According to earnings reports released last week, due to supply chain disruptions and soaring freight rates, wind turbine maker Siemens Gamesa Renewable Energy has decided to reduce its fiscal 2022 profit outlook, saying supply chain issues are lasting longer than expected.
Supply chain issues may be something that every company and industry has encountered after the advent of the COVID-19 pandemic. The closure of ports and cities to prevent outbreaks hit local transportation supply chains. Even if lockdowns are lifted, it takes quite some time to ease the congestion of goods at ports or freight stations. As a result, supply chain disruptions have led to costs that are much higher than expected. In addition, the pandemic has also made the market more volatile and unpredictable, affecting customer investment decisions and delaying plans.
At present, Siemens Gamesa's 5MW onshore wind turbine is also a headache for the company. Its design needs to be modified which may delay Siemens Gamesa's production and delivery plan. Siemens Gamesa's statement pointed out that the supply chain bottleneck exacerbated production delays. Siemens Gamesa CEO, Andreas Nauen, said in an interview that changing the design the 5.X wind turbine mainly affects the blades. Tests have shown that there are problems with the blades and internal materials need to be changed.
Taking into account higher costs, unpredictable market and production conditions, and cost estimates for contracts, Siemens Gamesa expects a negative impact to EBIT (earnings before interest and taxes) of EUR 289 million in the first quarter of fiscal 2022.
Revenue is now expected to decline by 9% to 2% in fiscal 2022 and 2021, down from a previous forecast of 7% to 2%. Analysts at German bank Berenberg stated, this is of course disappointing, as Siemens Gamesa had raised the alarm on these issues last quarter yet now it appears to have clearly underestimated the scale of the impact.
On the other hand, Nauen pointed out, in terms of wind turbine contracts, customers also missed some contractual obligations, sometimes deviating from prior planning. He pointed out that this problem also occurs with offshore wind turbine contracts in Taiwan.