November 11, 2020

Siemens Energy brings spin-off year to a solid conclusion

categories : finance & economy

Siemens Energy delivered a solid operating performance for fiscal year 2020 and achieved its guidance. The newly listed company increased new orders 1% from the previous year, to EUR34 billion ($40.22 billion) – amid a challenging macroeconomic environment which was dominated by the Covid-19 pandemic.

Key projects included an order for the seventh offshore wind farm grid connection in the North Sea, and an agreement on the first megawatt-level production facility for green hydrogen in China.

Siemens Energy ended the fiscal year with an order backlog totalling EUR79 billion.

Dr Christian Bruch, CEO of Siemens Energy AG, said: “I am proud how our Siemens Energy team managed the macroeconomic challenges, successfully executed the spin-off of our company while further streamlining our portfolio. We have fully achieved our fiscal year 2020 guidance and confirm our outlook for fiscal year 2021. With an outstanding and committed team we look forward to the transformation journey that lies ahead of us, as we are opening a new chapter as Siemens Energy.”

Though the company’s revenue in fiscal year 2020 was down 5% from the previous year, to EUR27.5 billion, the decrease was still within the projected target range of (5%) to (2%). The book-to-bill ratio – the ratio of new orders to revenue – was a strong 1.24.

Despite headwinds from Covid-19, adjusted EBITA before special items was EUR(17) million, just short of break-even. This translated to an adjusted EBITA margin of (0.1%) before special items.

Siemens Energy continues to implement the optimisation programme presented in early September. Adjustments of production capacities in France and Norway have already been initiated.

Additionally, in response to a drop in demand and unfavourable market conditions, Siemens Energy had decided to adjust its aero-derivative gas turbine portfolio.

Portfolio-related impairments and write-downs totaled EUR956 million. Another aspect was restructuring expenses of EUR376 million, as well as non-recurring costs of EUR195 million associated with the carve-out and other special items.

Therefore, Siemens Energy’s operating earnings in fiscal year 2020 were negatively impacted by special items amounting to approximately EUR1.5 billion.

STRONG CASH FLOW

These special items brought the net loss for fiscal year 2020 to EUR1.9 billion. By contrast, however, strong free cash flow before taxes came to EUR977 million, primarily due to a significant reduction in inventories and accounts receivable in Gas and Power.

Basic earnings per share (EPS) amounted to EUR(2.21). As already announced earlier this year, the Executive Board will propose to the Supervisory Board not to distribute a dividend for 2020, the company’s first independent fiscal year.

Compared with the strong equivalent quarter last year, which benefited from new orders at both Gas and Power and SGRE, Siemens Energy achieved a solid fourth quarter in 2020. As anticipated, new orders decreased 24% to EUR7 billion, primarily as orders were postponed due to Covid-19 in the Gas and Power segment.

Siemens Energy’s revenue decreased by 8% to €7.6 billion in the fourth quarter, which was impacted primarily by an 11% decline in revenue in the Gas and Power segment. This was attributable to delays and postponed projects mainly due to the Covid-19 pandemic. In contrast, the downturn in revenue in the SGRE segment was moderate.

Siemens Energy reported adjusted EBITA before special items of EUR70 million in the fourth quarter, equivalent to an adjusted EBITA margin of 0.9% before special items. Without special items of EUR402 million Q4 results would have been very strong and in line with previous year. Operational weaknesses in the onshore business at SGRE continue to negatively impact Q4 adjusted EBITA before special items. In total, the net loss at Siemens Energy Group level stood at EUR390 million. This was set against strong free cash flow before taxes, in an amount of EUR704 million.

Maria Ferraro, CFO of Siemens Energy, said: “In a market environment that remains challenging and uncertain, Siemens Energy delivered a solid fourth quarter. Both at the Group level and in the Gas and Power and SGRE segments, we showed an operating profit before special items. We continue to diligently focus on the tasks at hand, specifically reviewing all levers to improve our cost efficiency which increase profitability and cash flow. It is a journey, although we see progress so far and are on the right track.”

Siemens Energy is confirming the guidance. That projection is still based on the assumption that there will be no further adverse impact from the pandemic. The outlook for Siemens Energy in fiscal year 2021 includes nominal revenue performance of between 2% and 12% and an adjusted EBITA margin of 3% to 5%, before special items.

The Gas and Power segment is expected to show nominal revenue performance within a target range of between 2% and 11% in fiscal year 2021, with an adjusted EBITA margin of 3.5% to 5.5%, before special items.

Nominal revenue growth for the SGRE segment is expected to be between 3% and 12%, driven by the order backlog to date and stable performance in the Service and Product business. The adjusted EBITA margin before special items is projected at 3% to 5%.

Effective immediately, Siemens Energy will no longer participate in new tenders for pure coal-fired power plants. Siemens Energy will still meet the existing commitments for coal-fired power plant projects, including binding offers. It will also continue its CO2-reducing service and solutions business, e.g. combined heat and power (CHP) projects. Siemens Energy is now further analysing with the requisite care what specific consequences this step will have for its employees and sites that are concerned. Siemens Energy will now discuss with its partners in the field of coal-fired power plant technology about the consequences of the decision for the partnerships.

Accompanying its customers on the path of energy transformation and providing the necessary technologies and solutions – that is the mission of the company. With this step, Siemens Energy continues its transformation towards a more sustainable and growth-oriented portfolio. Overall, sustainable solutions already generate more than 50% of Siemens Energy's revenue.

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