Siemens Energy : Q3 FY2022 Earnings Release and Financial Results

Earnings Release Q3 FY 2022

April 1 to June 30, 2022

Munich, Germany, August 8, 2022 - Siemens Energy today announced its results for the third quarter of fiscal year 2022 that ended June 30, 2022.

Gas and Power resilient while SGRE again weighing down Group results - Major initiatives taken to shape Siemens Energy for the energy transition

"Our Gas and Power business has once again delivered in the recent quarter and thus proven its resilience. Despite unprecedented macroeconomic challenges, we see sharply higher order volumes with growing demand for our technologies to facilitate the energy transition. On top of maneuvering the daily operations, the Gas and Power team started to set the course for a new organizational structure aimed at significantly reducing complexity and shortening the decision-making processes. And yet there are also again drawbacks in the third quarter. Siemens Gamesa continued to experience high losses in a challenging market environment. The poor performance at Siemens Gamesa had a negative impact on our overall results. We expect the new management at Siemens Gamesa now to implement a rigorous turnaround plan. During the quarter we launched a cash tender offer for the outstanding minority shares in Siemens Gamesa with the intention to delist and fully integrate its operations", says Christian Bruch, President and CEO of Siemens Energy AG.

• In the recent quarter, Gas and Power (GP) achieved another solid performance despite unfavorable geopolitical and macroeconomic factors which continue to impact Siemens Energy's business development overall. While both segments faced strong headwinds from increased material and logistic costs as well as supply chain constraints, GP demonstrated resilience due to stringent measures taken based on its operational excellence program.
• Siemens Energy started the restructuring of its business activities in Russia in the third quarter which burdened the result of GP by €0.2bn, reported as strategic portfolio decisions under special items. These restructuring activities are expected to be concluded by end of this fiscal year without further significant financial impact.
• Orders continued to be strong with growth of 60.0% year-over-year on a comparable basis (excluding currency translation and portfolio effects). Both segments contributed to the increase, resulting in third quarter orders of €9.8bn driving order backlog to another record of €93.4bn.
• Revenue of €7.3bn was down by 4.7% on a comparable basis as growth at GP was more than offset by a decline at Siemens Gamesa Renewable Energy (SGRE).
• Despite burdens from supply chain constraints, GP reported a positive Adjusted EBITA before special items of €212m nearly on prior-year quarter's level. Due to the high loss at SGRE, Siemens Energy's Adjusted EBITA before special items was negative €131m (Q3 FY 2021: positive €54m). Special items amounted to negative €298m (Q3 FY 2021: negative €178m) largely related to the restructuring of business in Russia. Adjusted EBITA for Siemens Energy came in at negative €429m (Q3 FY 2021: negative €124m).
• Accordingly, Siemens Energy's Net loss was €533m (Q3 FY 2021: negative €307m). Corresponding basic earnings per share (EPS) were negative
  €0.54 (Q3 FY 2021: negative €0.32).
• Free cash flow pre tax decreased to negative €25m (Q3 FY 2021: positive €328m) driven by SGRE while GP exceeded the strong prior-year quarter's level.
• On May 21, 2022, Siemens Energy AG announced a voluntary cash tender offer to acquire all outstanding shares in Siemens Gamesa Renewable Energy S.A., i.e., approximately 32.9 percent of the share capital, which Siemens Energy AG does not already own. The minority shareholders will be offered €18.05 per share in cash. Following a successful closing of the transaction, Siemens Energy AG intends to pursue a delisting of Siemens Gamesa Renewable Energy S.A. from the Spanish stock exchanges, where it currently trades as a member of the IBEX 35 index. In June 2022, a €1.15bn cash deposit was pledged in favor of the Spanish National Securities Market Commission which reduced Siemens Energy's Net cash position at the end of recent quarter.
• Although further negative effects associated with geopolitical and macroeconomic challenges cannot be ruled out, management still expects to achieve its outlook given for GP and Siemens Energy excluding effects from lost revenue in connection with business in Russia for comparable revenue growth. Net loss of Siemens Energy in fiscal year 2022 is expected to exceed prior year's net loss approximately by the impact from the restructuring of business in Russia reported as special item.

Siemens Energy

				Q3
(in millions of €)		FY 2022		FY 2021		Change
Orders	9,840	5,950	60.0%¹
Revenue	7,279	7,262	(4.7)%¹
Adjusted EBITA	(429)	(124)	<(200%)
Adjusted EBITA margin	(5.9)%	(1.7)%		(4.2) p.p.
Special items	(298)	(178)	67.6%
therein Reconciliation to
Consolidated Financial	(3)	0		n/a
Statements
Adjusted EBITA before	(131)	54		n/a
Special items
Adjusted EBITA margin before	(1.8)%	0.7%		(2.5) p.p.
Special items
Net income (loss)	(533)	(307)	(73.5)%
Basic earnings per share	(0.54)	(0.32)	(69.3)%
(in €)
Free cash flow pre tax	(25)	328		n/a

1 Comparable basis: Excluding currency translation and portfolio effects

Earnings Release Q3 FY 2022 | Siemens Energy

• Strong order development was supported by large orders both at GP and SGRE and mainly driven by the development in the reporting re- gion Europe, C.I.S., Middle East and Africa where orders nearly dou- bled.
• Book-to-billratio was 1.35. Order backlog rose to a new record of €93.4bn (March 31, 2022: €89.3bn) partly benefitting from currency translation effects.
• Moderate decline in revenue was driven by continued challenges and supply chain constraints at SGRE.
• Service revenue came in close to prior-year quarter's level.
• On a nominal basis, orders and revenue rose 65.4% and 0.2%, re- spectively.
• Adjusted EBITA was negative in both segments. In GP, this was driven by sharply higher impacts from special items year-over-year. The de- cline in SGRE reflected continued supply chain constraints and oper- ational challenges.
• Impacts from special items were sharply up year-over-year and re- lated to the restructuring of GP's business in Russia and higher re- structuring and integration costs at SGRE.
• Adjusted EBITA before special items was negative because of SGRE while GP was nearly on prior-year quarter's level.
• Free cash flow pre tax came in negative, driven by the loss at SGRE, while GP delivered a strong contribution slightly above prior-year quarter's level.
• During the quarter, provisions for pensions and similar obligations decreased from €725m as of March 31, 2022 to €623m as of June 30, 2022 driven by higher discount rates.

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Gas and Power

				Q3
(in millions of €)		FY 2022		FY 2021		Change
Orders	6,362	4,455	36.9%¹
Revenue	4,868	4,579	0.7%¹
Adjusted EBITA	(21)	78		n/a
Adjusted EBITA margin	(0.4)%	1.7%		(2.1) p.p.
Special items	(233)	(147)	58.4%
Adjusted EBITA before	212	225	(5.7)%
Special items
Adjusted EBITA margin before	4.4%	4.9%		(0.6) p.p.
Special items
Free cash flow pre tax	432	422	2.2%

1 Comparable basis: Excluding currency translation and portfolio effects

Earnings Release Q3 FY 2022 | Siemens Energy

• Strong order growth across all businesses and reporting regions was supported by a sharply increased volume from large orders.
• GP reported a Book-to-bill ratio of 1.31. This resulted in an order back- log of €59.6bn again exceeding previous quarter-end record.
• Revenue grew slightly despite the sanctions against Russia and con- tinued supply chain constraints.
• On a nominal basis, orders and revenue increased by 42.8% and 6.3%, respectively.
• Adjusted EBITA of GP decreased mainly due to the impact from the restructuring of business in Russia totaling €0.2bn. In addition, the result was impacted by expected supply chain related effects and higher material prices in the short-cycle business.
• Impacts from special items sharply increased year-over-year related to the restructuring of business in Russia.
• Adjusted EBITA before special items was nearly on prior-year quar- ter's level and, together with respective margin, within expectations.
• Free cash flow pre tax was strong and slightly above prior-year quar- ter's level, supported by advance payments from customers related to the strong order development which more than offset higher out- flows for inventories.

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Siemens Gamesa Renewable Energy

				Q3
(in millions of €)		FY 2022		FY 2021		Change
Orders	3,523	1,520	127.9%¹
Revenue	2,436	2,704	(13.8)%¹
Adjusted EBITA	(392)	(185)	(112.1)%
Adjusted EBITA margin	(16.1)%	(6.8)%		(9.3) p.p.
Special items	(62)	(31)	100.6%
Adjusted EBITA before	(330)	(154)	(114.4)%
Special items
Adjusted EBITA margin before	(13.5)%	(5.7)%		(7.9) p.p.
Special items
Free cash flow pre tax	(514)	(35)	<(200)%

1 Comparable basis: Excluding currency translation and portfolio effects

Reconciliation to Consolidated Financial Statements

Adjusted EBITA				Q3
(in millions of €)		FY 2022		FY 2021
Total Segments	(413)	(107)
Reconciliation to Consolidated Financial Statements1	(16)	(17)
Siemens Energy	(429)	(124)

1 The presentation of certain prior year information is reclassified. Beginning with fiscal year 2022, GP segment's Real Estate Portfolio, formerly shown under Reconciliation to Consolidated Financial Statements, is assigned to the correspondent segment. Related prior year information has been reclassified to conform to the current year presentation.

Earnings Release Q3 FY 2022 | Siemens Energy

• Orders in the SGRE segment more than doubled primarily due to two large offshore orders in the United Kingdom and Germany totaling more than €1.8bn.
• Book-to-billratio of SGRE came in at 1.45 leading to a record order backlog of €34.0bn at quarter-end.
• Revenue was significantly down compared to prior-year quarter's level due to supply chain constraints in the wind turbines business and continued operational problems. The service business was slightly down year-over-year.
• On a nominal basis, segment's orders increased by 131.8%, and rev- enue decreased by 9.9%.
• Adjusted EBITA decreased compared to prior-year quarter due to lower volume, higher material and logistic costs and operational problems; recent quarter was affected by known challenges with the 5.X platform and increased costs mainly driven by component fail- ures and repairs in already installed onshore platforms.
• Negative Free cash flow pre tax sharply increased year-over-year, driven by the lower result and also impacted by cash outflows related to previously recorded provisions for losses on sales contracts.

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.

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Earnings Release Q3 FY 2022 | Siemens Energy

Outlook

For the GP segment in fiscal year 2022, we still expect comparable revenue growth (excluding currency translation and portfolio effects) and Adjusted EBITA margin before special items towards the low end of the guidance ranges of positive 1% to positive 5% and positive 4.5% to positive 6.5%, respectively. However, for the comparable revenue growth, effects related to the current market conditions in Russia are excluded. For fiscal year 2023, we target an Adjusted EBITA margin before special items unchanged in a range between positive 6% and positive 8%.

According to SGRE, for fiscal year 2022, the company now is working to achieve a comparable revenue growth near the low end of the previous target range of negative 9% to negative 2%, and an EBIT margin pre PPA (purchase price allocation) and integration and restructuring costs of circa negative 5.5%.

Consequently, for Siemens Energy we expect results still towards the low end of the guidance ranges for comparable revenue development (neg- ative 2% to positive 3% but excluding Russia-related effects) and Adjusted EBITA margin before special items (positive 2% to positive 4%). We now expect Net loss of Siemens Energy in fiscal year 2022 to exceed prior year's Net loss approximately by the impact from the restructuring of business in Russia reported as special item. We still assume Free cash flow pre tax to be in a range of a positive mid-triple-digit million €.

This guidance assumes no further major financial impacts from COVID-19 on our business activity and excludes charges related to legal and regulatory matters including further negative effects from the war in Ukraine and its economic consequences.

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