Siemens Energy AG (SMEGF) CEO Christian Bruch on Q2 2022 Results - Earnings Call Transcript

May 11, 2022 10:27 AM ETSiemens Energy AG (SMEGF), SMNEY
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Siemens Energy AG (OTCPK:SMEGF) Q2 2022 Earnings Conference Call May 11, 2022 2:30 AM ET

Company Participants

Tim Proll-Gerwe - Head of External Communication

Christian Bruch - CEO

Maria Ferraro - CFO

Conference Call Participants

Operator

Good morning and welcome to today’s press call at Siemens Energy. For your information this press call will be recorded and will be available as an audio webcast on the internet.

Now I would like to hand over to the moderator for today's conference Tim Proll-Gerwe, who is the head of external communication at Siemens Energy.

Tim Proll-Gerwe

Good morning everyone and welcome to today's press call. We will be presenting the Q2 figures for fiscal 2022. I hope you all are doing well. I hope you all are healthy. At 7 am we published our business figures and we would like to go into detail on them right now. As you know we had to adjust our figures and announce them in the 19th of April and here we had an announcement from Siemens Gamesa, so this is not a real surprise today. One thing is new however, these quarterly figures will be presented to you from Berlin and Maria, CEO, our CFO is here from [Indiscernible]. I hope everything works smoothly.

Mr. Bruch will be giving us an overview of the past quarter and then Maria Ferraro will be giving you detailed information on the Q2 figures. And then we will be available as always for your questions and answers. The CEO and the CFO should you have any further question please we will help with there as well. Mr. Bruch will be speaking to you in German and Ms. Ferraro will be speaking English for our audience, we have two webcast. One is the original. You will be hearing Mr. Bruch in German and Ms. Ferraro in English. Then we will have simultaneous interpretation into English. Ms. Ferraro will be speaking English.

For the Q&A we will have journalists with us. They will have a special telephone number. [Operator Instructions] The presentation can be found, as usual on the website. And remember that we will not be supplying you with the text of the speech because there was speaking off the cuff. We'd also remind you of the safe harbor statement with future oriented statements which you find on the second page of our presentation. So that was with the formalities over to you Mr. Bruch.

Christian Bruch

Thank you very much, Tim. And I would like to welcome you as well. Good morning. It's great to have you here and just spend the time with us as we have already heard on the 19th of April. Our preliminary business figures have been published before also because of the announcement of Siemens Gamesa, Siemens Gamesa Renewable Energy has published their results on the 5th of May in detail. Now today, Maria and myself would like to share some insights of financial figures and generally also the market environment.

Now, the market developments have been special. And this is also why I want to make a special statement here because the business figures that we're looking at here today need to be interpreted against the backdrop of a completely changed geopolitical situation. War in Europe was unthinkable and now seeing the images from Ukraine that leaves us stunned every day. And when the war started, we had stomped on new business in and with Russia. And now, there's all last for over two months. And so far, we have not seen any here signs of a quick resolution. Russia is becoming increasingly isolated in Europe. Now what this has meant for us in the second quarter is that we're seeing already first negative effects on revenue and profitability. And I'm going to share more details with you in a moment.

Now looking at GP, based on the current scope of the sanctions, we also currently expect a loss of revenue of around $300 million to $400 million in the current financial year due to the war in Ukraine. We expect a net loss and the high double digit to low triple digit million Euro range, but let me say again, the situation is very volatile. So really, we are following the sanctions regime literally every day. Sanctions have been quite complex and they have to be analyzed accordingly. I would assume that we are going to see an extension of those sanctions and therefore, there may still be further effects on revenue and net income.

These are possible but there's not something that we can currently influence. There are other criteria like the abolition of hedge accounting for the Russian Ruble, which then also lead to potential risks in terms of currency fluctuations which can also have an impact on our profitability. And of course, we also reviewing Russia business, the executive board and then need to analyze this, needs to analyze the impact carefully. And how we go from here and even when we withdraw from that market, we will do so obviously in an orderly manner and with a plan because we need meaningful solution for 1000 employees in Russia. We're looking at all the implications. And on that basis, we will make a decision.

Now, for us, this is really a rupture in history. We've had a tradition of 165 years in Russia. So the situation is dramatic. Russia will, of course, remain a neighbor of Europe. And I hope there will be a period in time when it becomes possible to discuss a post war scenario with that country.

Let me say that we want to live with a neighbor here in Europe that can ensure lasting peace in Europe and for that, obviously, we need to clarify our relations with Russia. And as a result of that war, we also see intensifying challenges in our supply chains. Over the past months and quarters, we've already focused on our supply chains. Additionally, we also now see a further burden resulting from the COVID 19 situation in China. And this not only includes deliveries and supply chains, but the fact of the matter is that in transmission, we have a plant in Shanghai. Now that plant had to be closed for a certain period.

Now, whenever plant needs to shut down, we're talking about a weekly loss of a million just to get you an understanding of what that really means an order of magnitude. And the team is managing this really well in an excellent way I should say. But again, every day, day in day out, so to speak, they need to grapple with those new challenges. And then the markets will remain challenging. We will continue to see increases in commodity prices and increasingly limited available of materials. It's actually more critical for us the limited availability of materials, because we need to adjust our production workflow, have to make changes here in there plus, also, there are higher logistics costs that also have an impact on our product costs.

And these challenges, obviously, also refer to many companies, even across sectors. You're aware of that problems just need to be managed accordingly. It's very important to take the right decisions. Now I believe this is a core competence of a company; how do we manage our supply chains? How do we structure production network to handle situations like these in the future, because I cannot assume that there's a short term solution to this. In terms of GP, we have already defined a number of actions to get a handle on the commodity and logistics problems. But still, we see effects that way on business.

As far as GP is concerned, we benefit from the supply chains. We have long term contracts for standard materials and have always had traditional long term relationships with logistics partners which mean we're not that much affected by those short term price fluctuation. Hedging is a common leverage we can use for copper and aluminum, which is important for our transmission business. And we're also changing the pool of suppliers in order to maintain a high level of flexibility in terms of our supplier relationships and when it comes to service and project businesses, especially those long term projects. We have price escalator clauses, that they are in place and they're compensating for some of those fluctuations. But it's true that it always has an impact on our production network on our production procedures that cannot be fully compensated by price escalator clauses, so that business is more affected because we cannot easily pass on the risk to our customers.

But I must say that our team is doing an excellent job in GP. We are still within our guidance corridor, despite significant headwinds from the war in Ukraine, COVID-19 And the supply chain difficulty. So against this backdrop, let us look at the summary of quarter 2 results, very solid performance on the part of GP and despite all the challenges that makes me and the entire team very proud. I would like to thank our team that has done an outstanding work. So despite the sanctions, despite the supply chain disruptions, we have achieved a good operating result and strong order intake.

Now when we come to SGRE unfortunately I need to say that situation has further deteriorated since the last quarter. Order intake compared to the high like for like basis of the previous year is down, has come down very sharply. Sales revenues also sharply down due to operational problems and the operating profit as well has deteriorated significantly. The profit warning weighs on Siemens energy and it truly is a further disappointment for all shareholders. And in a moment I'll go into the details about SGRE's performance. But for the moment, let me talk about the financial performance of Siemens Energy first as far as Q2 is concerned, solid order intake.

As I said, last year, in the second quarter, we had an extraordinarily high order intake because of major offshore projects for SGRE. Now, that is a business that tends to be more volatile, it's not something you can plan quarter-to-quarter. So against this backdrop, it's a normal scenario I would say in our business.

Revenues are slightly down on a like for like basis. And there again, this shows you where the supply chain disruptions come into play. It just says every time has been massively burdened by SGRE which in turn leads to significant loss after taxes and because of those poor results. So SGRE I need to point that out and Maria in a moment will present you with the details.

Now SGRE our new CEO, Jochen Eickholt has started his job and has now started analyzing the situation again I should say, to carry out an extensive new risk assessment. Now, those of you have been in the quarterly call with Jochen Eickholt also part of the target announcement you realize that his take on the operational problems is that they are greater than expected. And this is particularly true for the ongoing technical problems with the 5x project platform, their project delays, the high project costs, but also this sharp increase in commodity prices and logistics limitations also weigh on the wind energy sector and also because the material consumption, obviously for renewable energies is much higher. We find it very hard to get an index connection, impact on our business and I mean material. The material prices are indexed. But the volatilities are certainly not. In general let me say again, this is a difficult market environment for all players in the wind energy sector. And you heard the reports coming from that end as well. But Jochen Eickholt was right to point out that 70% of projects internally can be influenced, and 30% of them are externally impacted by the market. But two things need to happen both internally and externally. Changes need to occur there.

Still, I think there's a positive element in this message, because Jochen Eickholt has confirmed that what he has seen, nothing he is seen is unknown to him in other words. So SGRE needs to execute a comprehensive turnaround plan to stabilize the situation, to manage the supply chains, and really, also address short term challenges. A taskforce has now been established and that focus is on nothing but those current challenges.

The board was expanded with the inclusion of Tim [Indiscernible] someone who's changing from Siemens energy to Siemens Gamesa, a colleague of ours, who has good knowledge of project situations like these. And we now need to look at contractual relationships with customers to renegotiate them and also find a mechanism how to address a new contract. So some of these measures will only have an impact in the medium term. But it also requires a closer coordination across alignment between procurement and sales because it's true that the purchasing markets also are very volatile. As SGRE and Siemens Energy are working together very closely, we provide our expertise to resolve those issues and also to get to the bottom of the causes and again, we should point out that for project business, these are measures that will not materialize overnight. So it will take time until they are resolved.

And Mr. Eickholt has talked about that. He knows where to attack by but he also says the resolve those problems will take longer than originally estimated before. Despite all that, I'm convinced that wind power remains an important growth market. It's about us doing our homework for one thing. But the market also needs to understand and does understand how to handle the volatile supply chains. Wind continues to be an important part of our strategy.

Now with that, I'd like to see what in the past quarter has happened in terms of new orders. And we see this along the three pillars in which we are active. And we're upbeat about that, because every quarter, we found really good examples that show you that illustrate what excellent projects and successful projects have been out there along those three sectors. And that are in line with the logical consequences of an energy transition. And therefore, I'm very confident that we are on the right way forward.

In China, we have two customers with whom we have been very successful in signing contracts for gas turbines. One is a coal to gas replacement. So again, this is the logic that we have been following. It saves about 60% of Co2 emissions compared to today. That's the Guangdong Energy group that we have signed a contract with. We're delivering forecasts and steam turbines units, the eighth class turbines that include both new and new units and the modernization of existing power stations to respond to the growing energy demand in the south of China which is home to more than 70 million people.

But at the same time, it is a milestone in the success story of our age class turbines. 100 units have now been sold with 2.5 million operating hours. The downstream service business, of course is interesting for us.

Now number two. This is something that is truly exciting because we're talking about an upcoming dynamic market, which is on night connect interconnected project, which is a high voltage DC transmission system. This is the first power line the power connection using direct current between the UK and Germany. Now, why is that important? We're talking about power links that transmit up to 1.4 gigawatts both ways. So we're talking about energy supply of 1.5 million households here. And what that means is that between the UK and Germany, we are exchanging transmitting electricity both ways. And please bear in mind that you always have multiple delay between the wind power maximum in the UK and Germany. So if we're looking ahead into the world of the future, which will be more about volatility in power supply, and production, or generation and consumption are not always coinciding, it's going to be very important to ship to move those deliveries across countries. And this is what we need these interconnectors for. We have been extraordinarily successful here. It's a project that will save about 16 million tons of Co2 emissions. And we see this is a very interesting and dynamic market unfolding in front of our eyes, because it is about exchanging electricity between larger regions of the world.

Now, our third example is something that's happening in here in Berlin. It's the industrial production of electrolyzer modules. We've announced earlier that we're going to invest $30 million here in Berlin, having already invested $60 million in a new production facility here in Berlin and Spandau for vacuum interrupters. Now, that is our first venture into the gigawatt economy. So the first capacity will be one gigawatt can be easily tripled. In other words, if the market is ready, we can respond really quickly. So we believe we can cater to the market demands here and we're getting ready to now finalize all those units also increased our global footprint, which will allow us to reduce the manufacturing cost of green hydrogen technology and the commercialization of supply chains and production can be achieved.

Now where are we doing that we're doing it in a place where gas turbines produced, manufactured that we're also not converting to hydrogen so we can use them potentially in the future for other fuels as well. We assume that by 2030, we can fully switch over to full hydrogen operation. Today this is possible by up to 50% here in Berlin. We're pooling the competences that are illustrating the energy transition where different technologies come together.

And with that, it's over to Maria, who will cover some of the figures for you.

Maria Ferraro

Thank you, Christian. And good morning, everyone. A very warm welcome also from my side, from [Indiscernible] as mentioned earlier, thank you so much for joining us today. Also, as mentioned, the preliminary figures have already been published in our ad hoc announcement on April '19. I'd now I'd like to walk you through our financial performance in more detail. And after the call, happy to take any questions you may have. So first, let me give an overview or an overall picture.

As of Q2, we see first minor negative effects of the war in Ukraine, and its political consequences on our second quarter results. We do expect headwinds to get stronger as Christian mentioned, as we proceed into the second half of the year. But overall, our reporting segment gas and power has again shown a solid performance in the quarter. We see operational improvements coming into effect, our cost out measures, we see the effects of this on our bottom line, and a very strong order intake of gas and power. We also see a resilient and reliable service business as a growth driver for our group. This was a strong service quarter in both segments. Also, while gas and power is also facing increasing supply chain constraints as already mentioned, impacts are continually being reviewed on how to mitigate and overall the net impact so far is limited. And of course, our team in procurement, as mentioned is a core competence, and is using all possible levers to reduce the supply chain impacts by looking at long term contracts, and so on. However, the ongoing challenges at SGRE weighed down and impacted the overall performance of Siemens Energy Group. And with that perfect segue please to slide 11, where we see Siemens Energy Group at a glance and their major KPIs for the quarter.

You see a sharp decline in our order intake because of an exceptionally high previous year quarter. In Q2, 21 for example, SGRE had booked orders for three large offshore wind farms, contributing approximately just shy of 3 billion to order intake. But with this quarter's volume of close to 8 billion, we still have a solid order intake with a strong contribution from gas and power. Orders exceeded revenue leading to a book to bill ratio of 1.2 with a very strong book to bill of 1.5, a GP. This led to a new record high order backlog climbing to 89.3 billion for the group approximately this represents a bit more than three years of revenue, which again provides a solid foundation to deliver improvements and profit improvements that we're striving for. But as I mentioned, always, it's about quality, not only quantity, and we need to ensure that we make a profit on our projects through our execution and through operational excellence.

Looking at revenue on comparable basis revenue slightly declined at 1.7%, but rose on a reported basis. The decline is due to of course, operational problems and supply chain constraints, as mentioned, and this held back revenue at SGRE which came in at minus 10.5% comparable. The GP revenue moderately increased as expected. But we also to a smaller degree, though, but we also saw impacts from supply chain constraints in gas and power. For example, in our transmission business, this quarter, it should be noted that we also had a positive currency translation affect approximately 3% that supported revenue growth. A growth driver clear in terms of revenue was our service business. And again, this was a both segments both SGRE and gas and power.

Book to bill for Siemens Energy, again, very strong combined at 1.2 and as mentioned earlier, a very strong book to bill of 1.52, on gas and power. So EBITDA for special items here, you see a sharp decrease. We are at minus 21 million compared to a positive 288 million in the prior year quarter. This is driven entirely by the negative result in SGRE. As already mentioned SGRE continues to face operational problems mostly related to the ramp up of the 5x platform, with further pressure on energy, costs, higher commodity costs, supply chain constraints, and transportation costs. This all coupled with lower volume. Meanwhile, gas and power EBITDA to improve strongly, slightly better than expected, but however, could not compensate the loss at SGRE. The corresponding margin for the group was 0.3% minus compared to a positive 4.4% in the prior year quarter. This led to the group loss and net loss of minus 252 million again compared to a positive net income in the previous quarter year.

However, we do expect a net loss for the fiscal year 2022 as a result of this, and we're now saying this is to be level with prior year just as a reminder, prior year was minus 560 million. Free cash flow pre-tax came in negative as you see here at minus 350 million again, with diverging developments between both segments. We have a positive contribution on gas and power of 200 million and a negative cash flow pre-tax at SGRE at 560 million.

So now moving on, please to gas and power if we can look at the major financial KPIs for the quarter for the gas and power segment. As you see here, across the board, GP again delivered a solid performance across all KPI. Orders are plus 29% comparable at just shy of 7 billion very strong performance. It's important to note across all businesses, all businesses contributed to this double digit growth, generation, transmission and industrial applications. What's also important as you see here is that the growth is driven by both new units and our service business with particularly strong demand in the Americas recording region. We now have a record order backlog of 57 billion with as mentioned, something we look at very carefully is the margin quality, so with a good margin quality.

Revenue grew moderately by plus in 3% on a comparable basis. This is driven predominantly by our transmission industrial applications businesses generation was slightly down as expected quarter-over-quarter due to project volatility. Overall, the improvement mainly came from our service business. And then of course, with service business, then this leads to a positive mixed effect in our profitability. So looking at our profitability or adjusted EBITDA before special items, we had a strong quarterly performance here at 266 million which led to a margin of 6%. This was driven as mentioned by more service business, again, contributing to a better mix.

Our strong operational performance I think it's important that through the execution of our AIP program that we see this impact on our bottom line and I think this continuous delivery on our cost saving programs is seeing quarter-over-quarter. Impacts related to the war against Ukraine, I think we're limited in the reporting quarter, as I mentioned, I think Christian gave a very thorough update in his part on the expected effects on revenue and profitability, which we see for the second half year, based on the current sanctions regime. Free cash flow came in at 200 million pre-tax. It is below the last year quarter, which was though a very strong, a markedly strong quarter. We did have a swing and negative swing year-over-year associated with derivatives, and of course, Q1 fiscal year of this year. So for the half year, Q1 plus Q2 we also had an exceptionally strong quarter and therefore a strong half year so far for free cash flow generation in our gas and power segment.

So before we go to the outlook, maybe just in summary, I think it's important in terms of the impacts on our numbers. And what we see here for Q2, we see that SGRE does impact our overall performance of Siemens Energy Group. We do see very challenging market conditions, especially with respect to increasing or aggravated supply chain constraints. We have potential for the effects from the war expected. As Christian mentioned, this is an extremely dynamic situation with increased volatility. And however, and despite all of this in terms of headwinds, we've had solid development I guess in power. I think this continued into Q2, especially given this increasingly challenged market environment. That was a very solid performance. We're progressing in line with expectations. I think it's important to note we're back to growth on the top line. I think we show here with such an order performance from gas and power. We're winning important orders and growing our backlog in size and quality, which is important and forms our future business foundation.

Operational improvements continue with strong profitability and solid cash flow and we will continue to focus on our [Indiscernible] programs rather to ensure that those cost savings are sustained and are on track with our expectations with respect to our accelerate impact program, [Indiscernible] program for our savings for the current fiscal year, and we also keep a very stringent review of our networking capital. In supply chain environment, we have seen slight increases of inventory necessary, given the volatility that we see in the potential disruptions we see in supply chain as a result, but this is something we're watching very closely. And I do invite all of you to join our capital market day virtually or in person, of course, but virtually on May 24, where we will continue to provide even more transparency on how we will report in the future.

So now for the outlook please on page, the next page. So given SGRE's adjusted expirations for this fiscal year 2022 and in light of the prevailing challenges, we now expect for Siemens Energy for fiscal year '22 results still to be within the guidance range, however, towards the low end of the range. So for comparable revenue development, we see our ranges negative 2 to positive 3, and four adjusted EBITDA margin before special items, the range is positive 2% to positive 4%. And consequently, as we indicated before, we expect our net loss be level with prior year now compared to a previous guidance of a sharp improvement. With respect to gas and power, we maintain our guidance for the gas and power segment comparable revenue growth excluding currency translation portfolio effects between positive 1% and positive 5% and adjusted EBITDA margin before special items between positive 4.5% and positive 6.5%. However, again, in light of all of the challenges we've mentioned, both Christian and I, we do expect results now towards the low end of the guidance range. And we confirm our margin target for fiscal year 2023 of 6% to 8%.

So I think that's all from my side at this point in time, and I would like to hand back to you, Tim, thank you.

Question-and-Answer Session

Tim Proll-Gerwe

Thank you, Maria, and Christian Bruch. Now it's your turn journalists to ask questions to the executive board. [Operator Instructions] The first question is [Indiscernible] go ahead.

Unidentified Analyst

Good morning, everyone. I have a couple of questions. On Siemens Gamesa, first of all, Mr. Bruch it seems that pressure is increasing, and the share price has reached a record low this week. Siemens Gamesa is seen as a critical point, and you are looking for strategic solutions. How long can you delay all of this considering the current developments? That's my first question. And the second question is I'd like to turn to whether Siemens Gamesa will remain a core business as a whole. You said it's an important component. I'd like to know if Siemens Gamesa as a whole, will this continue to be a strategic core business?

Unidentified Analyst

Can you provide us with a figure for the book value of the Russian business? The reason I'm asking is, I guess there will be a risk of impairment if you seek a strategic solution for the business, which I guess this is not going to be easy in the current environment. So I guess there's a risk of impairments, So the question would be can you provide us with a book value for that business? And is there a risk of impairments as part of the strategic review? Thank you very much.

Unidentified Company Representative

Well thank you very much. Good morning. And thank you for your questions. Of course, these were what we had expected. I understand you're asking questions about Siemens Gamesa, all I can do is repeat what we've said in previous quarters as well. There's nothing more to say. It has to make sense we take a continuous look at all of this. And if we have more to say on this, we will do so. But at this point in time, that is not the case. Now on your question, your second question. Now I still think that it is possible even if when we take a look at the market onshore and offshore. This is to be successful, and if we really want to have stable margins and see service businesses well. This is what we can see is driven by onshore.

And of course, onshore business is a business, which, due to the access on the market, let's say, the different grids at Siemens Energy, this is something that we can certainly benefit from and everything that we say right now and if you listen to Jochen Eickholt as well, these are issues that can be solved. And I do think that the 5x is something which technically speaking is good. But as I said, the ramp up, and the costs were not satisfactory. But for me right now, it would not mean that I would react differently to my portfolio if I take a look at the opportunities on the market. Onshore is still the largest market out there. So yes, I also take a look at Siemens Gamesa as a whole Yes. Mr. [Indiscernible] on the book value, I don't think we can comment on that. But Maria, over to you.

A – Maria Ferraro

Yes, thank you, Christophe for the question. Hello, from my side. So yes, I mean, of course, it's not just the book value. Of course, it's the ongoing business. And just to give an understanding, in light of what Christian said about the 300 million impact approximately, it's about a half a billion that we see of ongoing business in Russia. And it's too early to say I mean the book value is just one component, as mentioned, different scenarios are under evaluation. So all scenarios and at this point in time, we are evaluating those scenarios accordingly.

Operator

Thank you very much. The next question is from [Indiscernible] go ahead.

Unidentified Analyst

Good morning. I'm going to ask a couple of follow up questions on Siemens Gamesa. So you say, what about capital market days? Will there be a decision on the future structure? And my second follow up question, did I understand you correctly, you are not considering exiting Siemens Gamesa, that is not an option for you if I understood you correctly?

Unidentified Company Representative

Good morning. Well on your first question, all I can say is I can't comment on that. But let me say one thing, the target of the capital market days is to give you more transparency in GP business, and what our future reporting will look like. We've got a lot of issues that are being dealt with in order to have an alignment to future areas in GP to make all of this very clear. I just wanted to make that point clear for you. And the second point you mentioned well for me, it is not an option that we're following right now. So I basically have nothing more to say on that.

Operator

And with that we talk to Mr. [Indiscernible]. Can we have your question, please?

Unidentified Analyst

Good morning. I have a question on Russia again. Have there been any write downs? Have you carried them out? And if yes, what's the order of magnitude? And when it comes to your guidance I'm not quite sure what you're saying you're remaining within the margin range. But at the bottom line, there will be a reduction of the outlook, saying that it may stay as bad as last year or even worse than that. So I'm not quite clear about the two different guidance levels you're providing here. Could you tell us exactly what those mean?

Unidentified Company Representative

Okay. I hope I understood you correctly. Russia currently is a revenue effect 314 million, which have related to profitability effect of the high double digit to the triple digit range. In other words, there is no asset value impairments that we've considered because the plants in Russia are there. They're owned by us. So there we are. Because that would only happen if we are closing down plants there or sell them. So today, when we talk about Russia's figures, we obviously reflect on everything we know so far. In other words, the sanctions regime as we see it today. However, this also means we don't know what is going to happen with the sanctions regime going forward, and then we're going to assess how that weighs on our business. And as far as the guidance is concerned, I'm not sure I understand your question, because when it comes to GP, the fact of the matter is that we are having an absolutely un-precedent situation with the supply chain logistics, the war, etc. And then you look at our quarter results for GP, we are coming in with an outstanding result, we're cautious when it comes to the whole year, because I do not think that the supply chain situations are going to, limitations are going to get easier. And we don't really know what's happening in China.

But if you see the general perspective, we have a hundreds of millions of headwind in revenues. But that is juxtaposed by next standing operational performance. So everything we've done before with our accelerated impact program, the improvement of our processes, etc, is having an effect, otherwise, we would not be within the guidance range. And again, this is how I started talking about that in my presentation. I've never seen a market saturated situation like this one before, never in my life. But the operational performance I'm very happy with when it comes to gas and power, and something that is obviously influencing the overall result of Siemens Energy is Siemens Gamesa, we're not happy with that. And the shareholders are not either. If it wasn't for that, we would be in really very good shape. Now, GP with a quarterly margin of 6% we're talking about a significant increase. So we're doing well, really well. But again, with all of that, we need to realize that the overall result matters. And this is why Siemens Gamesa, the problems, the operational problems have to be fixed really quickly.

Operator

Next question comes from [Indiscernible].

Unidentified Analyst

Good morning Mr. Bruch, I have a three question. Mr. Bruch first, you said you're reviewing your Russia business. And you're not going to talk about impacts at this moment. But once your review is complete, can that have an impact on the guidance for the current year? And if so, can it have significant impact on the ongoing guidance and for Russia you're saying you're expecting a low double digit, high double digit or learn triple digit millions impact. Now, what indicator? Is that referred to? And then a little question on the second quarter has been impairment at Siemens Energy engines. So what's the tune of that?

Unidentified Company Representative

First of all, as far as our Russia business is concerned, can they have an impact on the yearly guidance? Yes, of course, we're now guiding for the lower end of expectations. And if there's further write downs, or other effects that we need to factor in, I cannot rule out that this will weigh on our business. And we're currently looking at that, as I said. But for us, the Russia business is important, but it's not threatening or whatever I should call it. So I guess what that means is yes, there will be an impact. But it's certainly something that is manageable, when it comes to these impacts, but be it as it may have an impact on our guidance. Question two, if I understand you correctly, refers to the EBITDA and the high double digit and lower triple digit impact. I hope I understand you correctly, sorry. And the third one was on engines. Now, as far as this is concerned, we are talking here about a lower to middle million amount of write down effects. And in fact, you see that in our published figures from that disposal of that business.

Unidentified Analyst

Is it a single digit million?

Unidentified Company Representative

No, sorry, it's a low double digit, low to middle double digit million Euros.

Unidentified Analyst

Thank you very much.

Operator

Thank you very much. I don't see any more questions. [Operator Instructions]

Unidentified Company Representative

It doesn't seem to be the case. But as we said, the figures are no surprise today. So once again, thank you all for coming. And for your interest. Should you have any other questions please come contact us. Contact the press team. We will be happy to help you. The telephone conference for analysts with Christina and Maria Ferraro will begin at 10am you can dial into that as well. And the link is on our website. And I'd also like to mention the fact that our capital market day is on the 24th of May in Berlin. This is going to be streamed live so that you can also follow it virtually as well. So that's it for today. Stay healthy and have a wonderful day. Thank you.

Operator

Thank you very much for attending.

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