FRANKFURT, Germany, June 23 – Shares in Siemens Energy plummeted Friday after the company warned that technical problems at its wind turbine unit were worse than previously thought.
The group scrapped its full-year profit target and said it was setting aside more than a billion euros ($1.1 billion) over the coming years to fix the issues at troubled wind turbine subsidiary Siemens Gamesa.
In a call with reporters, Siemens Gamesa CEO Jochen Eickholt said “the quality problems go well beyond what had been known hitherto”.
“The result of the current review will be much worse than even what I would have thought possible,” he added.
Shares in Siemens Energy plunged by more than 31 percent shortly after trading opened in Frankfurt.
Siemens Energy issued an ad-hoc statement late Thursday saying it had ordered a technical review following a “substantial increase in failure rates of wind turbine components”.
The company also withdrew its profit guidance for the fiscal year, without giving an updated estimate.
Earlier this year, Siemens Energy said it was expecting a net loss that would exceed the previous fiscal year’s loss of 712 million euros.
In the call with reporters, Siemens Energy CEO Christian Bruch called the developments “bitter” and “a huge setback”.
– Slower turnaround –
Siemens Gamesa — created from the merger in 2017 of Spain’s Gamesa and the wind energy division of German conglomerate Siemens — has been facing difficulties for years linked to soaring commodity prices and technical woes.
At the heart of the latest troubles are faulty components, mainly related to bearings and rotor blades in onshore turbines, Eickholt said.
The company has seen just “a handful of failures” across a fleet of several thousand turbines, he said, but it now had to assess “what to expect over the next 20 years” and which preventative measures to take.
“We do not have all the facts” yet, he said, warning that repair and maintenance costs could climb higher still.
Siemens Gamesa was also facing other headwinds, Eickholt said, including “difficulties” ramping up production capacities in the offshore area.
Expectations for improved productivity have also “not materialised to the extent we had expected”, said Eickholt, partly because of rising material costs.
As a result, “the turnaround of Siemens Gamesa will take longer than I had expected”.
Siemens Energy will provide another update on August 7, after releasing its third-quarter results.
“I do believe that there is a positive wind business ahead,” Bruch said.
“But we also believe that we need to tackle these problems in a more consequential and a more effective way,” he said.
