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Summary
- Free cash flow pre tax seen at 1.0 bln to 1.5 bln euros
- Q3 sales at 8.8 bln euros vs 8.6 bln in LSEG poll
- Shares more than doubled YTD, strongest DAX performers
(Reuters) – Siemens Energy on Wednesday raised its free cash flow outlook for the second time in three months, citing stronger demand for its power grid equipment and gas turbines as the group recovers from a crisis at its wind division.
The company, which supplies the utility sector with components and services, had to seek help from the German government last year in the form of project guarantees to tackle serious quality problems at its wind turbine business.
But rising electricity demand, and the need for gas turbines, network parts and maintenance, have provided tailwind for the group that competes with U.S.-based GE Vernova, Denmark’s Vestas and China’s Goldwind.
Its shares have more than doubled since the beginning of the year, making Siemens Energy, which was spun off from Siemens AG in 2020, the strongest performer in Germany’s blue-chip index.
“The rapidly growing electricity market requires a wide range of our products. Especially our grid and gas turbine businesses are benefiting from this momentum,” Siemens Energy Chief Executive Christian Bruch said.
The group said it now expects free cash flow before tax of 1 billion to 1.5 billion euros ($1.1 billion to $1.6 billion) in 2024, from up to 1 billion previously. Third-quarter sales rose 18.5% to 8.8 billion euros, beating the analyst consensus of 8.6 billion euros based on LSEG data.
GE Vernova also raised its outlook last month, helped by increased demand for power equipment, as markets around the world are expanding their exposure to renewable energy and upgrading existing grid infrastructure.
Citi analysts described Siemens Energy’s results as decent, but noted limited upside due to the strong share price recovery.
“Reporting season has seen the market reacting somewhat unforgivingly towards a number of stocks in our coverage which have seen strong share price performance YTD. The lack of an upgrade to margin guidance may disappoint bulls,” they wrote.
Siemens Energy shares were up 2% at 1022 GMT.
The company also slightly narrowed the outlook for its struggling wind turbine division Siemens Gamesa, forecasting a loss before special items of up to 2.0 billion euros, while it previously did not rule out that the loss could exceed that level.
Siemens veteran Vinod Philip took charge at the division at the beginning of August. Bruch said he had hit “the ground running” in terms of the company’s efforts to restructure the business.
The company said statistical model updates for its 4.X and 5.X wind turbine classes, which were at the centre of the quality crisis, had not led to any material impact, easing concerns about any potential follow-up costs.
($1 = 0.9164 euros)
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