Siemens Energy Ag

year 2023, we lowered our margin expectations and now expect a group profit margin for Siemens Energy of 1% to 3%. This compares to 2% to 4% before. I would like just to highlight, obviously, if you compare it at a midpoint, this is a cut by roughly 100 basis points, and it's less than the mathematical impact of the change at Siemens Gamesa on our group margins. which means obviously the rest of the business is doing better than expected. And this is obviously a good space for the future. I would also like to highlight that we now expect positive cash flow for the group for the full year. And our change of view reflects the fact that yet again, we expect very solid cash conversion at gas services and grid technologies in particular. Let me move to Siemens Gamesa. and what I, as chairman of Siemens Gamesa, see happening on the ground. Jochen and his team are making progress. The underlying performance at Siemens Gamesa was in line with our expectations, and I'm particularly pleased to see that we see a positive development when it comes to the 5X. During the quarter, manufacturing volumes were up. The same is true for installations and project delivery, times improved. Mistral, so the optimization program within SGE, is in implementation and the new organization is running as of 1st of January. However, the charge of SGE is obviously disappointing. It originates in the installed fleet and reflects elevated failure rates due to failing components. As of today, 472 million euro is the best estimate of the cost to replace these components. And the process will take now several years. Keep in mind, this is a running fleet, which then over the next years to come has to be maintained. And during that time, Johan and the team have the chance, together with the supplier, to mitigate these costs. So that could be a potential positive contribution from that. Let me now share with you what will happen after the delisting. Immediately with the delisting, seven board members will leave the board of SGE This means the board will consist of three people, Jochen Eichold as the CEO, Anton Steiger from the legal side, and myself as the chairman. And Siemens Gamesa itself as an entity will have very limited external reporting requirements. We are talking about a dramatic simplification of the governance structures, and this means that Jochen and his team can really focus 100% on solving the operational problems and to achieve the all-important turnaround, and we will all obviously will support Jochen and his team in achieving this. And parallel, we are aligning the functions in order to realize the first synergies, for example, in procurement and logistics. We are deliberately not touching the operations itself in order not to jeopardize the progress Siemens Gamesa is making by implementing Mistral. Mistral remains the underlying key program to drive forward and to stabilize the company. Once we attain 100% ownership of Siemens Gamesa, we will have a more integrated organization and realize the full synergies. Keep in mind, we said three years after full integration is what we target in terms of implementation of the synergies. Let me, like always, move to three highlights out of the quarter, underlining once again, obviously, our structure in terms of driving electrification or driving energy efficiency and transformation of industry. We have the competence to support really entire energy infrastructures. And in that regard, we, I have to say, extended the collaboration also with the Iraq government. We have been active in Iraq over the past years already in terms of repairs and refurbishment of existing infrastructure. The second phase now very much focuses on new build infrastructure, using flare gases or void flare gases, building renewables and total between conventional and renewable production around adding six gigawatts to the system over the next five years and also extending grid infrastructures. And this is something which will also help the Iraq to prosper going forward. We had a world scale award from Umbreon, which underlines also our role in the build out of the renewable infrastructure. The award was to a consortium between us and the Spanish company Zagados for a contract to connect several wind farms in the North Sea, then to the shore and supply a total capacity of around 4 gigawatts, so enough electricity to supply 4 million people. And the project will involve four 2 gigawatt converter stations and combines also service business with it. Just before Christmas, production started at the Haruoni plant in Chile. This is a project we introduced before. This is a good example for combining different technologies, what we have to produce green molecules. In this regard, it's green sin fuel, which can power mobility, obviously, produced from wind power. And obviously here, the intention is now to demonstrate the practicality and then extend in a second phase the overall production capacity of the plant. As you know, at Siemens Energy, we have put ESG at the center of our strategy, and we are developing Siemens Energy alongside our ESG framework. Our goal is to be a leader within the energy industry when it comes to sustainability, corporate governance, and social topics. And in the report which we just issued, we documented our progress on our targets. You can see that we are on a good path to reach our goals, even so, We really need to continue with our efforts. It will be a continued push also from my side. But let me start to flag up certain key points. First of all, with the emissions. Last year, we could reduce our greenhouse gas emissions by 21% compared to the previous year, which means 50% compared to the baseline year 2019. And with that, we have already exceeded our original target, which was 46% reduction by 2025. Scope 3 emissions account for more than 99% of Siemens Energy's total greenhouse gas emissions and represent the most significant challenge to climate neutrality. Here we reduced our emissions by 12% versus the baseline and 300 basis points compared to 2021. At Siemens Energy, 90% of the electricity we consume stems from renewables, and as of the end of this year, we want to be at 100%. So this is another KPI where we are ahead of our original target of 84%. At the end of fiscal year 22, 22% of our leadership positions were held by women. And I'm pleased that with the new organization, we already in this year exceed our original target of 25% by 25 in the leadership position. So we're making good progress also in our diversity end. And I'm also excited It's not just gender, it's also really in very international representation and our leadership team. I firmly also believe in a safe working environment and our initiatives to reduce accidents, such as our Zero Harm Day, which was just completed recently, are extremely important to get this safety focused culture into the company. We did make progress on our total recordable injury rates. They went down from 2.47 to 2.17. Still some work to be done, but the trend is absolutely positive and good. And with this, I would hand over to Maria for the financial numbers.

Thank you, Christian. Good morning, everyone, and a very warm welcome also from my side. I'm very pleased to share with you our Q1 financial results for the group, and for the very first time, our new reporting segmentation. Now with transparency on our business areas, gas services, grid technologies, and transformation of industries, Therefore, as promised, much more transparency this quarter. So let me start by giving you a quick overview on where we stand regarding the voluntary cash tender offer and the related financing structure before I go through Q1. So as Christian mentioned, at the SGEGM on January 25th, shareholders approved the delisting, and we subsequently filed for the delisting of the shares from the Stock Exchange and with the Spanish National Securities Market Commission, or the CNMV. As a result of this, a standing purchase orders for shares of SGE commenced on December 23rd and is scheduled to end today, the 7th of February, at market close. This means the shares will cease trading today. Given this occurs, the official and definitive delisting is expected to happen around the 10th of February. Now, just to recap, during the acceptance period from November 8th to December 13th, approximately 175 million shares worth 3.2 billion euros were tendered. This equated to an ownership stake for us of 92.72%, of course, up from our 67.1%. Since then, as part of the standing purchase order, another 30.8 million shares were tendered until the end of January. worth roughly 550 million euros. This increased our stake to 97.2% and therefore the total cash consideration to approximately 3.7 billion. As we are still within the standing purchase order to tender timeframe, I don't know how many shares exactly will be rendered or tender today rather to know the exact stake and therefore the exact funding requirement. As of yesterday night, our stake stood at 97.6%. So going back to the end of Q1, the transaction value of 3.4 billion, of course, was financed as follows. We have the 1.15 billion cash that was pledged and deposited with the CNMV at the end of Q3. We have the 960 million euros proceeds from the mandatory convertible bond. This was also deposited with the CNMV in October of last year. And of course the remainder has been financed approximately 1.3 billion via the bridge facility that's in place. This is all fully reflected in our net debt position at the end of Q1. This is described of course also on slide 12. I'd like to reconfirm our clear intention to raise another max 1.5 billion of the transaction value via equity or equity like instruments to finance the bridge facility of course, because Siemens Energy is and remains committed to a solid investment grade rating. The financing of the transaction, how it's composed, including our intention to raise up to $2.5 billion in total equity or equity-like instruments, is designed to maintain and support this key objective. To maintain maximum flexibility, we seek authorization for 10% conditional capital, which will allow us to do a capital increase without preemption rights later at today's AGM. Just to reiterate regarding the equity component of this transaction. Number one, we continue to have a very good solid cash flow performance and we have a strong balance sheet. Number two, the transaction continues to be fully financed and secured. Number three, we have flexibility in sourcing the equity component for this transaction with various options which remain open and available to us. And we are looking to do this as quickly as possible Of course, as always, subject to market conditions. Now let's get on to Q1, please, on page 10, starting with an overview of the SE group. As Christian mentioned, SE level of orders was outstanding and better than expected. And I think this really, truly reflects the favorable demand pattern and the confirmation of our customers that they believe that we have the right portfolio to support them in their energy transition journeys. Comparable growth was 49.2%, despite a high basis of comparison. This resulted in orders for the quarter of $12.7 billion, the highest ever quarterly order intake of Siemens Energy. Order backlog of just shy of $99 billion marks a record, despite negative currency translation effects, of close to $4 billion. Of course, this is providing us with a solid foundation to deliver the growth and the margin improvements that we're striving for. I'll get into that a bit later. Revenue for the group came in at $7.1 billion. This is 16% increase on a comparable basis with all segments contributing to this growth. Nominal service growth was slightly higher, plus 19, than the new unit growth at 18%, and also contributing to a positive mix on the top line. As Chris just mentioned, 16% revenue growth is a great achievement, and again, across all businesses, even though we did have a weak basis of comparison. Book-to-bill Siemens Energy strong at 1.8 for the quarter and 1.42 for the 12-month rolling period. Profit before special items amounted to negative $282 million or minus 4%. In Q1 of last year, it was negative $69. This is, of course, due to the losses at SGRE and the charges of $472 million. I would like to highlight that we had a solid start. Gas services and grid technology reported sharp improvements year over year in their profit before special items. And transformation of industry delivered a turnaround. I'll get to that in a moment. Pre-cash flow pre-tax, negative at $58 million, more or less at prior year level. But this was better than we had expected. This is supported by advanced payments from our customers, reflecting the strong order development. cash performance was particularly strong in gas services, which generated free cash flow pre-tax of $359 million, and grid technologies, which generated free cash flow pre-tax of $361 million. Given this strong dynamic and strong start, we now have a more favorable view on our network and capital movement in fiscal year 23. Therefore, we've adjusted our free cash flow guidance upwards and expect free cash flow for the group to be positive in fiscal year 23. Now, let's go to the next slide, please, and take a look at the much-promised order backlog transparency and where we stand at the end of Q1. As we've reiterated in the past, the order backlog is so important for us because it's growing strongly, even with our ongoing selectivity in place, and we do really adhere to that. It provides us with visibility on revenue well beyond a 12-month timeframe, and of course, It reinforces and creates a strong business foundation. A strong book to build feeds into our order book, and the order book grew by another 13% over the last 12 months. This is increases across all businesses. During the quarter, we generated $7.1 billion, and another $22 billion is already contracted or in-house for fiscal year 23. In other words, 90% plus of our fiscal year 23 revenue is already secured in our backlog. What you can see on this chart is the resilience and essentially stickiness, if you will, of our service backlog, which is based on long-term service business. This is true for all our business areas, but particularly for gas services. Today, $54 billion, as you can see here on the slide, of the group's total order backlog is service. This has multi-year duration. This is high margin and resilient. I'm also happy to confirm, because it's not only about quantity, but I always say it's also about the quality, that the margin profile in our backlog continues to progress and support our margin targets accordingly. Next slide, please. I'd like to take you through the group cash bridge. Here, clearly, it reflects the funding of the CTO of $3.4 billion, as mentioned earlier, at the end of our first quarter. Looking at our cash and cash equivalents, that stands at $5.4 billion. This is $510 million lower than at the end of fiscal year 2022, mainly driven by the cash transfer of the $960 million proceeds of our mandatory convertible bond, as I mentioned earlier, to the CNMV in October. Before, of course, it was sitting in our account, and that was, of course, to be used as part of the December settlement. We have $5.5 billion of financial debt. This is up from $3.2 billion at the end of the fourth quarter, of which $2.4 billion is long-term. The increase is driven by the fact that we drew on the bridge loan in the amount of $1.6 billion to fund the CTO and the increased short-term debt at SGE. During the quarter, SE's provision for pensions and similar obligations decreased slightly from 570 at the end of last fiscal year to 545 million at the end of Q1. This was largely driven by FX improvements. Taking into account pensions, we have an adjusted net debt position of 660 million. The fact that we are now in a net debt position is, of course, as a result of the funding of the cash tender offer. Looking at our liquidity position, as at the end of Q1, we have total availability, sorry, total available liquidity, rather, of just shy of $11 billion. And we have around $5.4 billion in cash and cash equivalents, as mentioned, and $5.1 billion of undrawn credit lines. So now let's take a look, please, at the business areas. Our new transparency, starting with gas services. So, Quick remark on the KPIs you see here, a very strong quarter for gas services across all KPIs, well done. The overall gas market remains solid. In the first quarter, we booked 3.8 billion. This exceeds the high levels prior year by 22.3% comparable. The substantial order growth, which is important, it was driven by large orders, but in various geographies, special note from the US and Brazil, and a continued strong development in our service business. Book-to-bill stood at 1.47, and the order backlogged after Q1, 41 billion. In the first quarter, we booked 14 gas turbines greater than 10 megawatts. There are seven large gas turbines and seven industrial gas turbines in the range of between 10 and 100 megawatts. Q1 is characterized by a strong gas market for GT greater than 10 megawatts. and SE reached a market share of 25% accordingly. Revenue grew substantially by just shy of 22%, albeit versus a lower prior year base, and came in at $2.6 billion, mainly driven by a very strong service business this quarter and obviously then a positive mix. Profit before special items came in substantially better at $318 million, reflecting a 12.4% margin. This is approximately 390 bps greater than prior year. This is a combination as a result of a combination of higher revenue and that higher service contribution, which gives you a positive mix this quarter. And of course, strong execution. And I think that needs to be noted. It's operational excellence here, as well as an improved cost structure. Moving on to our grid technologies business. Here, as mentioned by Christian and also by myself, driving this outstanding order development in our grid technologies business. The overall market environment for grid technology remains very positive. Orders more than triple and rose to 6.3 billion euros. This development was driven by the large grid connection orders as mentioned by Christian earlier, and we're seeing strong demand in Europe for a while, but this quarter we're also seeing strong demand in other geographies such as the United States. Book-to-bill was 3.96 with backlog rising to 18.7 billion euros. Revenue grew significantly, just shy of 19% year-over-year on a comparable basis, supported by the strong order backlog and order intake, of course, in the prior fiscal year. Growth is mainly driven by expected increases in the product and solutions business. Profit before special items came in at a strong $110 million, or a margin of 6.9%. This also implies quite an improvement, almost 310 bps versus last year. This increase mainly results from higher revenue and a strong focus on project execution. Also, you may recall last year during the prior year quarter, we had mentioned that particularly in this business, we had supply chain constraints and negative impacts related to higher material and logistic costs, which impacted the short cycle business of transmission. On the next slide, let's take a look at TI or transformation of industries. At the capital market day, we clearly said that within, or comprised within TI, you have the independently managed businesses, or IMBs, you have sustainable energy systems, and electrification, automation, digitalization. Those were areas to focus not only on profit, but more on growth. Industrial steam, turbines and generators, and compression, of course, will focus on turnaround and profitability. And this is clearly reflected in our Q1 figures, as TI did deliver a turnaround with margin improvements across all businesses. Looking at orders, 17% decrease. This is because of a high basis of comparison, particularly in the compression business where we booked a handful of large projects in Q1 of last year, not repeated. On the other hand, though, we see substantial order growth in EAD and we booked 64 million worth of orders at SES. So underlying orders continue to progress positively. Revenue grew significantly by 13% year over year on a comparable basis with all four IMBs or independently managed businesses showing double digit growth. We have strong growth in services plus 24% and in new units at 13%. This also though contributes this quarter to a positive mix in the top line and of course in profit. So looking at profit, it continued the positive trend that we saw in the prior fiscal year which again confirming that all the hard work and all those measures that were put in place are starting to bear fruit. We're starting to see the beginning of the turnaround. Profit before special items came in at $57 million. This reflects a margin of 5.7%. This compares to a loss of $23 million in Q1 of prior year, so thereby implying an improvement of 840 BIPs versus last year. Again, this increase was not by accident. This was based on progress, real hard work across all businesses. Of course, higher revenue, improved business mix, and a higher service share, and those underlying operational improvements all contributed to this outcome. From a business perspective, the biggest improvement came from our turnaround cases within compression and industrial steam. With that, maybe very quickly to sum up our achievements in our first quarter of this fiscal year, 2013, First of all, I hope the increased transparency in our new reporting structure is helpful. I really enjoy it. I think it gives some views into our businesses, where are our opportunities, where are some of our challenges. No doubt we had strong orders and revenue growth, better than expected cash flow, strong underlying operational improvements at all three BAs, GS, GT, and TI. That gives us the confidence that we are on the right trajectory towards our full year assumptions for all BAs. Nevertheless, due to the aforementioned charges at SGE, we did have to adjust our outlook for fiscal year 23, as Christian mentioned. And let me just quickly highlight this on the next page. Just to focus on what has changed. So we now expect Siemens Energy's group profit before special items to be between 1% and 3%, previously 2% to 4%. And accordingly, a net loss of Siemens Energy Group on prior years reported level we previously had foreseen a sharp reduction of the net loss this year. Due to better than expected cash flow development in the recent quarter, we now expect free cash flow pre-tax for fiscal year 2023 to be positive. This was previously a negative range of low to mid triple digit million. And of course, we reconfirm our revenue guidance and outlook for this year. So with that, I hand over to Christian. Thank you very much. He'll explain our key priorities in the current financial year and some final remarks. Thank you.

Thank you very much, Maria. And very briefly from my side, let me conclude with the key priorities, which have not changed from what I said at the end of the fiscal year 2022. Because of the charge at Siemens Gamesa, we now expect lower margin, as Maria pointed out in her presentation. But we will make sure that we remain on track to reach the underlying targets we have set. And we will obviously work hard on the revised positive cash flow target, what we have given. We will leverage our new operating model, which went live beginning of this fiscal year. It is one of our five key levers to create value. And from the beginning of the year, we strive really to leverage these key advantages, which means the organization is leaner, more agile, more transparent, as also Maria has pointed out. And we'll continue to drive the underlying performance improvement over the quarters to come. And in this regard, obviously, we will continue to use that. The turnaround at SGE is key to our vision. That is not a question. And we are fully committed to this in terms of really achieving the turnaround. This will be also a lot of my personal attention this year. And the fourth element is We will capitalize on the opportunities that come with the government initiatives. You have seen a glimpse of it already in the first quarter. We see now the European program coming there. In addition, we see other programs in other regions of the world. So there is plentiful of opportunities in the energy transition, which we want to capture. And with this, I would hand over to Michael and look forward to your questions. Thank you very much.