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Shares of Siemens Energy, one of the world’s biggest wind turbine makers, fell 30% on Friday after the company warned it could have to spend more than a billion euros to fix a series of technical faults.
Due to growing challenges in its wind business, Siemens Energy dropped its profit outlook for the year, alarming investors who were reassured by the company last month that the unit’s outlook would improve in the second half.
Managing director Christian Bruch said that “although this should be clear to everyone, I would like to stress again how bitter this is for all of us”.
The scale of the problems at Siemens Gamesa, the group’s wind business, is a blow to an industry that has been beset by rising costs and supply chain disruption for the past 18 months.
JPMorgan analysts said the warning came at a time when “the worst for the wind industry was now expected to be behind us”, but added that technical issues were also an issue for others.
In a statement on Thursday evening, Frankfurt-listed Siemens Energy said it expected “significantly higher costs”, potentially in excess of 1 billion euros, following a review of “rates of failure of wind turbine components”.
He also reported difficulties in increasing the unit’s productivity and increasing offshore wind capacity.
On May 15, Siemens Energy said Siemens Gamesa’s outlook was “volatile” with a weak first half, but it expected better performance in the second half.
Speaking to reporters on Friday, Siemens Gamesa chief executive Jochen Eickholt pointed to problems with the rotor blades and bearings, and said the turnaround could take longer than expected. The company had reported issues with components in January.
“It’s a disappointing and bitter setback,” Eickholt said. “The quality issues go far beyond what was known, especially in the onshore area.”
“Failure rates affect some components like (before), but they are also different because they are new forms of failure.”
He added: “We are addressing the subject but it takes time and it comes at a cost.”
The expected cost of more than one billion euros should be spread over “a series of years”.
It comes less than two weeks after Siemens Energy took full control of Siemens Gamesa in an attempt to turn around the business after a series of profit warnings.
Describing the announcement as a “huge setback”, Bruch said he still believed the new company structure would help resolve the issues. “I remain convinced that the energy transition can only be managed with the help of wind power,” he added.
In its February quarterly results, Siemens Gamesa booked 1.6 billion euros in new orders, boosted by projects in Canada, India and Germany.
Siemens Energy, spun off from the German Siemens conglomerate, also manufactures turbines for gas-fired power plants and electrical substations, among other products.
It plans to provide more details in its next scheduled trade update. Siemens Energy is sticking to its overall revenue forecast.
Siemens Energy shares fell 30% to €16.16 on Friday.