Siemens Gamesa’s CEO Resigns After Run of Profit Warnings

(Bloomberg) -- Siemens Gamesa Renewable Energy replaced its chief executive officer after project delays and cost overruns led to profit warnings at the wind-turbine subsidiary of Siemens Energy AG.

Jochen Eickholt, a Siemens Energy executive board member, will succeed Andreas Nauen as CEO on March 1. Eickholt, 60, has a track record of restructuring struggling businesses and will be charged with fixing the issues that have plagued Siemens Gamesa.

“His proven ability to turn around underperforming businesses and his vast leadership experience will be key elements to successfully implement the necessary changes and improvements at Siemens Gamesa,” Siemens Energy Chairman Joe Kaeser said in a statement.

Turbine makers are grappling with rising commodity costs and pandemic-related disruptions to supply chains. Surging prices for energy, steel and copper have squeezed profit at Siemens Gamesa and its rivals. That's leading to tough conversations with customers, who may not be able to cope with higher expenses.

Siemens Gamesa on Thursday reported a net loss of 403 million euros ($455 million) for the first quarter, missing expectations by a wide margin.

“I'm disappointed about this outcome,” Nauen said on a call with reporters Thursday. “I have to admit the results are clearly not where they should be and I fully understand the board had to take this decision.”

The company warned there may be further impacts on earnings this year because of supply chain issues and the impact of Covid-19.

“We cannot rule out the possibility that a shortage of materials and components and/or a lack of transportation capacity might again have an impact on the business, particularly on deadlines and costs in larger projects,” the Zamudio, Spain-based turbine maker said in a statement.

Siemens Gamesa's raw material and logistics costs won't return to pre-Covid-19 levels until at least 2023, Nauen said on the conference call.

Facing Difficulties

The company is also facing difficulties scaling up one of its new turbine models, known as the 5.X platform. Volatile markets have impacted investment decisions by some of its customers, resulting in project delays. Siemens Gamesa reported a loss of 309 million euros in earnings before interest and tax for the first quarter of its 2022 fiscal year and warned that inflation will continue to weigh on margins.

Nauen was appointed to lead the company in June 2020 with the goal of returning the onshore division to profitability. Those efforts were made more difficult by the impact of the pandemic on commodities prices and logistics costs.

The issues at the company already weighed on Siemens Energy's results last year, frustrating the German firm's management and fueling speculation the parent might try to buy out other investors to seize full operational control.

Analysts at Bernstein said Eickholt's appointment as CEO could pave the way for Siemens Energy taking full control of the unit, noting his experience in turning companies around ahead of a transaction.

“The parallel is clear: take steps to stem Gamesa's hemorrhage, and prepare the business for integration with the parent,” analysts Nicholas Green and Jonathon Urwin wrote in a note.

Siemens Energy last month lowered its full-year outlook due to mounting losses at its renewable subsidiary.