Siemens Gamesa sets new business strategy

Siemens Gamesa CEO Andreas Nauen

Siemens Gamesa Renewable Energy has revealed its strategy to achieve profitable growth.

Siemens Gamesa said that a refreshed corporate strategy would unleash the full potential of the company by capturing growth opportunities in its profitable Offshore and Services businesses and driving a turnaround in Onshore.

The strategy prioritizes profitability over volume, cash generation, as well as efficiency and productivity in all operations.

Siemens Gamesa CEO Andreas Nauen said: “It has been a tough period for the industry and the company, but I am confident we have all the right components in place. Our people, technology, scale and global footprint are strong foundations on which to build a long-term industry leader.”

While wind turbine manufacturers’ margins have been eroded by external factors — such as the introduction of auctions, global trade tensions, and the disruption caused by COVID-19 — the long-term outlook for wind power is very favorable.

According to the International Energy Agency (IEA), renewable energies will account for more than 50 percent of the global capacity mix in 2040 and wind is expected to attract the highest investments in that period, according to BNEF.

Strong growth is expected in particular in the Offshore and Services markets over the next decade, while demand in Onshore will remain solid. Prospects are expected to be buoyed by the emergence of green hydrogen technologies in which SGRE expects wind to play a key role.

“We have a strong profitable competitive position in the growing Offshore (#1) and Services (#2) markets, and there is very significant potential in our Onshore business that we will realize through the turnaround process now underway,” said Nauen.

The company presented the LEAP acceleration program based on three pillars:

# Innovation: both in terms of product portfolio and business offering
# Productivity: through cost optimization and strict cash management
# Operational excellence: in project execution quality and in health and safety in our operations

Digitalization and sustainability are at the heart of the LEAP program, as enablers and differentiating factors.

Financial objectives

# EBIT margin pre-PPA and I&R costs in the range of 8 percent-10 percent
# Grow faster than the market
# Cash conversion rate greater than 1 minus growth

Siemens Gamesa expects to achieve these objectives as financial framework by 2023.

Siemens Gamesa expects revenues of €10.2-11.2 billion and EBIT margin pre-ppa and I&R costs in the range of 3-5 percent for fiscal year 2021.

Business units

WTG – Onshore industry forecasts predict stable long-term demand, with estimated high level of annual installations of 55 GW through 2025 growing to more than 65 GW in 2030. Siemens Gamesa has defined a roadmap to return the business to sustainable profitability, leveraged on the LEAP program and focused on prioritizing profitability over volume, as well as reducing the risk profile of the business model.

The WTG – Offshore segment is expected to achieve strong growth in current European markets but also in new emerging markets globally such as Taiwan or the United States. On the back of this growth potential, installations of more than 180 GW are expected between 2020 and 2030. Siemens Gamesa will continue to develop its technology, delivering innovative solutions, such as the new SG14-222 DD turbine.

Siemens Gamesa is well positioned in the Service segment, which is projected to achieve 8 percent CAGR through 2025. The company plans to outstrip the market maintaining strong profitability through innovation and developing business models including digital solutions while maintaining focus on productivity and operational excellence.