Siemens Energy AG Unsponsored ADR ((SMERY)) has held its Q1 earnings call. Read on for the main highlights of the call.
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Siemens Energy AG’s latest earnings call carried a distinctly upbeat tone, underpinned by record orders, a swelling backlog, and sharply higher profitability. Management acknowledged foreign‑exchange and supply‑chain pressures, but stressed that operational progress, especially in Gas Services, Grid Technologies, and the Siemens Gamesa turnaround, is firmly outweighing the remaining risks.
Record Orders Signal Surging Demand
Siemens Energy reported orders of €17.6 billion, its strongest quarter ever and up 34% year on year on a comparable basis. The book‑to‑bill ratio of 1.82 shows demand far exceeds current revenue, underscoring strong medium‑term visibility for the business.
Backlog Peaks, Locking In Revenue Visibility
The company’s order backlog climbed to a record €146 billion, up from €138 billion at the end of the previous fiscal year. Management said this now covers about 90% of expected revenue for the rest of fiscal 2026 and just over 70% for 2027, effectively locking in much of future activity.
Double‑Digit Top‑Line Growth Despite FX Drag
Revenue reached €9.7 billion, an increase of 12.8% year on year on a comparable basis. This growth came despite an estimated 400‑basis‑point foreign‑exchange headwind from a weaker U.S. dollar, which dampened reported figures and especially service revenue comparisons.
Margins Rebound With Strong Profitability
Profit before special items rose to €1,159 million, representing a margin of 12.0% and more than doubling last year’s 5.4%. The 660‑basis‑point jump reflects operating leverage on higher volumes and improved performance across several key segments.
Net Income Jumps and Balance Sheet Strengthens
Net income surged to €746 million, an increase of €494 million compared with a year earlier. Cash and equivalents reached €11.8 billion, while the adjusted net cash position improved to €7.6 billion from €4.8 billion at the end of the prior fiscal year, supporting future investment and returns.
Record Free Cash Flow Powered by Prepayments
Free cash flow before tax nearly doubled year on year to €2.9 billion, a new record for the company. Management noted that strong orders, reservation fees, and customer prepayments were major contributors to this cash performance.
Gas Services Delivers Standout Quarter
Gas Services recorded orders of €8.8 billion, up 81% year on year, including 102 gas turbines representing 13 gigawatts of new capacity. The business generated about 13.9% revenue growth, €515 million profit before tax with a 16.6% margin, a book‑to‑bill of 2.83, and €1.9 billion of free cash flow before tax.
Grid Technologies Maintains Strong Momentum
Grid Technologies posted €6.0 billion in orders, up 22% year on year, with a backlog of €45 billion. Revenue rose to €3.1 billion, an increase of 26.9%, while profit before tax reached €538 million with a 17.6% margin and free cash flow before tax came in at €1.8 billion.
Siemens Gamesa Moves Closer to Breakeven
Siemens Gamesa reported a profit before special items of negative €46 million, a sharp improvement from negative €374 million a year earlier. Revenue grew 3.9% on a comparable basis to €2.4 billion, and management said productivity gains in offshore and services keep the unit on track toward breakeven.
Strategic Investments and Credit Rating Upgrades
Under its Elevate program, Siemens Energy highlighted a roughly $1 billion U.S. investment plan to expand manufacturing capacity and add about 1,500 jobs. The company also ramped up transformer capacity, secured copper supply via ASTA Energy, and saw its credit ratings lifted to investment‑grade levels by both S&P and Moody’s.
Capital Returns: Dividends and Buybacks
Management proposed a dividend of €0.70 per share for fiscal 2025, implying a cash outflow of around €600 million in the second quarter. In addition, a share buyback program of up to €6 billion through fiscal 2028 is set to begin in March, signaling confidence in future cash generation.
FX Headwinds Weigh on Reported Growth
A weaker U.S. dollar reduced Siemens Energy’s reported revenue growth by roughly 400 basis points compared with last year. The company indicated that this currency effect also affected service revenue comparables, masking some of the underlying operational strength.
Siemens Gamesa Still a Cash Drag
Despite the profit improvement, Siemens Gamesa generated negative free cash flow before tax of €545 million in the quarter. This included €101 million of quality‑related cash outflows, and management expects similar full‑year quality costs in the mid‑triple‑million euro range.
Special Items and Divestments Trim Headline Profit
Special items totaled negative €152 million in the quarter, mainly linked to the sale of the Indian wind business. These one‑off effects reduced reported net profit, although management emphasized that the underlying operational performance remains strong.
Supply‑Chain Constraints and Longer Lead Times
The company reported persistent supply‑chain challenges and cost inflation, particularly in the gas turbine supply base. Lengthening lead times are making delivery scheduling and customer slotting more complex and could ultimately push up installed project costs.
Seasonality and Timing Skew the Quarter
Management cautioned that the first half of the year is typically stronger than the second, and that Q1 benefited from favorable timing of prepayments and milestones. As a result, profitability and cash flow may not follow a straight upward line from quarter to quarter.
Order Timing Distorts Onshore and Offshore Trends
Siemens Gamesa’s orders fell to €1.6 billion, down from the prior year, largely because last year’s figures included a major offshore project. Some of the current quarter’s profitability also benefited from timing effects and hedging gains that may reverse in later periods.
Non‑Recurring Cash Boost From Reservation Fees
Strong free cash flow was heavily supported by reservation fees and customer advance payments, which are not fully disclosed in detail. Management warned that these elements are variable and may not recur at the same level, adding uncertainty to future cash‑flow comparisons.
Guidance and Outlook Underpinned by Record Start
Siemens Energy said it is fully on track to meet its 2026 guidance and kept 2028 targets unchanged, citing the record €17.6 billion of orders, 12.8% comparable revenue growth, and 12% margin in Q1. With a €146 billion backlog, high revenue coverage for 2026 and 2027, planned capital spending at about 5% of sales, and sizeable shareholder returns, management signaled confidence while acknowledging seasonality and ongoing Siemens Gamesa quality cash outflows.
Siemens Energy’s earnings call painted a picture of a company moving past prior troubles and benefiting from strong structural demand in gas and grid infrastructure. While foreign‑exchange swings, supply‑chain friction, and Siemens Gamesa cash outflows remain watchpoints, the combination of record orders, rising margins, and robust capital returns left investors with a broadly optimistic outlook.