties, and other factors, including, but not limited to, those described in disclosures, in particular in the chapter “Report on expected developments and associated material opportunities and risks” in the Annual Report. Should one or more of these risks or uncertainties materialize, should acts of force majeure, such as pandemics, occur, or should underlying expectations including future events occur at a later date or not at all, or should assumptions not be met, Siemens Energy´s actual results, performance, or achievements may (negatively or positively) vary materially from those described explicitly or implicitly in the relevant forward-looking statement. Siemens Energy neither intends, nor assumes any obligation, to update or revise these forward-looking statements in light of developments which differ from those anticipated. This document includes supplemental financial measures – that are not clearly defined in the applicable financial reporting framework – and that are or may be alternative performance measures (non-GAAP-measures). These supplemental financial measures should not be viewed in isolation or as alternatives to measures of Siemens Energy´s net assets and financial position or results of operations as presented in accordance with the applicable financial reporting framework in its consolidated financial statements. Other companies that report or describe similarly titled alternative performance measures may calculate them differently. Due to rounding, numbers presented throughout this and other documents may not add up precisely to the totals provided and percentages may not precisely reflect the absolute figures.

This document is a Quarterly Statement according to § 53 of the Exchange Rules for the Frankfurter Wertpapierbörse

 

 

 

Financial Results First quarter of fiscal year 2023

Key figures (in millions of €, except where otherwise stated)

Volume

 

Profitability

 

Capital Structure and Liquidity

 

Employees

 

Consolidated Statements of Income

 

Consolidated Statements of Comprehensive Income

 

Consolidated Statements of Financial Position

 

Consolidated Statements of Cash Flows

 

Overview of Segment figures

 

EBITDA Reconciliation

 

Orders & Revenue by region (location of customer)

 

Disaggregation of external revenue