Siemens Energy : Q1 FY2022 Earnings Release and Financial Results

Earnings Release Q1 FY 2022

October 1 to December 31, 2021

Munich, Germany, February 9, 2022 - Siemens Energy today announced its results for the first quarter of fiscal year 2022 that ended December 31, 2021.

Solid performance at Gas and Power overshadowed by negative development at SGRE

"The solid performance of Gas and Power shows that we make progress with our transformation. Our measures have started to have an impact, and the results are heading in the right direction. However, the latest profit warning at Siemens Gamesa Renewable Energy is a setback and disappointing for all shareholders. As majority shareholder, we will continue to support SGRE in achieving the turnaround in the onshore business even in a difficult market environment", says Christian Bruch, President and CEO of Siemens Energy AG.

• Continuing constraints in global supply chains cause challenges in the business. While operational per- formance at Gas and Power (GP) was solid, Siemens Gamesa Renewable Energy (SGRE) was impacted harder than expected by difficult supply markets and faced project-related and technical challenges.
• Both segments contributed to another strong quarter for order intake at €8.3bn, up 10.1% on a compa- rable basis (excluding currency translation and portfolio effects). Strong Book-to-bill ratio (ratio of orders to revenue) of 1.40 resulted in a new record order backlog of €87.1bn.
• Revenue was €6.0bn, 11.4% lower on a comparable basis, in line with our expectations, due to timing effects associated with the execution of large projects in both segments and supply chain constraints impacting revenue conversion mainly at SGRE.
• While GP substantially improved its Adjusted EBITA, SGRE reported a negative result of €318m, impacted by additional supply chain related costs and ramp-up challenges with the 5.X platform of the onshore business.
• Adjusted EBITA for Siemens Energy was negative €57m (Q1 FY 2021: positive €243m) due to the negative
  result at SGRE. Recent quarter saw minor impacts from special items of positive €6m (Q1 FY 2021: nega- tive €123m). Adjusted EBITA before special items of Siemens Energy was negative €63m compared to positive €366m in prior-year quarter.
• Net loss amounted to €240m (Q1 FY 2021: net income of €99m). Corresponding basic earnings per share
  (EPS) were negative €0.18 (Q1 FY 2021: positive €0.09).
• Free cash flow pre tax sharply improved year-over-year to negative €69m (Q1 FY 2021: negative €388m) driven by a very strong performance of GP.
• Due to financial performance at SGRE in the recent quarter and its adjusted guidance, Siemens Energy amended its outlook for fiscal year 2022 and will reassess its prior expectations for Siemens Energy Group's Adjusted EBITA margin before special items for fiscal year 2023. For fiscal year 2022, manage- ment now expects Siemens Energy Group's comparable revenue development to be in a range of negative 2% to positive 3% and an Adjusted EBITA margin before special items between positive 2% and positive 4%.

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Siemens Energy

				Q1
(in millions of €)		FY 2022		FY 2021		Change
Orders	8,330	7,432	10.1%¹
Revenue	5,956	6,541	(11.4)%¹
Adjusted EBITA	(57)	243		n/a
Adjusted EBITA margin	(1.0)%	3.7%		(4.7) p.p.
Special items	6	(123)		n/a
therein Reconciliation to
Consolidated Financial	(0)	(1)		n/a
Statements
Adjusted EBITA before	(63)	366		n/a
Special items
Adjusted EBITA margin before	(1.1)%	5.6%		(6.7) p.p.
Special items
Net income (loss)	(240)	99		n/a
Basic earnings per share	(0.18)	0.09		n/a
(in €)
Free cash flow pre tax	(69)	(388)	82.2%

1 Comparable basis: Excluding currency translation and portfolio effects

Earnings Release Q1 FY 2022 | Siemens Energy

• On a comparable basis, orders clearly increased supported by higher volume from large orders in both segments compared to prior-year quarter.
• Book-to-billratio was strong at 1.40. Order backlog rose to a new high of €87.1bn (September 30, 2021: €83.8bn).
• Significant decline in revenue was in line with our expectations and mainly related to the phasing of large projects in both segments.
• Service revenue came in slightly above prior-year quarter's level.
• On a nominal basis, orders rose 12.1% and revenue declined 8.9%.
• Adjusted EBITA sharply declined as the negative result at SGRE out- weighed a substantially higher result at GP year-over-year.
• Impacts from special items sharply decreased in both segments, pri- marily at GP because of lower stand-alone costs and a positive effect related to strategic portfolio decisions.
• Adjusted EBITA before special items and corresponding margin of Sie- mens Energy also sharply decreased year-over-year due to the nega- tive result at SGRE.
• During the quarter, provisions for pensions and similar obligations slightly increased from €830m as of September 30, 2021 to €836m as of December 31, 2021.

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Gas and Power

				Q1
(in millions of €)		FY 2022		FY 2021		Change
Orders	5,890	5,166	11.7%¹
Revenue	4,140	4,292	(5.9)%¹
Adjusted EBITA	259	193	34.3%
Adjusted EBITA margin	6.2%	4.5%		1.8 p.p.
Special items	17	(76)		n/a
Adjusted EBITA before	242	268	(9.9)%
Special items
Adjusted EBITA margin before	5.8%	6.2%		(0.4) p.p.
Special items
Free cash flow pre tax	722	142	>200%

1 Comparable basis: Excluding currency translation and portfolio effects

Earnings Release Q1 FY 2022 | Siemens Energy

• Significant order growth at GP was supported by increases across all businesses. The increase was driven by the new unit business and benefited from large orders.
• From a regional perspective, the reporting regions Americas and Asia, Australia contributed to order growth.
• GP reported a high Book-to-bill ratio of 1.42 resulting in a record or- der backlog at quarter-end of €53.6bn.
• Revenue clearly decreased mostly related to timing effects associated with the execution of large projects at Generation.
• Service revenue was largely stable compared to the prior-year quar- ter.
• On a nominal basis, orders increased by 14.0%, and revenue went down by 3.6%.
• Adjusted EBITA of GP had a solid quarterly performance. Substantial improvement year-over-year mainly due to lower impacts from spe- cial items compared to prior-year quarter.
• In total, slight effects from special items due to sharply reduced stand-alone costs year-over-year and a positive one-time effect re- lated to aeroderivative gas turbines previously written-off.
• Free cash flow pre tax sharply increased year-over-year primarily due to project-related advance payments.

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Siemens Gamesa Renewable Energy

				Q1
(in millions of €)		FY 2022		FY 2021		Change
Orders	2,472	2,281	7.1%¹
Revenue	1,829	2,295	(23.1)%¹
Adjusted EBITA	(318)	71		n/a
Adjusted EBITA margin	(17.4)%	3.1%		(20.5) p.p.
Special items	(11)	(47)	(75.9)%
Adjusted EBITA before	(307)	118		n/a
Special items
Adjusted EBITA margin before	(16.8)%	5.1%		(21.9) p.p.
Special items
Free cash flow pre tax	(796)	(360)	(121.4)%

1 Comparable basis: Excluding currency translation and portfolio effects

Reconciliation to Consolidated Financial Statements

Adjusted EBITA				Q1
(in millions of €)		FY 2022		FY 2021
Total Segments	(60)	264
Reconciliation to Consolidated Financial Statements	2	(21)
Siemens Energy	(57)	243

Earnings Release Q1 FY 2022 | Siemens Energy

• Orders in the SGRE segment clearly increased year-over-year. In- creases in the offshore and service businesses more than offset an onshore decline.
• Book-to-billratio of SGRE came in at 1.35 leading to an order backlog of €33.6bn at quarter-end, above prior fiscal year-end's level.
• Revenue was substantially down compared to prior-year quarter's level driven by the decline in the wind turbines business. The service business posted an increase.
• On a nominal basis, segment's orders increased by 8.4%, and reve- nue decreased by 20.3%.
• Adjusted EBITA deteriorated compared to prior-year quarter mainly driven by stronger than expected supply chain related disruptions and ramp-up challenges of their onshore 5.X platform. These nega- tive earnings effects totaled €289m.
• Impacts from special items sharply declined year-over-year.
• Negative Free cash flow pre tax sharply increased year-over-year, amongst other factors, due to an increase of inventories.

Reconciliation to Consolidated Financial Statements includes items which management does not consider to be indicative of the segments' performance - mainly centrally carried pension expenses, Treasury activities and other central items as well as eliminations. Beginning with fiscal year 2022, GP segment's Real Estate Services, formerly shown under Reconciliation to Consolidated Financial Statements, are assigned to segment GP. Related prior year information has been reclassified to conform to the current-year presentation.

The positive change year-over-year in Reconciliation to Consolidated Financial Statements was mainly due to elimination effects.

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Earnings Release Q1 FY 2022 | Siemens Energy

Outlook

Due to the business development of SGRE in the recent quarter and its adjusted guidance, we amended the outlook for the fiscal year 2022 for the SGRE segment and, accordingly, for Siemens Energy. In addition, management will reassess its prior expectations for Siemens Energy Group's Adjusted EBITA margin before special items for fiscal year 2023 of positive 6.5% to positive 8.5%.

Our assessment for Siemens Energy's business environment remains widely unchanged and we confirm GP segment's outlook for fiscal year 2022. Global economy should continue to grow in fiscal year 2022 and we expect global supply chain constraints to persist as well as COVID-19 to remain a factor of uncertainty. There- fore, a shortage of materials and components and/or a lack of freight capacity may continue to have an impact on our business, especially as it pertains to the on-time execution of large projects. Nevertheless, we are still confident that the measures we have taken as part of our transformation - especially at GP - will lead to higher profitability at Siemens Energy in fiscal year 2022, although on a lower than expected level.

For Siemens Energy in fiscal year 2022, we now expect comparable revenue development (excluding currency translation and portfolio effects) to be in a range of negative 2% to positive 3% (previously negative 1% to positive 3%) and an Adjusted EBITA margin before special items between positive 2% and positive 4% (previously between positive 3% and positive 5%). We still expect a sharp improvement of Net income and Free cash flow pre tax to be in a range of a positive mid-triple-digit million €.

For the GP segment in fiscal year 2022, the outlook is unchanged. We target comparable revenue growth to be in a range of positive 1% to positive 5% and Adjusted EBITA margin before special items to be between positive 4.5% and positive 6.5%.

For the SGRE segment, we now expect in fiscal year 2022 a comparable decline of revenue between negative 2% and negative 9% (previously negative 2% and negative 7%). Adjusted EBITA margin before special items now is expected to be in a range of negative 4% to positive 1% (previously positive 1% to positive 4%).

This guidance assumes no further major financial impacts from COVID-19 on our business activity and excludes charges related to legal and regulatory matters.

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