Siemens Energy’s shares slump as wind-turbine issues may cause $5 billion loss

Siemens Energy
ENR,
-6.91%
also reduced its margin guidance to as low as -10%, from the low end of positive 1% to 3%, and its comparable revenue to grow between 9% and 11%, against earlier guidance of 10% to 12%.

The company lost €2.93 billion in the fiscal third quarter, against a €564 million loss in the year-earlier quarter, while revenue rose 8% to €7.51 billion and orders jumped by 54%. Analysts said Siemens Energy’s gas and power divisions performed well.

Siemens Gamesa, which makes the wind turbines, was responsible for a €2.56 billion loss on its own — compared to the consensus estimate of a €1.55 billion loss. The company took €1.6 billion of charges on its onshore wind division and €600 million for increased product costs and ramp-up challenges in the offshore business.

“Whilst I’m very disappointed that we are experiencing these issues, I’m pleased with the fact that, in most cases, we recognized them well before our customers became aware of the issues,” Siemens Gamesa CEO Jochen Eickholt said on a conference call.

Nicholas Green, an analyst at Bernstein, questioned how much confidence investors can have that the company has gotten to the bottom of its problems.

“The comfort we’re trying to seek is that there won’t be additional turbines in the future that could come up with a problem and it sounds from your description that clearly you don’t fully know the problem. We also can’t fully say that a turbine that passes muster today won’t struggle in a year’s time,” he said, according to a transcript of the analyst call.

Siemens
SIE,
-0.75%
holds about a third of Siemens Energy shares. Siemens Energy last year agreed to buy out the third of Siemens Gamesa it didn’t already own, and Gamesa was delisted in February.