ZAMUDIO/MUNICH (dpa-AFX) - The problems at the Spanish wind power subsidiary Siemens Gamesa are not abating and continue to cause serious problems for the power engineering group Siemens Energy. Now Siemens Gamesa has once again identified quality deficiencies in certain components, resulting in million-dollar charges in the first fiscal quarter (as of the end of December). Gamesa thus continues to be in the red - as a consequence, Siemens Energy has to lower its forecast for the current fiscal year 2022/23. The Munich-based company's shares, which are listed on the Dax, fell by around one percent on Friday.

Due to the numerous problems, Siemens Energy shares were almost twice as weak as the leading index in 2022, with a drop of around 22 percent. However, they had recovered strongly from a record low of 10.25 euros in mid-October. At 18.53 euros, the shares now cost a good 80 percent more than in mid-October.

Gamesa said Thursday evening that a review of installed wind turbines had found "a negative development in failure rates for certain components, leading to higher warranty and maintenance costs than previously estimated." In the process, Gamesa put the financial burden at 472 million euros, resulting in a loss of operating income (Ebit) before certain purchase price allocations of around 760 million euros in the quarter.

In a conference call with analysts, CEO Jochen Eickholt was only vague about the exact nature of the problems. The manager said that the focus was on the service business and only to a lesser extent on turbines. It was a mix of different problems, with different components and platforms, which would have some effects. The countries and regions affected are also difficult to delineate, he said. Chief Financial Officer Beatriz Puente expects cash inflows to be impacted over the next eight years. She expects the impact in fiscal 2023 to be in the mid-double-digit range.

As a result of Gamesa's problems, Siemens Energy had to row back on its forecast for 2022/23. For example, the operating profit margin before special items is now expected to be only 1 to 3 percent, compared with the 2 to 4 percent previously forecast. The net loss is also expected to remain at the previous year's level and not fall sharply as previously targeted, the statement added.

In the last fiscal year (to the end of September), the wind power subsidiary Siemens Gamesa as well as burdens in connection with the withdrawal from Russia had caused the loss after taxes at the power engineering group to swell by 15.5 percent to 647 million euros. High costs, supply chain bottlenecks, project postponements, quality defects in older turbines and home-made problems with the new 5.X onshore turbine had all had a negative impact on Gamesa's bottom line.

"In particular, the reassessment of costs for existing service contracts had a negative impact on earnings in the past quarter," a Siemens Energy spokesman said of the current development. In the operating areas, the company said it saw an improvement in Gamesa's situation. However, the legacy contracts in particular required "full management attention" under the still difficult conditions in the procurement market.

Meanwhile, Siemens Energy's day-to-day business in the first quarter went better than analysts had expected in terms of revenue and orders received. The sales forecast therefore remained unchanged: Comparable sales growth - i.e., excluding exchange rate and portfolio effects - is expected to continue to reach 3 to 7 percent in the fiscal year that runs through the end of September.

Gamesa faces a complete takeover by Energy, which will hold more than 90 percent at the end of the offer. An extraordinary general meeting of the company, which is listed on the Spanish stock exchange, must still approve the venture next week, but this is considered a formality. After that, Energy plans to take Gamesa off the stock market.

Analyst Nicholas Green of U.S. analyst firm Bernstein Research called Energy's investment decision a "major financial blow." In his understanding, Gamesa's service business was supposed to be the stable foundation for the company's future, but now it is showing weaknesses. And more generally, he doesn't believe the wind industry has a solid commercial foundation either.

After the takeover, Siemens Energy hopes to have a better grip on the wind power manufacturer, which has failed to meet its targets several times in recent years after the emergence of more and more new problems. Gamesa CEO Eickholt, who was dispatched by Energy, has given the group a far-reaching turnaround program. In principle, Siemens Energy had seen 2022/23 as a transition year. At the presentation of the targets in the fall, Group CEO Christian Bruch aimed for an improvement in business development, even if the bottom line is likely to be a loss. Bruch does not see the company in the black until the next fiscal year.

Away from Gamesa, however, things have been going well recently. The company speaks of a strong improvement in the underlying operating result in the areas of Gas Services, Grid Technologies and Transformation of Industry.

Group order intake reportedly grew by more than half year-on-year in the first quarter to 12.7 billion euros, while revenue rose by around 19 percent to just under 7.1 billion euros. Both figures thus significantly exceeded the median analysts' estimate. Operating profit of minus 384 million euros, however, was well below market expectations, as was operating profit before special items of minus 282 million euros./mis/lew/knd/jha/