Siemens Gamesa loses 884 million euros in just three months

It looks like a bottomless pit. Since the merger between the companies Siemens Wind Power and Gamesa materialized in the spring of 2017, the resulting company has become a machine for generating losses in the millions. In the last three months of activity, in the period from October to December last year, the Basque wind power company has reaped no less than 884 million euros in losses. It would have been a "complicated quarter", as the company has described it, if it were not for the fact that it lost 924 million in the last full financial year and another 627 million in the previous one.

The company, now almost 100% controlled by the German multinational Siemens Energy, has not been able to find a way out of its particular crisis, and for each problem there is not a solution but an additional setback. The latest, already acknowledged by its managers, is that a good part of the wind power generation equipment sold in recent years has more mechanical and electrical problems than expected. As a consequence of this discovery, they have already had to provision -anticipate future losses that are taken as certain- more than 400 million euros to attend to repairs and fulfillment of guarantees that they have given to their customers. Bad business.

Unlike other cases of companies in losses or in crisis, Siemens Gamesa does not have a market problem -wind energy is in vogue in much of the world- and neither does it have a problem with sales or order book. It is the only thing that is improving, although in this case it seems that higher sales are followed by greater losses. The company posted a turnover of 2,008 million euros in the last three months, an increase of 9.8% compared to the same period last year. The orders, worth 33.7 billion, guarantee a workload for the next four years, and the challenge for the current management - the CEO has changed three times in just five years - is to make money out of it. At least, not to lose it.

More problems

The disaster of unexpected breakdowns in the wind-powered electricity generation turbines was the last straw. Before that, there were not inconsiderable losses in the construction of several wind farms in northern Europe -the deadlines were not met and the penalties have been historic-; numerous technical problems in the 5.X turbine for onshore generation that have delayed the delivery promised to customers and also a sudden increase in raw materials and equipment components that have destroyed the profit and loss account. Machines sold three years ago at a fixed price and at the costs of the time, have now become, just at the time when they had to be manufactured and delivered, full-spectrum turbines: in addition to generating electricity they also generate losses in the millions.

The company has nevertheless conveyed a message of confidence for the future, although it has admitted that it will take some time - certainly more than a year - to get the company back on track. They have launched a plan to integrate departments and simplify the structure; also a workforce adjustment that affects 2,900 employees worldwide -of which 350 in Spain- and its integration in Siemens Energy will give it a financial lifeline because in this aspect there are also weaknesses. Its net financial debt is already around 2,000 million euros and it will need an injection of resources to try to cross the desert of losses that still lies ahead.