Release Date: February 12, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Siemens Energy AG (SMEGF, Financial) reported a strong operational performance with revenue growth of more than 18% and a margin improvement of 270 basis points.
- The company achieved a record order backlog of EUR131 billion, with a strong book-to-bill ratio of 1.53.
- Siemens Energy AG (SMEGF) experienced excellent cash conversion, with cash flow of EUR1.5 billion exceeding expectations.
- The company is well-positioned in the growing offshore wind market, with successful auctions in South Korea and Japan indicating a resurgence in this sector.
- Siemens Energy AG (SMEGF) strengthened its balance sheet, reflected in improved bond yield spreads and an S&P upgrade to a stable outlook.
Negative Points
- Order intake was down compared to the previous year due to large orders in the prior year quarter, particularly affecting Grid Technologies.
- Siemens Gamesa continues to face challenges, with onshore wind affected by temporary interruptions in sales activities.
- The company faces challenges in expanding its manufacturing capacities, particularly in the US, due to construction and labor constraints.
- Despite strong growth, Siemens Energy AG (SMEGF) experienced setbacks in reducing Scope 3 downstream emissions, which increased compared to the previous year.
- The onshore wind market remains slow, with new unit sales and capacity reductions posing risks to future growth.
Q & A Highlights
Q: Could you provide an update on your gas turbine capacity reservations and how this affects delivery timelines?
A: Christian Bruch, President and CEO, explained that Siemens Energy is expanding its capacity by roughly 30%, which will impact volumes from 2026 onwards. Larger frames are more loaded than smaller ones, and delivery times for large frames are now extending into 2029 and 2030. The company is also working to ensure flexibility in meeting customer needs by potentially using multiple smaller turbines.
Q: Regarding grid orders, should we consider the recent EUR5 billion in orders as a new baseline, excluding large HVDC projects?
A: Christian Bruch noted that the strong demand for grid stabilization, particularly synchronous condensers, contributed to the order volume. While HVDC projects remain significant, the company is seeing a more diverse range of orders, which provides resilience and balance in their portfolio.
Q: How does the 20 gigawatts of gas reservation agreements compare to previous levels, and what impact does data center demand have on market size assumptions?
A: Christian Bruch stated that the 20 gigawatts of reservations reflect strong momentum in gas, comparable to the 19 gigawatts ordered last year. While data center demand is materializing, the company maintains its midterm market size expectation of around 70 gigawatts, with data centers potentially contributing an additional 15-20% to the market.
Q: How is Siemens Energy positioned in the US market, especially with potential tariffs?
A: Christian Bruch highlighted that Siemens Energy has a strong local presence in the US with eight factories and 12,000 employees. The company has invested approximately EUR0.5 billion in capacity expansion over the last three years. While tariffs could impact the supply chain, Siemens Energy is well-positioned competitively and is exploring mitigation strategies.
Q: Can you provide insights into the order backlog quality and its impact on future targets?
A: Maria Ferraro, CFO, indicated that the backlog margin has improved across business areas, supporting the company's guidance for fiscal year 2025. While some backlog margin improvements will contribute to fiscal year 2028 targets, others will extend beyond 2028, reflecting a positive market momentum and increased electricity demand.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
