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Shares in Siemens Energy, one of the world’s largest wind turbine makers, plunged 30 per cent on Friday after the company warned it may have to spend more than €1bn fixing an array of technical faults.
As a result of the mounting challenges at its wind turbine business, Siemens Energy scrapped its profit outlook for the year, alarming investors who were reassured by the company last month that the outlook for the unit would improve in the second half.
Chief executive Christian Bruch said that “even though it should be clear to everyone, I would like to emphasise again how bitter 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 been beset by rising costs and supply chain disruption over the past 18 months.
Analysts at JPMorgan said the warning came at a time when “expectations were building that the worst for the wind industry is now behind us”, but added that technical problems were an issue for others, too.
In a statement late on Thursday, Frankfurt-listed Siemens Energy said it was expecting “significantly higher costs”, potentially above €1bn, following a review into “failure rates of wind turbine components”.
It also flagged challenges in boosting productivity at the unit and in ramping up offshore wind capacity.
Siemens Energy on May 15 had said the outlook for Siemens Gamesa was “volatile” with a weak first half, but it was expecting a stronger performance in the second half.
Speaking to reporters on Friday, Jochen Eickholt, chief executive of Siemens Gamesa, highlighted problems with rotor blades and bearings, and said the turnround could take longer than expected. The company had flagged problems with components in January.
“This is a disappointing, bitter setback,” Eickholt said. “The quality problems go well beyond what had been known, in particular in the onshore area.”
“The failure rates affect certain components just like [previously], but they are also different because they are new forms of failures.”
He added: “We are tackling the topic but it is time-consuming and it comes at a cost.”
The expected more than €1bn cost is set to be staggered over “a series of years”.
It comes less than two weeks after Siemens Energy took full control of Siemens Gamesa to try and turn round the business following a string of profit warnings.
Describing the announcement as a “huge setback”, Bruch said he still believed that the new corporate structure would help solve the problems. “I am still convinced the energy transition can only be managed with the help of wind energy,” he added.
At its quarterly results in February, Siemens Gamesa reported €1.6bn of new orders, boosted by projects in Canada, India and Germany.
Siemens Energy, which was spun out of German conglomerate Siemens, also makes turbines for gas-fired power stations and electricity substations, among other products.
It plans to provide further details at its next scheduled trading update. Siemens Energy is sticking to its overall revenue guidance.
Shares in Siemens Energy dropped 30 per cent to €16.16 on Friday.