Siemens Gamesa Announces Job Cuts, Records First Profitable Quarter Since 2020

Business & Finance

November 10, 2022, by Adnan Durakovic

Wind turbine manufacturer Siemens Gamesa plans to terminate around 2,900 positions by Fiscal Year 2025, out of which 1,900 will be in Europe.

The company said it is working with employee representatives to mitigate the impact of this adjustment as much as possible through natural attrition, internal transfers, and early retirements.

The move comes as part of Siemens Gamesa’s Mistral program through which the company aims to stabilise its business. The decision was made after the company had carried out an organizational review to identify synergies across several functions and to adjust its manufacturing footprint and capacity to match market demands.

Described as ”a roadmap for the company to unlock its long-term potential”, the Mistral program will be implemented from January 2023 onward.

The news was disclosed in Siemens Gamesa’s financial report for the Fiscal Year 2022.

The turbine maker recorded a net profit of EUR 286 million in the fourth quarter of the Fiscal Year 2022, the first time the company has ended a quarter in black since the first quarter of Fiscal Year 2021 (October-December 2020).

A strong final quarter has helped Siemens Gamesa reduce the net loss for the year to EUR 940 million, as compared to EUR 1.226 billion net loss reported at the end of the third quarter of Fiscal Year 2022.

Overall, Siemens Gamesa said that the company’s performance during the fiscal year reflected market imbalances caused by persisting supply chain disruptions, heightened by geopolitical tensions and additional waves of COVID-19, as well as upward pressure on the price of inputs and shipping.

The company also experienced internal challenges during the period, including the industrialization of the Siemens Gamesa 5.X onshore platform, where progress was slower than planned, and additional costs related to failures and repairs of components in legacy onshore platforms.

All these factors affected the manufacturing, execution and delivery of projects in progress. Based on new assumptions about market, production and project-execution conditions, the backlog of projects for delivery in future years needed to be reassessed, Siemens Gamesa said.

The turbine maker signed orders for EUR 11,598 million in the last twelve months, boosting the company’s backlog to a record EUR 35,051 million, a EUR 2,509 million increase year-over-year.

Revenue from October 2021 to September 2022 amounted to EUR 9,814 million, a four per cent drop year-on-year. EBIT pre PPA and before integration and restructuring costs amounted to minus EUR 581 million, with an EBIT margin of minus 5.9 per cent.

The numbers are said to come as a result of supply instability and delays in project execution, the challenges around the ramp-up of the Siemens Gamesa 5.X platform, reduced manufacturing activity, and component failures and repairs in legacy onshore platforms. This impact was partially offset by the sale of renewable development assets in southern Europe.

In the fourth quarter, revenue amounted to EUR 3,372 million, a 17.8 per cent increase year-over-year. EBIT pre PPA and before integration and restructuring costs amounted to EUR 375 million, with an EBIT margin of 11.1 per cent.

Order intake from July to September increased 53 per cent year-over-year to EUR 4,405 million, EUR 1,566 million of which was in offshore, a 76 per cent increase year-over-year.

”Fiscal year 2022 was definitely a very difficult one. But with the launch of the Mistral program, we have set the stage to deliver profitable growth and achieve our long-term vision,” said Siemens Gamesa’s CEO, Jochen Eickholt.

”Before we get there, we have a transition year ahead of us, still impacted by elevated inflation, supply chain disruptions and geopolitical risks. This is affecting the entire wind industry and could jeopardize the energy transition – unless there is a clear commitment from policymakers and authorities to treat the industry as having the greatest strategic importance. Because we are indispensable to society and a crucial pillar of the future energy system.”

With the new organizational setup implemented through the Mistral program, Siemens Gamesa said it is preparing to reap significant cost synergies through the potential integration into Siemens Energy. On 7 November, the Spanish National Securities Market Commission CNMV approved the voluntary cash tender offer by Siemens Energy to acquire all outstanding shares in Siemens Gamesa which it does not already own.

Outlook

Following a challenging year, Siemens Gamesa said it begins fiscal year 2023 in an equally complex environment characterized by persistently high inflation and supply chain disruptions that severely affect the cost of materials.

However, after this transition year, it expects the market environment to normalize. This is expected to enable Siemens Gamesa to regain profitability and resume cash flow progressively in the future.

This progression will be supported by three key levers: sales growth supported by a global increase in demand, especially in offshore; the results of the Mistral strategy program; and leveraging long-term relationships with suppliers and customers to maximize value creation throughout the wind energy chain, the company said. This is expected to help protect wind turbine manufacturers and other players against inflation and price volatility.

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.