Siemens Energy Ag

Please stand by, we are about to begin. Good morning, ladies and gentlemen, and welcome to the Siemens Energy's Q3 fiscal year 2025 analyst call. As a reminder, this call is being recorded. Before we begin, I would like to draw your attention to the safe harbor statement on page 2 of the Siemens Energy presentation. This conference call may include forward-looking statements. These statements are based on the company's current expectations and certain assumptions and are therefore subject to certain risks and uncertainties. At this time, I would like to turn the call over to your host today, Mr. Tobias Hang. Please go ahead, sir.

Good morning and a warm welcome to the Siemens Energy Q3 analyst call. My name is Tobias Hang and I'm very excited to host this analyst call for the first time in my role as the head of investor relations. As always, all documents were released at 7 a.m. on our website. Our president and CEO, Christian Bruch, and our CFO, Maria Ferraro, are here with me. Christian and Maria will take you through the major developments during the third quarter of fiscal year 2025. This will take approximately 10 minutes. Thereafter, Christian and Maria are available to answer your questions. For the entire conference call, you have allowed one hour. So from here, Christian, over to you.

Thank you very much, Tobias, and good morning, everyone, also from my side. Thank you very much for joining us today. The third quarter proved to be another successful period for our company, further demonstrating our path to profitable growth. In addition to our strong financial performance, we have accomplished important milestones to generate shareholder value in the medium to long term, and which I'll address later. Let me mention one accomplishment right at the start, as we just released the information a couple of days ago. After exiting the Bund guarantees, the Bund now waived the condition that restricted us from paying a dividend for the fiscal year 2025. So we are now in the position to pay a dividend for 2025 if the Annual General Meeting in February 2020 approves this. This is an important milestone achieved. And I would like to thank all employees at Siemens Energy for their hard work and commitment, which has contributed to our strong performance. This quarter's most notable achievement was a record-breaking order intake of €16.6 billion. This reflects an increase of almost 65% in comparison to last year, supported by two large offshore orders at Siemens Gamesa and strong orders across all businesses, resulting in a book-to-bill ratio of 1.7. Our order backlog has reached a new record high of €136 billion. This was achieved despite negative currency translation effects of almost €4 billion. Revenue demonstrated consistent growth reaching €9.7 billion in the quarter and this reflects a 13.5% increase when compared to the same period in the previous year. Our profit before special items increased to 497 million euro, driven by a strong performance from grid technologies, gas services and transformation of industry. Overall, Siemens Energy's profit margin was 5.1% for the quarter, which is an improvement of 450 basis points year over year. Our cash flow stood at 419 million euros in quarter three, which is lower than in the previous year, however, well in line with our expectations and the fiscal year 2025 guidance. As everybody else in the industry, we experienced macroeconomic uncertainties during the quarter. These included the euro's tariff discussion and geopolitical tensions in different regions. Despite these challenges, we were able to successfully manage operations. Notwithstanding the prevailing volatility in the market environment, the underlying demand and pricing trends remain favorable. In quarter three, we recorded an impact of around 100 million euros from tariffs, which is broadly in line with our previous statement and mainly driven by one-time effects related to long-term service agreements. The EU-US agreement on 15% tariffs effective late July is higher compared to our original assumption of 10%. Thus, it will have an additional impact of up to a mid-double-digit million euro amount in Q4. Our business has delivered another strong quarter, continuing the solid performance of this fiscal year. This puts us on track to meet the upgraded guidance issued in the second quarter and we are currently trending towards the upper end of the range. As previously communicated, a comprehensive update regarding our midterm targets will be provided with the full year financial results on November 14th. At our Capital Market Day, which is scheduled for November 19 and 20 in Charlotte, North Carolina, we will present an in-depth overview of our business operations, their strategic plans for achieving profitable growth, and generating attractive shareholder returns. Allow me to provide you with a brief overview of the factors that contributed to our record order intake in this quarter. The demand for electricity is continuously increasing and it is essential to ensure a reliable and secure supply. From a global standpoint, the U.S. experienced the most significant surge in orders, accounting for nearly 35% of all orders in Q3. This represents a three-fold increase compared to the previous year, with a total value of around 6 billion euros. Notably, demand remains strong despite the tariff uncertainties, underscoring the current resilience of the market. However, despite our success in the U.S., we were able to secure a globally balanced order book. At Siemens Gamesa, we have received two major orders in Poland for offshore wind projects, both valued at over 1.5 billion euros each. And these orders underline our excellent position in offshore wind. Gas services set a new order record in the third quarter with a quantity of 86 gas turbines. This encompasses the entire portfolio of frame sizes, ranging from 15 megawatts to 500 megawatts. We have booked around 9 gigawatts of orders, which were mainly converted from our reservation agreements. Of these, 3 gigawatts were related to data centers. Growth was also driven by orders from the U.S., which accounted for nearly 50% of the total gas turbine orders. With regard to the applications, around 60% of the orders were related to our core business, including coal and oil-to-gas shift, peaker units, and generally higher energy demands. However, 40% of these orders were driven by new applications, including data centers, floating energy, and power ship applications. This has also resulted in significant growth in medium-sized gas turbines. Year-to-date sales for those have already exceeded the total sales from the previous two years combined. At the end of the third quarter, we had 21 gigawatts of reservations agreements on hand. Considering the order backlog of 37 gigawatts, we have now a total commitment of 58 gigawatts. The favorable pricing trend continued in the third quarter across all frames. We anticipate that this trend will be maintained for the foreseeable future. Also, grid technologies continued their successful development in the last quarter. As indicated already in the last quarter, we see in addition to HVDC and large transformer projects the demand for grid stabilization equipment on the rise to cope with the increased volatility requirements for the grid infrastructure. In the third quarter, we observed for grid technologies an exceptional global market demand for our product business, particular for power transformers. Also here it was supported by a strong order intake in the US. Our previously announced capacity expansions are therefore required to meet the demand for this market growth. At the same time, we are focusing on productivity increases to optimize capacities and reduce lead times. In our solutions business, we benefit from our long-term relationships with our customers, especially in Europe, where we see the demand continuing. We were nominated preferred supplier for two large HVDC projects in the UK by National Grid and Scottish Power. In the US, we were awarded an HVDC project, which constituted our largest order for grid technologies in this quarter. In Germany, our grid stabilization equipment FACT has been recognized with an award for a significant bundle of three STATCOM stations. Particularly in North America, we were able to achieve higher pricing by offering competitive lead times to our customers. So far, the project pipeline has remained robust despite tariff uncertainties. In transformation of industry, the demand came mainly from Germany, Northern Europe, and the Asia-Australia region. The order growth can mainly be attributed to electrification, automation, and digitalization, but also industrial steam and generators. Our compression business maintains stable pricing despite macroeconomic uncertainty due to tariffs and the oil price volatility. We still see underlying long-term market trends remaining intact. We are committed to continuous improvement within our company, and I'm proud to share with you some of the milestones we have completed in this quarter. Let me first start with our onshore wind business. We have successfully received the first order for the revised 4X wind turbine, and as previously stated, focus here primarily on the southern European market. Siemens Gamesa will supply eight turbines for the La Brasa wind farm in Spain Basque Country, and this project represents the first new wind farm development in the Basque Country for two decades. Siemens Gamesa also released the first tranche of the revised 5X turbine for sale. This is an important step for our onshore business on the road back to a regular presence in our key markets. To ensure product quality and strong turbine performance with roughly revised machine architecture, main components, and production steps. During the conditional market launch, we will continue to conduct prototype testing to validate the positive technical assessments obtained to date. Parallel to the technical evaluation, we will gradually expand the plant production volume based on the validation results. As I previously indicated, our substantial offshore orders this quarter have further increased our backlog. Consequently, we are continuously working to strengthen the resilience of our supply chain. We have now signed a memorandum of understanding with TDK to source rare earth magnets from Japan and with this build an alternative of supply from China. To address the significant increase in demand for power transformers, Contra and Siemens Energy are investing approximately €260 million in expanding their large power transformer factory in Jankomir, Zagreb. The construction is scheduled to begin in 2026. The new investment will more than double the capacity by 2031 from the original capacity in 2022. Maximizing profitability remains a primary objective for us. In the current market environment, focusing on pricing opportunities remains key. At the same time, it is important to keep the focus on project excellence and cost consciousness. I'm proud how our teams are executing the demanding backlog and leverage the improved backlog margins to significantly drive the margin profile in this quarter. In the second quarter, we announced our partnership with Rolls-Royce on SMRs, which entails the exclusive provision of steam turbines, generators, and ancillary systems for small modular reactors. This partnership is already yielding initial results as Rolls-Royce SMR has been selected by Great British Nuclear to construct three SMRs in the UK and signed an early works agreement in the Czech Republic for potential small modular reactors at the Tamnian nuclear power plant. In this dynamic market environment, small bolt-on acquisitions are one lever to lay the foundation for additional growth. We recently acquired the remaining 50% stake in RWG, a company that provides maintenance, repair, and overhaul services for industrial aeroderivative gas generators and power turbines. It is a strategic acquisition to strengthen our service capabilities for the growing aeroderivative market segment. In addition, we have acquired a transformer factory in Italy and this facility is used as a feeder plant for medium power transformers for the Trento and Nuremberg plants. I don't want to spend too much time on our strong balance sheet, as Maria will discuss our last quarter's achievement in detail later. The most notable milestone, as mentioned at the beginning of this quarter, was the exit from the Bund guarantees, which will enable us to distribute returns to our shareholders in the future, and now even already for fiscal year 2025. Capital allocation will be one of the primary topics addressed at our Capital Market Day event in November, where we will present a comprehensive plan outlining how shareholders will participate in our future success. And with this, let me hand over to Maria.