Prior to Siemens Energy's fourth-quarter financial report, Kepler Cheuvreux analysts suggested in a research note Tuesday that, even with the earlier profit warning, the organization "could have considerable unpredicted liquidity fluctuations during the next financial year." Deutsche Bank decreased its 12-month stock price outlook for Ørsted, a Danish energy major, by 36% on Monday, referencing delays from suppliers, reduced tax credits and increased prices. Similarly, ONYX Insight, tracking more than 14,000 turbines in 30 countries, showed in a report Tuesday that supply-chain issues remain the largest difficulty for wind-power industry operations.
As the top dogs in the wind power sector announce their quarterly financial results, the dependability of their supply chains has become a major focus for both investors and industry heads. At the beginning of the year, Siemens Energy caused a stir when it cancelled its financial forecast and alerted that expensive difficulties from the Siemens Gamesa wind turbine subsidiary could remain for a long time. This stirred up worries about more extensive troubles throughout the industry and put the European wind power giants' economy in the spotlight. Siemens Energy is anticipated to announce its financial fourth quarter figures on Nov. 15. Its stock has dropped more than 35% so far this year. Other than the turbine issues, the German energy firm reported orders of approximately 14.9 billion euros ($15.7 billion) in its third quarter, a more than 50% rise from the year before, mostly due to substantial orders from Siemens Gamesa and Grid Technologies. Nevertheless, the 2.2 billion euro penalty because of Gamesa's quality complications prompted Siemens Energy to anticipate a net yearly loss of 4.5 billion euros. Ahead of its fourth-quarter earnings, Kepler Cheuvreux analysts wrote in a Tuesday study note that despite having already warned about profits, the business "is still vulnerable to immense negative cashflow shifts in the next fiscal year." Siemens Gamesa Faces Weak Order Intake, Delivery Delays and Rising Penalties
It is predicted that Siemens Gamesa will face significant struggles, including low order intake, delivery delays, and increased customer penalty payments throughout the first half of the year. Furthermore, the issues at Siemens Gamesa are overshadowing the stability in other divisions of the company. With this in mind, Morgan Stanley has reduced its price target for Siemens Energy from 20 euros per share to 18 euros per share, although they still hold an overweight long-term position in regards to the stock. Ben Uglow, a capital goods analyst at Morgan Stanley, noted in a research note Monday that the current valuation for Siemens Energy has a negative value for the Gamesa division which may have been excessively punished. He further commented that it will take some time to regain investor confidence, although there appears to be an undemanding valuation and good fundamentals in the Gas & Grid businesses, prompting them to remain Overweight. Additionally, Deutsche Bank this week made an enormous 36% cut to their 12-month share price forecast for Danish wind energy producer Ørsted prior to its interim earnings report on November 1. As a result, the stock has dropped by half in value since the beginning of the year.
Deutsche had previously alerted to difficulties in the wind turbine sector, including supplier issues, reduced tax credits and increasing costs. Nonetheless, Ørsted's share cost dropped even more earlier this year when they suggested a 2.1-billion-euro impairment charge in their US offshore wind portfolio.Simultaneously, Danish wind turbine maker Vestas - although still procuring considerable orders - has observed its stocks drop roughly 30% thus far this year due to consistency problems disturbing the industry as a whole. Vestas will be releasing its interim financial report for the third quarter on Nov. 8.Supply chain concernsONYX Insight, tracking over 14,000 wind turbines across 30 countries, stated in a report Tuesday that supply chains are still the primary problem for the sector, with dependability not far behind.The analytics business, possessed by British energy giant BP, questioned senior personnel at over 40 owners and operators of wind turbines all over the world to get a better understanding of industry leaders, and found that 57% stated the supply chain as the main impediment to their actions.ONYX Chief Commercial Officer Ashley Crowther said that while effects of Covid-19 on production were just beginning to heal - then Russia's invasion of Ukraine and the subsequent ascent in inflation appeared.
According to Crowther's report, survey participants have experienced delays in new projects, mainly due to increased lead times for the supply of new turbines and price surges. This tallies with what the Original Equipment Manufacturers (OEMs) have stated in their financial reports, such as Vestas indicating a 29% rise in average selling prices of wind energy solutions in its 2022 annual report. Furthermore, supply chain issues have mainly impacted OEMs like Siemens Gamesa and Vestas, and this has been evidenced in their recent financial reports, with major Western OEMs suffering losses or issuing profit warnings and implementing restructuring plans to handle the crises. Additionally, those surveyed by ONYX expressed worries over reliability, with 69% foreseeing more issues due to aging assets and 56% attributing problems to new turbine technology. Conversely, only 22% saw reliability problems decreasing from new technology upgrades. Crowther attributes this to OEMs trying to fulfill market demand a few years ago by quickly designing and delivering turbines with the aim of creating energy at cheaper prices but at the expense of durability.
He commented that supply chain issues, in combination with multiple turbine designs, had caused OEMs to suffer financial losses, which includes being liable for liquidated damages payments. He continued by pointing out that this situation had prompted manufacturers to engage in price competition, leading to bigger turbines quickly being made with reduced quality.
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