Siemens Energy unveiled sweeping changes at its struggling wind division on Wednesday, including job cuts and a new CEO, tightening its grip on a loss-making business as the provider of power equipment emerges from its biggest crisis to date.
The announcement, which was flanked by a raised full-year outlook and a fourfold increase in quarterly operating profit, caused shares in the former Siemens division to soar 11.5% to the top of Germany’s blue-chip index by 0828 GMT.
That was the highest level since the company disclosed major quality issues at its newer onshore wind turbine platforms 4.X and 5.X last June, causing shares to plummet and forcing the group to seek billions of euros in state-backed guarantees.
“The turnaround of our wind business is still our focus. To this end, we are taking steps to reduce complexity and create a more focused business,” Siemens Energy Chief Executive Christian Bruch said.
As part of the changes, which will include unspecified job and capacity cuts, board member Vinod Philip will become the new CEO of wind turbine unit Siemens Gamesa from August, the group said, adding it was time for a generational change.
Philip, who is currently in charge of functions such as IT, logistics and purchasing, joined Siemens Energy’s management board in 2022 after spending more than two decades in various roles at Siemens AG.
He will replace 62-year old Jochen Eickholt, also a Siemens veteran, who led the wind turbine maker through its most turbulent time since it was created in 2017, including last year’s onshore wind turbine crisis.
RAISED OUTLOOK
“It is only fair to emphasize that the causes of the quality problems did not fall under his tenure as CEO,” Bruch said of Eickholt, adding Philip, 50, was an “excellent and highly esteemed manager”.
Siemens Energy said it would resume sales of revised versions of its 4.X turbines in Europe by the end of September, adding the 5.X platform was expected to re-enter the market next year. Both models are currently not being sold.
Going forward, Siemens Gamesa’s onshore business will be focused on two main markets, Europe and the United States, the group said, fleshing out a more streamlined approach that was first flagged late last year.
Siemens Energy, which competes with Vestas and GE Vernova, said it would stick to both onshore and offshore, allaying concerns it may sell or shut down parts of its wind business.
Thanks to strong demand for power grid equipment, Siemens Energy also raised its outlook for sales, operating profit and free cash flow in 2024, now expecting revenues to grow by 10%-12% in 2024.
Free cash flow pre tax is now expected to be up as much as 1 billion euros, Siemens Energy said, having previously guided for a negative cash position of up to 1 billion. Second-quarter profit before special items rose more than fourfold to 170 million euros ($183 million).
“Very strong reporting. Visibility to us seemed rather low so this is a positive surprise,” a local trader said.
(Reporting by Christoph Steitz and Tom Kaeckenhoff; Editing by Cynthia Osterman, Rachel More, Shri Navaratnam, Gerry Doyle and Sharon Singleton)
