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Shares of Siemens Energy, one of the world’s largest wind turbine manufacturers, fell 30 percent on Friday after the company warned it may have to spend more than 1 billion euros to fix a range of technical faults.
As a result of mounting challenges in its wind turbine business, Siemens Energy scrapped its earnings forecast for this year, alarming investors who were reassured by the company last month that the outlook for the unit would improve in the second half.
CEO Christian Bruch said that “While it should be obvious to everyone, I want to stress once again how bittersweet this is for all of us.”
The scale of the problems at Siemens Gamesa, the group’s wind turbine business, is a blow to an industry that has suffered from rising costs and supply chain disruptions over the past 18 months.
JPMorgan analysts said the warning came at a time when “expectations were growing that the worst for the wind industry was now behind us,” but added that technical issues were a problem for others, too.
In a statement late Thursday, Frankfurt-listed Siemens Energy said it expected “significantly higher costs,” potentially in excess of €1 billion, after reviewing “wind turbine component failure rates.”
He also pointed out the challenges in increasing productivity per unit and increasing offshore wind capacity.
Energy company Siemens had said on May 15 that Siemens Gamesa’s outlook was “choppy” with a weak first half, but that it was expecting a stronger performance in the second half.
Speaking to reporters on Friday, Jochen Eckholt, CEO of Siemens Gamesa, highlighted problems with the rotor blades and bearings and said turnaround could take longer than expected. The company had reported problems with components in January.
“This is a bitter, disappointing setback,” Eckholt said. “Quality issues go beyond what has been known, particularly in the wild area.”
“Failure rates affect certain components just like [previously]but they are also different because they are new forms of failures.
He added, “We are touching on the subject, but it takes a long time and it is expensive.”
The projected cost of more than €1 billion is to be rolled out over a “series of years”.
It comes less than two weeks after Siemens Energy took full control of Siemens Gamesa to try to turn the business around after a series of profit warnings.
Calling the announcement “a major setback,” Broch said he still believes the new company structure will help solve the problems. “I remain convinced that the energy transition can only be managed with the help of wind power,” he added.
In its quarterly results in February, Siemens Gamesa reported €1.6 billion in new orders, supported by projects in Canada, India and Germany.
Siemens Energy, which spun off from Germany’s Siemens group, also makes turbines for gas-fired power plants and electric substations, among other products.
It plans to provide more details in its next scheduled trade update. Siemens Energy adheres to its total revenue guidelines.
Siemens Energy shares fell 30 percent to 16.16 euros on Friday.
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