Siemens Energy CEO sees limited synergies in struggling wind turbine unit

Summary: Siemens Gamesa made $1.59 billion operating loss; Unclear whether it can turn double-digit margins; Wind unit only loss-making business in group

BERLIN - Siemens Energy sees limited synergies between its struggling onshore and better-performing offshore wind units, its CEO said on Friday, reflecting ongoing uncertainty over the future of the group's only loss-making division.

Siemens Gamesa, Siemens Energy's wind division that produces both offshore and onshore turbines, is still recovering from a quality crisis two years ago, causing the division to post an operating loss late Thursday of 1.36 billion euros ($1.59 billion) in the fiscal year that ended in September.

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While management had high hopes for the wind business when Siemens Energy was spun off from Siemens AG (SIEGn.DE), opens new tab in 2020, it is gas turbines and power networks fuelling most of the group's profits and share price.

"We have to believe that wind is a double-digit margin business," Siemens Energy CEO Christian Bruch said on Friday at the group's annual press conference, adding it was too early to say whether that was the case.

ALL BUSINESSES MUST DELIVER DOUBLE-DIGIT MARGINS

Asked about a potential breakup of the division to rid itself of the weaker onshore business, Bruch told Reuters: "synergies between the two businesses, I do believe they're more limited than people believe."

Finance chief Maria Ferraro said all of the group's businesses were expected to deliver double-digit margins, adding there were regular portfolio reviews with that aim in mind.

Siemens Energy, which also on Thursday raised its mid-term targets and proposed its first dividend in four years on strong demand for gas turbines and power grids, confirmed that it expects Siemens Gamesa to break even in 2026.

For 2027, a small profit is expected, Bruch said.

The unit's ongoing losses have repeatedly driven calls by investors to review or even sell the business, but Siemens Energy has so far committed to turning the business around, touting the long-term prospects for wind energy overall.

"Keep in mind it's a tale of two cities," Bruch said. "Offshore, we are market leader. We have excellent products. If the market continues to thrive ... I think we are well positioned also to continue to grow the margins."

For onshore wind, where the quality issues caused it to halt the sale of its newer generation turbines, Bruch said "the key question will be: Will the Chinese flood the market or not? I don't know this yet."
($1 = 0.8575 euros)