Siemens Energy : Q3 FY2023 Earnings Release and Financial Results

Earnings Release Q3 FY 2023

April 1 to June 30, 2023

Munich, Germany, August 7, 2023 - Siemens Energy today announced its results for the third quarter of fiscal year 2023 that ended June 30, 2023.

Serious ramp-up challenges in the wind business overshadow excellent performance in conventional energy business

"Our third-quarter results demonstrate the challenges in turning around Siemens Gamesa. The strong performance of our other business areas gives me confidence in our company's ability to put businesses back on a strong footing", says Christian Bruch, President and CEO of Siemens Energy AG.

• Siemens Energy's results of the third quarter were impacted by charges at Siemens Gamesa. These relate mainly to quality issues of certain onshore platforms as well as increased product costs and ramp-up challenges in the offshore business.
• Siemens Energy continues to benefit from a favorable market environment. Orders of €14.9bn reflect 54.2% growth on a comparable basis (excluding currency translation and portfolio effects), primarily driven by large orders at Siemens Gamesa and Grid Technologies (GT). The Book- to-bill ratio (ratio of orders to revenue) came in at 1.98 and led the order backlog to a new record of €109.0bn.
• Revenue increased by 8.0% on a comparable basis to €7.5bn.
• Profit before Special items of Siemens Energy was negative with €2,048m (Q3 FY 2022: negative €222m) driven by above mentioned charges at Siemens Gamesa totaling €2.2bn. Profit before Special items at Gas Services (GS), GT, and Transformation of Industry (TI) sharply increased compared to the prior-year quarter, driven by continued strong operational performance.
• Special items declined to negative €41m (Q3 FY 2022: negative €259m) as the prior-year quarter was heavily burdened by Russia-related
  charges. Profit for Siemens Energy was negative with €2,089m (Q3 FY 2022: negative €481m).
• Siemens Energy reported a Net loss of €2,931m (Q3 FY 2022: Net loss €564m), including negative tax effects from valuation allowances on deferred tax assets in connection with the charges at Siemens Gamesa. Corresponding basic earnings per share (EPS) were negative €3.42 (Q3 FY 2022: negative €0.58).
• Free cash flow pre tax improved to positive €27m from negative €25m in the prior-year quarter.
• In light of the developments at Siemens Gamesa, management adjusts the outlook for Siemens Energy. Due to the aforementioned challenges at Siemens Gamesa, management now expects for Siemens Energy Group comparable revenue growth to be in a range of 9% to 11%, a Profit margin before Special items between negative 10% and negative 8% and a Net loss of around €4.5bn. Free cash flow pre tax now is expected up to a negative low triple-digit million € amount. Management maintains its revenue and Profit margin assumptions for the segments GS, GT, and TI.

Siemens Energy

				Q3
(in millions of €)		FY 2023		FY 2022		Change
Orders	14,886	9,840	54.2%¹
Revenue	7,506	7,280	8.0%¹
Profit	(2,089)	(481)	>(200)%
Profit margin	(27.8)%	(6.6)%		(21.2) p.p.
Special items (SI)	(41)	(259)	(84.2)%
Profit before SI	(2,048)	(222)	>(200)%
Profit margin before SI	(27.3)%	(3.0)%		(24.2) p.p.
Net income (loss)	(2,931)	(564)	>(200)%
Basic earnings per share	(3.42)	(0.58)	>(200)%
(in €)
Free cash flow pre tax	27	(25)		n/a

1 Comparable basis: Excluding currency translation and portfolio effects. Orders developed year-over-year by 51.3% on a nominal basis, revenue respectively by 3.1%.

Earnings Release Q3 FY 2023 | Siemens Energy

• Sharp orders growth year-over-year was due to Siemens Gamesa and GT, mainly driven by higher volume from large orders.
• Book-to-billratio came in at 1.98. The order backlog once again ex- ceeded the previous record level and rose to €109.0bn.
• Revenue increased clearly, but was held back by a decrease at Sie- mens Gamesa.
• Service revenue share increased slightly year-over-year.
• Profit before Special items declined sharply due to Siemens Gamesa's loss. All other segments sharply exceeded their prior-year quarter's level both in terms of profit and corresponding margin.
• Special items sharply declined year-over-year as the prior-year quar- ter was burdened by charges of €0.2bn related to the restructuring of business in Russia.
• Negative tax effects in connection with the charges at Siemens Gamesa which impacted Net loss resulted from valuation allowances on deferred tax assets.
• Free cash flow pre tax included a material cash outflow at Siemens Gamesa which was more than offset by an overall positive Free cash flow pre tax of the other segments and Reconciliation to Consoli- dated Financial Statements.

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Gas Services

				Q3
(in millions of €)		FY 2023		FY 2022		Change
Orders	2,177	2,612	(17.2)%¹
Revenue	2,719	2,376	21.2%¹
Profit	291	42	>200%
Profit margin	10.7%	1.8%		8.9 p.p.
Special items (SI)	(5)	(111)	(95.2)%
Profit before SI	296	153	93.2%
Profit margin before SI	10.9%	6.4%		4.4 p.p.

1 Comparable basis: Excluding currency translation and portfolio effects. Orders developed year-over-year by (16.7)% on a nominal basis, revenue respectively by 14.5%.

Earnings Release Q3 FY 2023 | Siemens Energy

• Orders decreased year-over-year driven by lower volume from new units large gas turbine orders, while orders in the service business had a positive effect.
• Book-to-billratio was 0.80. The order backlog amounted to €41.3bn (March 31, 2023: €42.1bn).
• Revenue grew substantially both in the new unit and the service business.
• Profit before Special items almost doubled year-over-year. The in- crease was due to higher volume, continued operational improve- ments as well as a more favorable business mix.
• Prior-yearquarter was considerably burdened by charges related to the restructuring of business in Russia.

Grid Technologies

				Q3
(in millions of €)		FY 2023		FY 2022		Change
Orders	4,294	2,660	63.9%¹
Revenue	1,823	1,588	18.7%¹
Profit	154	(21)		n/a
Profit margin	8.5%	(1.3)%		9.8 p.p.
Special items (SI)	(5)	(47)	(89.9)%
Profit before SI	159	26	>200%
Profit margin before SI	8.7%	1.6%		7.1 p.p.

1 Comparable basis: Excluding currency translation and portfolio effects. Orders developed year-over-year by 61.4% on a nominal basis, revenue respectively by 14.8%.

• Continued strong orders mainly supported by large orders in the so- lution business, including an order for offshore grid connections in the North Sea. Continued strong order momentum in the product business. All reporting regions showed growth led by Europe due to the large order mentioned before.
• GT reported a Book-to-bill ratio of 2.35 with the order backlog rising to €22.2bn.
• Revenue grew significantly, supported by all businesses.
• Profit before Special items and the corresponding margin sharply in- creased. The improvement was driven by margin-accretive volume growth and operational improvements. The prior-year quarter was burdened by strong headwinds from supply chain constraints and negative hedging effects.
• Negative impacts from Special items in the prior-year quarter related mainly to the restructuring of business in Russia.

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Transformation of Industry

				Q3
(in millions of €)		FY 2023		FY 2022		Change
Orders	1,299	1,217	13.9%¹
Revenue	1,070	1,014	10.5%¹
Profit	65	(39)		n/a
Profit margin	6.0%	(3.8)%		9.9 p.p.
Special items (SI)	(5)	(55)	(91.2)%
Profit before SI	70	17	>200%
Profit margin before SI	6.5%	1.6%		4.9 p.p.

1 Comparable basis: Excluding currency translation and portfolio effects. Orders developed year-over-year by 6.8% on a nominal basis, revenue respectively by 5.6%.

Therein:

Sustainable Energy Systems		FY 2023		FY 2022		Change
Orders	4	2	136.3%¹
Revenue	24	12	109.3%¹
Profit margin before SI	(55.5)%	(111.7)%		56.2 p.p.

1 Comparable basis: Excluding currency translation and portfolio effects. Orders developed year-over-year by 137.0% on a nominal basis, revenue respectively by 109.3%.

Electrification, Automation,
Digitalization		FY 2023		FY 2022		Change
Orders	474	443	18.3%¹
Revenue	274	257	12.7%¹
Profit margin before SI	8.5%	(0.6)%		9.1 p.p.

1 Comparable basis: Excluding currency translation and portfolio effects. Orders developed year-over-year by 7.0% on a nominal basis, revenue respectively by 6.6%.

Industrial Steam Turbines
& Generators		FY 2023		FY 2022		Change
Orders	422	373	17.4%¹
Revenue	332	334	4.3%¹
Profit margin before SI	9.6%	8.3%		1.3 p.p.

1 Comparable basis: Excluding currency translation and portfolio effects. Orders developed year-over-year by 13.1% on a nominal basis, revenue respectively by (0.6)%.

Compression		FY 2023		FY 2022		Change
Orders	412	460	(5.8)%¹
Revenue	450	420	11.5%¹
Profit margin before SI	7.3%	0.9%		6.4 p.p.

1 Comparable basis: Excluding currency translation and portfolio effects. Orders developed year-over-year by (10.5)% on a nominal basis, revenue respectively by 7.2%.

Earnings Release Q3 FY 2023 | Siemens Energy

• Significant increase of orders year-over-year supported by growth in the Electrification, Automation, Digitalization and the Industrial Steam Turbines & Generators businesses. From a regional perspec- tive, the increase came primarily from Europe.
• Book-to-billratio was 1.21. The order backlog increased to €6.5bn.
• Clear revenue growth supported by all four independent businesses, mainly driven by the service business.
• Profit before Special items and the corresponding margin improved sharply year-over-year based on an improved business mix due to a higher service share, a better cost position resulting from structural capacity adjustments as well as some minor positive one-time effects at the Compression and the Electrification, Automation, Digitaliza- tion businesses.
• Special items in the prior-year quarter included charges primarily re- lated to the restructuring of the business in Russia.

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Siemens Gamesa

Earnings Release Q3 FY 2023 | Siemens Energy

• Orders more than doubled compared to an already strong prior-year

quarter. This was due to a higher volume from large orders, including

a single offshore order worth €2.3bn.

(in millions of €)

Orders

Revenue

Profit

Profit margin

Special items (SI)

Profit before SI

Profit margin before SI

			Q3
	FY 2023		FY 2022		Change
	7,359	3,523	113.2%¹
	2,054	2,436	(12.2)%¹
	(2,561)	(405)	>(200)%
	(124.7)%	(16.6)%		(108.0) p.p.
	(11)	(23)	(52.5)%
	(2,550)	(382)	>(200)%
	(124.1)%	(15.7)%		(108.5) p.p.

• Book-to-bill ratio came in at 3.58. The order backlog amounted to

€39.9bn.

• Revenue declined significantly, mainly due to the reversal of revenue

associated with the circumstances mentioned below.

• Profit before Special items was burdened by charges totaling €2.2bn

which included €1.6bn related to quality issues of certain onshore

platforms. Following a substantial increase in failure rates of certain

wind turbine components, an extended technical review suggested

that significantly higher costs will be incurred than previously as-

sumed to reach the targeted quality level. The other charges mainly

relate to increased product costs and ramp-up challenges in the off-

shore business.

1 Comparable basis: Excluding currency translation and portfolio effects. Orders developed year-over-year by 108.8% on a nominal basis, revenue respectively by (15.7)%.

Reconciliation to Consolidated Financial Statements

Profit before Special items (SI)				Q3
(in millions of €)		FY 2023		FY 2022
Total Segments	(2,025)	(186)
Reconciliation to Consolidated Financial Statements	(23)	(35)
Siemens Energy	(2,048)	(222)

Reconciliation to Consolidated Financial Statements includes items, which management does not consider to be indicative of the segments' performance - mainly group management costs (management and corporate functions) and other central items, Treasury activities as well as eliminations. Other central items include Siemens brand fees, corporate services (e.g. management of the Group's real estate portfolio (except Siemens Gamesa), which was allocated to the Gas and Power segment in the prior year), corporate projects, centrally held equity interests and other items.

The positive change year-over-year in Reconciliation to Consolidated Financial Statements was mainly due to a favorable one-time effect related to a legacy power plant construction project which more than offset increased costs for corporate functions.

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