Siemens Wind Division Struck by Turbine Charges
Siemens released its financial figures for the fourth quarter and fiscal year 2014 today, reporting that its fourth-quarter profit in the Energy Sector declined to €403 million, as ongoing challenges within the Sector led to lower results year-over-year.
A year earlier, fourth-quarter profit of €564 million was burdened primarily by €151 million in “Siemens 2014” charges.
In contrast, the major impact on profit in the current period was €223 million in charges at the Wind Power Division, which resulted in a loss for the Division compared to a profit in the prior-year period. Power Generation led all Siemens Divisions in profit contribution in both periods under review, but recorded a moderate decline year-over-year.
Sector profit for the current quarter benefited from a gain of €48 million at Wind Power related to the fair value measurement for an equity investment. A year earlier, profit was burdened by impairments of €39 million at the Sector’s tidal hydro power business.
Fourth-quarter revenue for the Sector declined 4%, due to a significant drop in revenue in Europe/CAME compared to the prior-year period. Orders came in 7% lower, as a sharp drop in the Americas, mainly in the Power Generation Division, more than offset large contract wins for offshore wind farms in Europe/CAME. Energy’s book-to-bill ratio was 0.99 and its order backlog was €58 billion at the end of the quarter.
Wind Power reported a loss of €66 million compared to a profit of €179 million in the fourth quarter a year earlier. The primary factor in the change was €223 million in charges for inspecting and replacing main bearings in onshore wind turbines and for repairing offshore and onshore wind blades.
In addition, the profit contribution from the Division’s higher-margin offshore business was significantly lower than in the prior- year period. The Division’s result for the quarter benefited from the €48 million gain mentioned above for the Sector. Revenue for Wind Power was unchanged compared to the prior-year period, as strong growth in the Americas offset declines in other regions. Orders were up 19% year-over-year, driven by large orders in Europe/CAME.
Power Transmission posted a loss of €67 million compared to a loss of €42 million in the same quarter a year earlier. Profit was again held back by project execution challenges, including charges of €41 million in the current period compared to €37 million a year earlier. The Division reached several material milestones with respect to its North Sea grid connection projects in the fourth quarter. While the charges related to offshore grid connections decreased compared to the prior-year period, the current period also included charges related to a high-voltage direct current (HVDC) project in the U.K.
The current period included €25 million in charges primarily for capacity adjustments, while the prior-year period included €76 million in “Siemens 2014″ charges. In addition, profit was again held back by a revenue decline and a high proportion of projects in the solutions business with low or negligible profit margins. Fourth-quarter revenue for Power Transmission came in 11% lower year- over-year, due in part to selective order intake in the past. Orders were down 14% compared to the prior-year period, as the Division continued its selective order intake. On a geographic basis, revenue and order intake were down in all three reporting regions. Legacy projects are expected to hold back results in coming quarters.