Siemens Energy Ag

Good morning and a warm welcome to the Siemens Energy Q2 and half-year results analyst call for fiscal year 2026. Following the pre-release of our preliminary figures on April 23, 2026, we published our full and final Q2 fiscal year 2026 results along with the half-year report this morning at 7 a.m. on our website. Our President and CEO Christian Bruch and our CFO Maria Ferrara are here with me. Christian and Maria will take you through the major developments during Q2 Fisk Year 2026. This will take approximately 30 minutes. Thereafter, Christian and Maria are available to answer your questions. For the entire conference call, we have allowed one hour.

Christian, over to you. Thank you very much and good morning everyone and thank you for joining us today. Siemens Energy has delivered another strong quarter and I'm very proud how our team is executing successfully on the strong backlog, driving capacity expansion and managing through geopolitical challenges day after day. Let me flag up some highlights from the last quarter before Maria dives into the details of our quarter two results. We achieved a record order intake of 17.7 billion euros and with that a record order backlog of €154 billion. That record backlog comes with increasing backlog margins across all businesses. The demand for our products in the different regions remains strong, with good pricing and with gas services and grid technologies contributing materially. We continue to build a diversified backlog comprising different customer segments and regions, and I will refer to this later in the presentation. In the last quarter, I also spent time with our teams in the Middle East, and seeing how they support our customers while keeping everybody safe in a demanding situation gives me a lot of confidence in our path forward. From a business perspective, the financial impact of the Middle East conflict has been very limited, and we continue to see solid interest in new projects across the region. We achieved broad-based revenue growth across all business areas based on digital execution and increasing capacities coming out of our factories. In line with our expectations, we delivered €10.3 billion revenue in Q2, despite FX headwinds. Given the strong momentum, we raised our full-year comparable revenue growth guidance to 14% to 16%. Our profitability continues to increase year over year driven by a favorable business mix and steady productivity gains. We delivered a profit margin before special items of 11.3%. Grid Technologies was a key contributor with margins of more than 17% and we expect margin progression to continue throughout the year. Grid Technology is our fastest growing and most profitable business area with a broadening portfolio including more digital solutions. Yes, services once again achieved profitability levels at the top end of the industry. And I would like to highlight the continued progress at Siemens Gamesa, where business is clearly on its planned trajectory to break even, reducing losses in the quarter to 44 million euro. Also, transformation of industry continues to execute profitably. Over the past months, I visited several of our sites and was truly impressed by the progress in our factory expansions. As communicated before, we invest more than 2 billion euros in fiscal year 2026 to build up production capacities across the different regions. And as a result, we expect a clear step up in revenues over the coming months, particularly in grid technologies and gas services. Our earnings qualities and cash generation remain strong, And free cash flow in quarter two came in at around 2 billion euros. Year to date, we have in fiscal year 2026 already returned around 2.4 billion euro to our shareholders through dividends and share buybacks. And we are planning on accelerating the share buyback this year by an additional up to 1 billion euro. And Maria will afterwards share some comments on it. Across all businesses, we execute our Elevate program to further drive operational excellence and resilience. And I'm really excited about the potential that AI provides us to transform the way we operate. AI is being increasingly embedded into our operations and decision-making, allowing us to get better every day. And it is not just business operations. We are also pushing AI application across all corporate functions, and I'm pleased to see how people take it up. And this will show tangible benefits in future, and the teams are really on it. As a global leader in energy technology, we are on track to position Siemens Energy as best-in-class industrial company for the long term. Overall, based on strong demand, improving visibility, and disciplined execution, we raised our 2026 full-year outlook across all key financial metrics. As mentioned before, the market environment in quarter two remained highly favorable with strong demand for our products across the different regions and continued strong pricing. Growth was again led by the Americas, in particular the United States. Asia and Australia also delivered solid contributions with strong order intake growth. Revenue comparisons were impacted by strong prior year offshore wind projects in Taiwan. In EMEA, order intake was slightly lower year over year, mainly reflecting some shifts in parts of the Middle East. Overall demand in the region remains intact. And gas services and grid technologies clearly stand out in performance. Let me start with gas services. Three drivers underline the strong performance in the second quarter. First, gas services remains one of the most profitable players in the industry and is well on track to meet its profitability targets. Second, we continue to see strong conversion from reservation agreements into firm orders with a current split of roughly 70% firm orders and 30% reservations. Third, pricing dynamics for new projects remain very attractive, and we expect this to continue for the foreseeable future. In quarter two, gas services delivered another record quarter with 8.9 billion euros in orders across 12 countries. Demand was strong in the Middle East and Europe, and obviously in the United States. U.S. demand was largely driven by data centers with excellent pricing conditions. The 5 gigawatt of order intake in quarter two brings our total data center-related commitments to 24 gigawatts, that is, orders and reservations. In total, we booked 77 turbine orders in quarter two, including 26 large, 45 medium, and 6 small turbines, resulting in 12 gigawatt of new turbine orders, with the majority linked to traditional applications. We successfully convert reservation agreements going forward. During the quarter, nine gigawatts were converted into firm orders, ending quarter two with 27 gigawatts of reservation agreements. Our focus remains on short-term conversion, allowing us to fully benefit from the favorable pricing environment. The margins of new unit and service agreements we booked in quarter two improved significantly relative to current backlog margin levels. In total, we now have 87 gigawatts of commitments in place after delivering more than 3 gigawatts during the quarter. By the end of the fiscal year, we expect total commitments to reach 90 to 100 gigawatts. Our supply chain expansion is progressing well and supports the already announced capacity expansion in the coming years. Let me now turn to grid technologies. Real Technologies continues to outperform in both growth and margin expansion, and this leads us to upgrade our guidance for the full year significantly. We now expect to reach a profit margin before special items of 18% to 20% already in fiscal year 2026, a level originally targeted for fiscal year 2028. At the same time, we target comparable revenue growth of 25% to 27% for the current year. business benefits from long-term structural drivers, electrification, large-scale grid replacement, renewable integration, and from data centers. Reliable and resilient grid infrastructure is also a critical enabler for data centers, and as a result, demand for grid connections, transformers, and grid stabilization solutions is accelerating. In the first half of fiscal year 2026, this translated already into nearly 2 billion euro of data center orders in grid technologies. Global supply remains constrained, supporting pricing discipline and operating leverage. We see stable but elevated prices in Europe, while we observe higher average pricing levels in North America due to increased demand related to data centers. And this underpins our decision to continue investing heavily in U.S. capacities. But the demand does not only come from one region. The rising demand is visible in many parts of the world. We see an attractive long-term growth outlook well beyond the current investment cycle. To meet this sustained demand, we are expanding manufacturing capacities globally, and our transformer and switchgear capacity will increase by around 50% between 2026 and 2030. Looking ahead, we expect a clear acceleration in grid technologies performance during fiscal year 2026, driven by, first of all, higher revenue conversion from backlog, and second, new production capacities coming online, such as in Austria, Italy, Saudi Arabia, or China. And third, obviously, the operating leverage and productivity gains we have because of the great backlog. And this underpins our confidence in delivering 18 to 20% margins already in fiscal year 2026. Grid technology is now not only the fastest growing business in our portfolio, but also one of the most profitable with visibility extending well into the next decade. And while we are expanding capacity for our products and solutions in grid technologies at record speed, we are simultaneously broadening our digital portfolios. The electricity grids in the different regions of the world are transforming, and the electricity demand is accelerating rapidly, driven by electrification, the energy transition, and data centers. At the same time, renewable generation is increasing volatility and complexity in power flows. All of this offers us opportunities for new products to help our customers through this transformation. And beside the capacity expansion in our factories, we develop digital offerings to make the grid infrastructure more capable for the future. And we have recently launched our new software suite Noedra for Grid Technologies in the logic that these digital applications create the mind of the grid. Noedra adds a digital intelligence layer that helps customers operate increasingly complex grid systems smarter and more efficiently. It brings together four high-value software and service layers. Noedra Shield, which secures the grid end-to-end with cybersecurity and compliance. Noedra Flow, which optimizes transmission with real-time insights and dynamic capacity. Noedra Node, which digitizes substations and turning them into intelligent self-monitoring assets. And Noedra Atlas, which supports the strategic grid planning and the energy transition. And together, this is a platform play, moving us towards recurring higher margin digital revenue while unlocking value from our installed base. And four weeks ago, we inaugurated our own grid AI lab in Orlando together with customers and partners like NVIDIA. And this investment accelerates how we apply artificial intelligence across the power grid. The lab combines Siemens Energy's deep domain expertise with NVIDIA's advanced AI infrastructure. It enables us to deliver real-time insights, digital twins, and predictive models that address pressing customer needs. And this is where we develop and train the intelligence behind Noedra, turning complex, multi-source grid data into actionable insights across operations, planning, and system optimization. Customer feedback clearly confirms tangible value and practical relevance of our digital and AI-driven approach for day-to-day grid operations. Overall, This gives us strong confidence that digital solutions, and Noedra in particular, enables the next chapter of the grid digitalization, scalable by design and anchored in clear customer value. And with that, becoming an important growth driver for our grid technologies business. So, exciting times and lots of opportunities ahead of us. And with that, I will hand it over to Maria.

Thank you, Christian. And good morning, everyone from my side. Hope you're all doing well. Thank you for joining us today. We are continuing fiscal year 2026 with very strong momentum. In the second quarter, we delivered another record quarter in orders, continued high profitability, and very strong cash flow generation. Now let me take you through the key financial developments for Q2 and the first half of the year. Moving to the next slide, looking at the group performance. Q2 was another exceptional quarter. Orders reached 17.7 billion euros, setting yet another quarterly record for Siemens Energy. The increase was driven by strong demand in the new units business at gas services and grid technologies. From a regional perspective, as Christian mentioned, the U.S. was a main contributor, with order intake more than doubling compared with prior quarter. Our book-to-bill ratio was 1.72, and our order backlog hit an all-time high of €154 billion. That's €8 billion more in just one quarter, again giving us excellent visibility for fiscal year 26 and beyond. Quarterly revenue increased to €10.3 billion, up 9% year-over-year on a comparable basis, with all segments contributing 1%. to the revenue growth, but primarily driven by gas services and grid technologies. We did experience some foreign exchange headwinds, primarily driven by a weaker U.S. dollar. This weighed on the top line by roughly 550 basis points year over year. For clarification, currency movements continue to have no material impact on our profitability. This is due to our effective hedging strategies, which leave us with only minimal unhedged exposure and, of course, our global footprint with strong local-for-local sourcing. Profit for the group before special items was $1.164 billion, with a margin of 11.3%. This is up 220 basis points compared to Q2 of prior year. This substantial increase was supported by broad-based improvements across the portfolio. and with Siemens Gamesa delivering the most pronounced improvement year over year. Again, just a word on the Middle East exposure. As Christian already mentioned, we continue to monitor the situation closely, and to date, the impact on orders, revenue, and profitability have been limited. Net income for the group increased to $835 million. This is up more than $330 million year over year. Free cash flow pre-tax was very strong. and reached $2 billion, a significant improvement versus last year's result. This was driven by the profit of gas services and grid technologies, customer advance payments, and reservation fees, given the high order intake. Now let's take a quick look at our order backlog on the next slide. During the past year, our order backlog grew by $21 billion, again for that record $154 billion in the quarter. 44% of the backlog is service-related. supporting recurring revenues and attractive margin characteristics. Backlog margins continue to improve further across all business areas. In fiscal year 26, we now have approximately 93% revenue coverage for the second half of the year, and we are already just shy of 80% coverage for fiscal year 27. Now let me turn to free cash flow development. So as mentioned, the free cash flow generation continued to be strong in the second quarter, amounting to $2 billion. And we reached $4.8 billion for the first half of fiscal year 26. This performance, again, was supported by strong profit growth, increased customer advance payments, and reservation fees. Driven by our strong order momentum and a positive outlook for the group's profitability, we revised our full-year pre-tax free cash flow guidance upward from $4 to $5 billion to approximately $8 billion. The share buyback program announced at the Capital Markets Day in November of up to $6 billion through fiscal year 28 is progressing as planned. Since March 2026, approximately 11.6 million shares have been repurchased at an average price of $157.1 million on May 8. As a result, The first $2 billion tranche of the $6 billion program is now substantially completed. Considering this year's strong free cash flow performance, we are pleased to confirm an acceleration of the share buyback program with additional repurchases of up to $1 billion in our Siemens Energy shares anticipated during the current fiscal year. As a result, expected total shareholder returns in fiscal year 2026, including the $0.6 billion dividend paid in March, will increase to approximately $3.6 billion. So now let me look at the individual business areas. Looking at gas services, Christian mentioned quite a bit here already. However, gas services delivered an outstanding performance in another strong quarter in Q2 of fiscal year 2026. Again, orders were $8.9 billion. This is up 32% year-over-year and the highest order intake ever for gas services. The book-to-bill ratio for Q2 was 2.55, again leading to a record order backlog for gas services of $66 billion. The market for gas turbines greater than 10 megawatts saw remarkable strength during the second quarter. This quarter, gas services booked a total of 77 gas turbines for power generation in oil and gas. 26 of those were large gas turbines and 51 industrial gas turbines. Our Q2 market share for gas turbines greater than 10 megawatts stands at 27%. This is the number one position. Revenue increased 15% year over year, the highest ever quarterly revenue in GS. This was supported by strong execution in new units with significant growth of 47% comparable. Service revenue was slightly below prior year. The service share as a percentage of revenue in Q2 decreased to 57% versus 67% in the previous year. This, again, was expected given the very strong new unit bookings in the previous quarters, and the new unit success today, as you know, structurally expands to the high-margin service base of tomorrow. Profit for gas services before special items increased to $552 million, and the margin of last year's level, again, slightly reflecting that business mix effect with a more pronounced share of new units, as I already mentioned. Pre-cash flow pre-tax was $1.8 billion, significantly higher than last year, particularly benefiting from advanced payments on large orders. And overall, for gas services, a very strong quarter, and congratulations to the entire team. So now let's move on to our grid technology business. For here, grid technologies had a very strong performance in the second quarter. Orders increased to $7 billion, up 42% year over year. This increase in order intake was in part driven by solutions business due to a large HVDC project order in the Baltic Sea with a volume of more than $1 billion. In addition, the products business with transformers recorded substantial growth. mainly by demand from the U.S. Book-to-bill ratio was 2.28. In order backlog, also here a record, increased to $49 billion for grid technologies. Revenue at $3.1 billion represented year-over-year growth of 12%. This was supported by solid execution across both solutions and products. As a result, we've upgraded revenue growth guidance for fiscal year 26 to 25 to 27%, This is from 19% to 21%. And we expect a significant acceleration in revenues for GT in the second half of this year, primarily driven by the increased capacities from our brownfield expansions and, of course, project phasing in the solution business. Looking at profit before special items for GT, this amounted to $524 million. margin of 17.1%. The year-over-year margin decrease was primarily attributable to a one-off timing effects in prior year quarter of approximately 100 million, of course, which positively influenced the prior year results. Therefore, on a comparable basis, the Q2 margin of prior year was actually 16.4%, therefore an increase year-over-year. So in addition, we have increased our full-year guidance for profit before special items for GT from 16% to 18% to 18% to 20%. For the second half of this year, just to repeat, we do expect a notable increase in margin. This is driven by the higher revenues and an enhanced contribution from higher margin products, as well as improved project executions. Lastly, free cash flow pre-tax was $735 million. This was supported by profit and milestone payments and continued to transformation of industry. Again, this business delivered another solid and consistent quarter. Orders were $1.3 billion, slightly lower year over year, mainly driven by timing shifts in the Middle East, particularly at compression and our EAD, or electrification automation and digitalization businesses. Book-to-bill ratio was 0.88, and the order backlog at the end of the quarter was $8 billion, unchanged and stable from previous quarter. Revenue increased moderately by 5% to $1.4 billion. Profit before special items improved to $171 million. This resulted in a margin for TI of 12% for the quarter. Of course, this was mainly due to productivity improvements, and a higher margin of the processed order backlog. Free cash flow amounted to $46 million. This was lower than last year, mainly due to timing effects. Again, overall, transformation of industry continues to deliver reliable profitability quarter over quarter. Now moving on and turning to Siemens Gamesa, where we continue to see clear and tangible progress. Orders of 846 million were slightly above the level of prior quarter, mainly driven by onshore new units business, which also included some SG 7.0 platform orders. That's the successor to the 5X turbine. As anticipated, no material offshore order was booked in the recent quarter. Therefore, book-to-bill ratio stood at 0.33, and the order backlog was $33 billion. Year-over-year, comparable revenue increased slightly due to the growth in the offshore business. Profit before special items improved significantly year-over-year to negative $44 million, and the margin improved to minus 1.7 percent in Q2. This is compared to minus 9.2 a year ago, or negative $249 million. In Q2, Siemens Gamesa delivered continued financial and operational improvements. The positive development was mainly due to better productivity and increased cost efficiency in offshore, as well as progress in the service business across the fleet. Free cash flow pre-tax was minus $654 million, partly due to planned quality-related cash-outs in the quarter. The Siemens Gamesa team continues to work diligently through the matters, step by step, and the direction of travel is very clear. And we remain confident in achieving breakeven supported by the operational measures in progress and already implemented. So now let me move on to our revised outlook for fiscal year 26. So based on the positive business development in the first half and the strong market demand, we have raised our outlook for fiscal year 2026 across all key financial metrics. The change in the outlook is due mainly to a stronger-than-expected performance at grid technologies. For Siemens Energy, we now expect comparable revenue growth of 14% to 16%, up from 11% to 13%. Our profit margins before special items is now 10% to 12%, up from 9% to 11%. Net income is expected of around $4 billion, up from $3 billion to $4 billion. And free cash flow pre-tax is now at around $8 billion. This is up from $4 to $5 billion. And let me briefly highlight the changes within the business areas. So Ingrid Technologies, we now plan a comparable revenue growth of 25% to 27%, previously 19% to 21%, and a profit margin before special items between 18% to 20% before this was between 16% to 18%. And in Siemens Gamesa, we now assume a comparable revenue growth of 3% to 5%, which was before 1% to 3%. And of course, we confirm the profit margin before special items at breakeven. Furthermore, one last piece of information that I'd like to share with you is that we intend to provide you with new midterm targets for fiscal year 30 with our full year results in November. So with this, thank you very much for your attention. And I now hand back to Christian for some closing key remarks.