Siemens Energy Raises Targets Again on Electricity Demand

(Bloomberg) -- Siemens Energy AG increased its cash flow outlook after demand for grid technologies and gas services swelled, propping up turnaround plans for the beleaguered wind-turbine division. 

The industrial company now expects pre-tax cash flow of as much as €1.5 billion ($1.6 billion) during fiscal 2024, up from as high as €1 billion, it said Wednesday. Siemens Energy said orders for gas services more than doubled as electricity demand rises, driving the backlog of contracts to a record even as a partial sale pause in the wind unit dragged.

There’s “strong growth in electrification and good momentum in each and every one of the businesses,” Chief Executive Officer Christian Bruch said in an interview with Bloomberg Television. “As electricity demand grows, we see new markets coming up such as data centers.”

Siemens Energy is seeking to get back to business after years-long issues with faulty turbines at the wind unit engulfed the company, overshadowing profits elsewhere. Losses related to Spain’s Gamesa still resulted in an overall net negative result of €102 million in the past quarter, compared with a loss of nearly €3 billion a year ago.

Group third-quarter sales rose 19% to €8.8 billion, exceeding an average forecast of €8.63 billion. For fiscal 2024, the company said it will meet its goal for net income of as much as €1 billion. 

In May, Siemens Energy raised its outlook on the back of higher orders for power transmissions as governments renew aging infrastructure and enhance grid connections for renewable energy projects. It plans to invest €1.2 billion in its grid unit and create more than 10,000 new jobs in the division by 2030, the Financial Times reported last month.

Among the spending, the German manufacturer is still working on controlling issues related to faulty wind turbines, which coincided with a broad industry malaise of high raw material prices and unprofitable contracts. 

Gamesa is restructuring its onshore wind business — where the company has temporarily halted sales — with plans to reduce output and jobs. The cuts could affect as many as 4,100 positions at Gamesa, Bloomberg reported in May. 

The turnaround at its Spanish wind turbine unit is on track, with repairs of faulty turbines ongoing. “We are starting to bring fixes into the field,” Bruch said in the interview. “We are getting ready to relaunch the first platform this year.”

The unit also plans to focus on European and US markets to benefit from rising demand for offshore turbines that help offset slower sales of onshore turbines. 

(Updates with CEO comments in third, eighth paragraphs)

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