Whether on the Iberian Peninsula, in the Canadian province of Alberta, on the west coast of Peru or along the Danube in Serbia: New wind turbines are currently being installed around the globe. This renewable energy source plays a central role in the fight against climate change. According to figures from the International Renewable Energy Agency, newly installed capacity reached 93 gigawatts (GW) last year. Within five years, the capacity of wind turbines installed worldwide has increased by more than three quarters to a total of 824.8 GW. Despite these impressive figures, stocks in the sector are in the doldrums. The share prices of the leading wind power specialists are under enormous pressure. This also applies to Siemens Energy - on a one-year horizon, the German turbine giant has lost more than 30% of its capitalization.
A side effect of the correction was that the share only experienced a brief interlude in the DAX. In March 2021, half a year after the spin-off from the Siemens parent company including the stock exchange listing, Siemens Energy had moved into the German leading index. Twelve months later, the industrial stock was relegated to the MDAX. The downgrade to the mid-cap benchmark is likely to be one of CEO Christian Bruch's minor problems. The mechanical engineer with an ETH doctorate has been at the helm of the tradition-rich company for a good two years. Since then, the core division "Gas and Power" has developed according to plan: Its profitability has increased by 35% in the year and a half since the spin-off from Siemens. Bruch has to contend with almost notorious difficulties in the wind power sector. It is true that the subsidiary Siemens Gamesa has a bulging order book. At the end of fiscal year 2021 (as of September 30), the order volume amounted to more than EUR 32 billion (see chart). But the Spanish company is not managing to make a proper and, above all, lasting profit from the boom.
On the contrary, Siemens Gamesa has had to cut its earnings targets three times in less than a year. In the first half of fiscal 2022 alone, the company posted a loss of EUR 377 million. A few weeks after the interim report was presented, the parent company pulled the ripcord. Siemens Energy wants to take over the Spanish subsidiary completely and delist it from the stock exchange. The group plans to make a takeover bid worth a good EUR4 billion for the 33% of shares outstanding. "An integration allows us to access a common infrastructure," the CEO said, explaining the move. He hopes to achieve synergies of around EUR 300 million per year - especially in purchasing and logistics. Nevertheless, Christian Bruch expects the restructuring to take years. On the one hand, Siemens Gamesa, like its competitors, is struggling with rising raw material costs. At the same time, there are start-up difficulties with the new 5.X wind turbine generation.
In addition to the crackdown in Spain, Siemens Energy as a whole is to be made leaner. At its recent Capital Markets Day, the company announced plans to eliminate nearly one in three managerial positions. In addition, the segment for gas and power plants will be divided into three business units. In addition to the largest segment, gas turbines and their maintenance, there will be a segment for power transmission and storage as well as the business area "Transformation of Industry" - where Siemens Energy is primarily dedicated to reducing energy consumption and CO2 emissions in industrial processes. With the new structure, which is to take effect from the coming fiscal year, the Group aims to offer the capital markets greater transparency. Regardless of these measures, stock market players are likely to pay particular attention to whether and how quickly management makes progress in the wind power sector.
A largely stable price performance would be enough for the new barrier reverse convertibles (BRCs) to play to their strengths. Leonteq has launched several variants of this popular yield enhancement structure. As a single underlying, Siemens Energy makes coupon payments of 10% p.a. each in the product currencies CHF and EUR. The barriers are uniformly set at 59% of the initial level. A multi-BRC also offers interesting conditions. Besides Siemens Energy and the Danish industry giant Vestas, ABB is the underlying. The Zurich-based group is involved in the wind power segment with various components. The coupon on this CHF product is 14% p.a.. This opportunity is partially protected by a risk buffer of 41%. For all three BRCs, the term ends after 15 months. Please note: As soon as there is a barrier breach, the partial protection expires. In addition, early termination and redemption is possible due to the soft callable feature.
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