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- About 1/6 of all electricity generated in the world is based on technology from Siemens Energy
- Leading portfolio of conventional to renewable energy
- Clear commitment to accelerate profitability, rigorously driving operational excellence, portfolio adjustments and gradual shift of focus from innovation to sustainability and service
- Clear target for adjusted EBITA margin (before Special Items) of 6,5% to 8,5% for fiscal 2023
At a virtual Capital Market Day, Siemens Energy, the world leader in energy infrastructure, today presented its post-spin-off strategy. Siemens Energy pursues accelerated profitable growth. Management aims to achieve an adjusted EBITA margin before Special Items of between 6,5% to 8,5% for fiscal 2023. The Board of Executive Directors is committed to driving operational excellence, adjusting the portfolio to meet market demand and gradually shift focus from innovation and R&D to sustainability and service.
“The separation of the energy business is an important milestone in implementing our Vision 2020+ strategic concept. We have created a leading independent energy company with a strong brand and the industry's most comprehensive offering. As a result, Siemens Energy is best equipped to lead the transformation of global energy in a sustainable and economically viable way. The new Siemens AG, in turn, will become a transparent and significantly risk-free company. With its core businesses Digital Industries, Smart Infrastructure and Mobility, the company will play a significant role in shaping the industrial digitization known as Industry 4.0,” said Joe Kaeser, CEO of Siemens AG.
Relevant player to ensure sustainable energy supply in the future
Siemens Energy will become independent at a time characterized by fundamental changes in energy systems around the world. The balance between fossil fuels and renewable energy sources is changing. At the same time, around 850 million people still live without access to electricity. According to studies, the global demand for electricity generation will increase by more than 50% by 20401. One of the main challenges for societies, as well as for companies around the world, is to meet the growing demand for energy while at the same time , protecting the climate – and doing so economically.
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Due to the richness of its portfolio and its state-of-the-art technology, Siemens Energy is well positioned to meet different customer and societal requirements. With 91.000 employees in more than 90 countries, the company is a world leader in almost the entire energy value chain. It is estimated that 1/6 of all electricity generated is based on Siemens Energy technology, confirming that it is an extremely relevant company to guarantee future supplies of sustainable energy.
Christian Bruch, President and CEO of Siemens Energy, said: “Siemens Energy is a mirror of today's energy world. Our comprehensive and diverse products, solutions and services allow us to meet the world's growing demand for energy while supporting efforts to reduce greenhouse gases. This puts us in an ideal position to serve our customers through the energy transition.”
Courage for temporary solutions
The growing demand for energy needs to be met in an environmentally friendly way – sustainable, affordable and reliable. However, energy market transformation starts at a wide range of different points and proceeds at different speeds. It depends on the economic development and political agendas of individual countries, as well as their access to energy sources.
“The challenge our customers face is converting their facilities to a more sustainable configuration. But we also need to face the fact that this transformation will not happen overnight. There are still more than 850 million people around the world without access to electricity. So the question is how to turn this gap into an affordable, reliable and sustainable energy supply,” said Christian Bruch, president and CEO of Siemens Energy. “What we need, therefore, is the courage to find temporary solutions that make us better today, based on available technologies, such as greater efficiency or the use of clean fuels. At the same time, we need to continue to use innovative technologies to ensure we don't get stuck with halfway solutions. Siemens Energy is the right partner to tackle all these challenges.”
Industry leader in decarbonization
When it comes to decarbonization, Siemens Energy is the industry leader: more than 50% of its portfolio is already decarbonized. Its broad portfolio includes products that enable the energy transition, such as hybrid power plants and gas turbines that can run on hydrogen. Siemens Energy is also a major player in wind power and invests in the hydrogen economy. Its SF6 (sulfur hexafluoride) free drive portfolio is industry leading. With the help of Siemens Gamesa Renewable Energy (SGRE) products, customers are already saving more than 260 million metric tons of greenhouse gases per year.
ESG (Environmental, Social, Governance) is a key aspect of Siemens Energy's strategy. The company is committed to the UN SDGs and to achieving climate neutrality in its own operations by 2030, while setting strict targets for employee health and safety. Additionally, inclusion and diversity are key elements of Siemens Energy's sustainability strategy. In terms of gender diversity, the Executive Board is committed to increasing the number of women in leadership positions at the top two organizational levels below the Executive Board by at least 25% by 2025 and by at least 30% by 2030.
accelerated profitability
The Board of Executive Directors aims to accelerate profitability globally, vigorously driving operational excellence, making portfolio adjustments to meet market demands and gradually shifting towards sustainability and services.
Christian Bruch, president and CEO of Siemens Energy, says: “Siemens Energy is a great company to tackle the global challenge of energy supply and transition, however our performance needs to improve. The target is to increase our adjusted EBITA margin before Special Items from 6,5% to 8,5% for fiscal 2023.”
In the first phase of the strategy, the focus of Siemens Energy's Gas & Power segment is on increasing profitability and cash flow through fiscal 2023. Among the most important drivers for operational excellence, the company is evaluating a leaner cost structure, optimized logistics, centralized purchasing and reduced non-compliance costs. For example, Siemens Energy recently downsized its offering of aeroderivative gas turbines. In addition, the company is currently analyzing a potential exit from its coal-fired energy business, which generates a lot of CO2.
Another lever in the Gas & Power segment will be a rigorous focus on project selection and better execution. Projects with a negative lifecycle margin will constantly be phased out and the bidding processes will be more selective to improve the margin in the project business. The organization is currently evaluating operational excellence initiatives targeting more than €300 million of additional annual gross global cost savings, above the already announced savings target of €1 billion by fiscal 2023, compared to baseline costs. for the 2018 fiscal year.
The Services item is an important driver of value
At the heart of Siemens Energy's future value creation is the services business, with high conversion rates of up to 100% (the latest in large high-efficiency gas turbines). Siemens Energy's Services business is highly resilient and is based on its large installed base and long-term service contracts and generated revenues of €9,5 billion in fiscal 2019. of the Generation Division's revenue is linked to services; in Industrial Applications, the revenue contribution was even higher, around 2019%. In Transmission, Services comes from a small base, but is growing similarly to SGRE (Siemens Gamesa Renewable Energy). All things considered, the backlog of services for the Siemens Energy Group's segments was €51 billion as of June 60, 48.
Leading the energy transformation through innovation
Siemens Energy will shift its R&D spend in line with strict return criteria targeting service and sustainability, the two key value drivers in the ongoing energy transformation. Spending €1 billion annually on R&D, as well as the fact that the Group has a portfolio of more than 24.000 patents and utility models, in addition to employing approximately 5.000 people in R&D, shows the importance of innovation for Siemens Energy.
Solid financial foundation with significant growth potential
Siemens Energy has a solid financial foundation. The Group received liquidity equivalent to approximately EUR 6,4 billion, resulting in Siemens Energy's net cash position (excluding SGRE business activities) of approximately EUR 2,2 billion, and a substantial order book of €82 billion, both as of June 30, 2020. Siemens Energy demonstrated resilience in fiscal 2019, with orders of €33,7 billion generated across the group and total revenue of €28,8 billion euros, resulting in a solid BO/BI (book-to-bill) ratio of 1,2. The main financial KPI of the Group's earnings release is Adjusted EBITA before Special Items, which increased from €1,46 billion in FY 2018 to €1,52 billion in FY 2019, of which €0,8. 2023 billion euros was generated by the Gas and Power segment. For fiscal 6,5, Siemens Energy is targeting an Adjusted EBITA margin before Special Items of between 8,5% to XNUMX%.
