Earnings Transcript for ENR.DE - Q2 Fiscal Year 2023

Operator: Good morning, ladies and gentlemen, and welcome to the Siemens Energy's 2023 Second Quarter Conference 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 risk and uncertainties. At this time, I would like to turn the call over to your host today, Mr. Michael Hagmann, Head of Investor Relations. Please go ahead, sir.

Michael Hagmann: Thank you, Timo. Good morning and a warm welcome to the Siemens Energy Q2 analyst call. As always, all documents were released at 7 on our website. Here with me are Christian Bruch, our President and CEO; and our Chief Financial Officer, Maria Ferraro. They will take you through the major events during the last quarter. Approximately that should take 30 minutes. Thereafter, as usual, about 30 minutes for Q&A. We do have a hard stop today so I would ask you to ask only one question later. And with that, I hand over to Christian.

Christian Bruch: Thank you very much, Michael. And also good morning everybody from my side. Thank you very much for joining Maria and myself for our quarter 2 conference call. And that is the first conference call without a separate conference call from SGRE and this is something obviously what we're going to pick up here in our discussion. It has been a very important quarter for us. One thing is obviously Siemens Gamesa delisted in February and in March we successfully refinanced the transaction via the equity raise and the Green Bond and I'm really super proud of what the Siemens Energy and the Siemens Gamesa team have achieved within the last quarter. Post the Siemens Gamesa delisting, we initiated the process to attain now the remaining shares in Siemens Gamesa. We target a selective capital reduction and called for an Extraordinary General Meeting on June 12 and 13 and obviously hope that this will be successful. These achievements what we have seen also really over this quarter, particular mark major milestones on our journey which started three years ago when we kicked off Siemens Energy. And three years after the spinoff, the operating performance of the former Gas & Power business is gaining momentum. Our orders are strong, which proves that we are able really to capitalize on the opportunities provided by the energy transition. And the different parts of our portfolio help to address very diverse challenges across the globe, which we need to overcome to build a more resilient energy supply. We are at the beginning of substantial investment cycle in the energy infrastructure and in that obviously we are well-positioned really to benefit from it. We were able to convert backlog into strong revenue growth, Maria will talk about that, and also enjoy margin expansion in-line with the trajectory we need to reach to our guidance and our medium-term targets. We continue with remedial actions at Siemens Gamesa and the leading indicators suggest that we are stabilizing the organization. Nevertheless, Siemens Gamesa incurred another big loss as Jochen and the team are dealing with operational challenges, including those related to the ramp-up of new capacity and new products in the offshore business and the rectification of the quality issues. And for the former GP business, the operating environment continues to improve whilst it remains challenging in the wind industry. Even so we see that the various government initiatives are starting to have an effect. It will remain a task for the wind industry, including policymakers to define auction schemes and commercial conditions in the projects, which ensure a reliable risk and reward profile for all participants in the market. And in that regard, seeing that we have a stronger demand growth in the U.S. and in Europe particular, which allows us to continue to remain selective reaching a better order quality, but it will be very interesting also to see the second half of the year where a lot of auctions, particularly on the offshore side, going to continue. Let me briefly touch on our guidance. 20% comparable growth during the first half was stronger than expected. We therefore raise our revenue guidance from a range of 3% to 7% to a range of 10% to 12%. We maintain our margin guidance of 1% to 3%. However, because of the performance of Siemens Gamesa in the first half of the year, we now expect the group margin to be around the low end of this range and Maria will more talk about the exact numbers. Let me touch base a bit on the boundary conditions in the energy market and obviously with the Inflation Reduction Act and European Green Deal as important initiatives, they accelerate the shift in these boundary conditions and we are definitely seeing that we're benefiting from this shift. Let me start with wind. The key message here is that the demand will be strong, which allows us to continue to remain selective in the commercial approach. In the U.S., production and investment tax credits will foster investments in renewables, including onshore and offshore wind. And in Europe, we expect the Green Deal to create a more predictable and simplified regulatory environment and to provide faster access to funding, which will be required obviously also because a lot of extension of fabrication, infrastructure and so forth is needed at the end to implement these projects. This push into renewables requires further investments in grid infrastructure. In the U.S., USD3 trillion will be made available in form of loans and grants to support grid investments. In Europe, the Green Deal will support investment, especially due to easier and faster permitting. And the higher share of renewables also requires grid stabilization. And with our modern and highly efficient gas turbines, we are well-positioned to provide the [peak gas] [ph] and the solutions needed to stabilize these grids. We are developing a lot of new technology around grid stabilization so there's a lot of things to come. The IRA and the Green Deal support the builder of hydrogen infrastructure to decarbonize industry and transport. And now the details on some of the programs need to be defined to convert this ambition level into the extraordinary growth, which is needed to achieve a resilient energy infrastructure. Through our Transformation of Industry business area, we want to provide these type of key components, as well as the solutions for this buildout. Let me give you an update on Siemens Gamesa. As I said, this is the first time without a dedicated Siemens Gamesa call. Even so the financial performance remains weak, it is our focus that the Mistral program is leading to a stabilization of our operations in the short-term and that we are paving the ground for the road to profitability. Over the last 6 months, we have progressively been able to de-risk the business via selective bidding, contractual indexation, and hedging, the stabilization of our supply chains and the industrialization of our product development. We have been able to increase prices and to improve terms and conditions on new contracts. Furthermore, we are building long-term partnerships with our clients as our recently announced agreement with RWE tests. We have been able to improve project execution. Manufacturing, volume, and installations of the Siemens Gamesa 5.X continue to increase and we see improved project delivery times. Installations have for example rolled to up figures risen by 45% in quarter 2, and our plan fulfillment is up 35%, which compares to an increase of plus 10% in quarter 1. So, these things go in the right direction. Even so and we clearly also said it, the environment in 2023 for wind we expect still volatile. There's a lot of things still happening back and forth. So, there's still a long way to go from the current performance to our targets, but we are moving in the right direction even so with challenges remain. Let me now turn to the transaction itself, and as mentioned before, we have called for an EGM on June 12 and 13. Here shareholders are invited to approve a selective capital reduction in case. Obviously 25% at the end of the shareholders participate in the EGM and vote in favor for the capital reduction, we would be able to gain control of 100% of the shares and fully integrate Siemens Gamesa into Siemens Energy. Within 30 days, the remaining minority shareholders would receive the 18.05 per Siemens Gamesa share and the shares remain non-fungible in case these conditions are not met. Siemens Gamesa is now treated as a reporting segment of Siemens Energy. This means that reporting in regulated documents is limited, due to IFRS. However, for an interim period, we will continue to provide you with the KPIs you need so you can see how we progress as transparent as possible. As we speak, we are working on the integration and are aligning the functions to leverage the best of both processes and structures. Let me briefly comment on the order intake at Siemens Gamesa. In onshore, we had a well-balanced order intake between the regions

Maria Ferraro: Thank you very much, Christian, and hello everybody. Good morning from my side. So going straight into it looking at the Siemens Energy Group. The company continued to enjoy strong growth in orders and in revenue. As Christian just mentioned, Siemens Energy's market remained quite favorable. Overall volume is very strong where we recorded orders of 12.3 billion, reflecting a 56.3% growth on a comparable basis. This means our order backlog has reached a new record high of 102 billion and exceeded the 100 billion mark for the first time. Again what's important about that and you know, I have the order backlog slide rather included to ensure that of course it's not only growing in terms of amount, but certainly the quality and this is really building our solid foundation to deliver the growth and the margin improvements that we're all striving for. Looking at revenue, this increased by 23.8% to 8 billion on a comparable basis in the second quarter with all segments both in orders and revenue showing strong growth. And what's also important, it was also in new units and in service. Book-to-bill very strong at 1.53 for the quarter and around 1.5 for the 12-month rolling period. Profit before special items improved year-over-year and was slightly positive with 41 million or 0.5%. This again is a bit of a mixed picture. We have a higher loss at Siemens Gamesa, which was more than offset by a strong performance in all other segments led by our Gas Services business. Special items came in at positive 23 million and this was driven by a positive effect of 78 million in connection with the Accelerating Impact program. Most measures of the program have been executed or in execution or contractually solved. And again, due to the improved market conditions we just talked about and the volume growth, the assessment of the further progress of the program has now changed. Free cash flow was as expected negative with negative 294 million, slightly better than in prior year second quarter and slightly better than expected again, but still negative. A higher cash outflow at Siemens Gamesa was partly offset by a strong cash flow in other segments, primarily at Grid Technologies and I think this is really excellent cash flow following an extremely strong top line at the GT business. Now, looking again at the order book development. As I just mentioned, we see our increasing order backlog and it grew in all dimensions, which is also something that we look at. It's new unit service across all businesses, different geographies and the book-to-bill remains above one for all businesses. And we confirm very strongly that the margin profile in the backlog continues to support our margin targets. Moving on to the cash bridge as at the end of Q2. So, first of all, I'm very pleased with the successful financing and transactions via the equity raise and our inaugural Green Bond issuance, both marking major milestones for us in the second quarter. To recap, on March 15 we successfully placed approximately 73 million new Siemens Energy shares, reflecting a share capital increase of 10%. This was with institutional investors through an accelerated book building. The shares were placed at a price of 17.32 per share and this resulted in gross proceeds of 1.25 billion. So, this is important, it concludes the equity portion for the planned acquisition of the outstanding shares of Siemens Gamesa. And again remember how the transaction was formed was to underpin and ensure that we continue to support our solid investment grade rating. Furthermore, we successfully placed as mentioned our first-ever Green Bond for Siemens Energy with a nominal value of 1.5 billion. The proceeds of the Green Bond placement were used as planned to refinance existing debt at Siemens Gamesa. The Green Bond has two tranches, a 750 million tranche at a fixed rate with a maturity of 3 years, and another 750 million tranche at a fixed rate with a maturity of 6 years. And the total order book across the two tranches showing the vote of confidence in Siemens Energy was approximately 5.5 billion. So, now let me take you through the group cash bridge. So overall, you see we have 5.2 billion in cash and cash equivalents and 5.3 billion of financial debt, of which 3.3 billion is long term. This brings us to a net debt position of 101 million, which was very similar to the net debt position of 45 million at the end of Q1. Looking at the main cash outflows and inflows, the main cash inflow during Q2 was the 1.2 billion approximate net proceeds from the capital raise. On the other hand, we had cash outflows with respect to negative free cash flow after-tax in the amount of 420 million. Therein lies of course the operating cash flow and CapEx. The remaining buyback of Siemens Gamesa shares within the standing purchase order of around 400 million is also included, the purchase of treasury shares in the amount of 85 million, financial interest of 56 million and an increase of lease liabilities at Siemens Gamesa in the amount of approximately 200 million. Again giving you some context on the cash inflows and outflows. During the quarter, our provision for pensions and similar obligations stood at 546 million at the end of Q2 so no change versus Q1. So taking into account the pensions, we have an adjusted net debt position of 693 million, just a slight increase of 43 million versus Q1. And now looking at our liquidity position. At the end of Q2, Siemens Energy has a total available liquidity of 9.7 billion as we had around the 5.2 billion mark of cash and cash equivalent and of course our undrawn credit lines of 4.5 billion. So, now as promised, we have our additional transparency for BA for each of the business areas. So, let's take a look starting with Gas Services. So, here we see a very strong quarter for all KPIs for Gas Services, really well done. Looking at orders, the overall gas market, as Christian outlined, remains very solid and in the second quarter we booked orders worth 4.5 billion. This exceeds the relatively strong prior year quarter by 23% comparable. The substantial order growth, as I mentioned earlier, was driven by demand in Europe with strong orders in Eastern Europe. Book-to-bill very solid at 1.57 and an order backlog in our Gas Services business after Q2 of 42 billion. In the second quarter we booked 31 gas turbines greater than 10 megawatts thereof 12 large gas turbines and 19 industrial gas turbines in the range of between 10 megawatts and 100 megawatts. In Q2 the market for gas turbines greater than 10 megawatts was strong with 67 units. Therefore, we reached the Number 1 position with a market share of 46%, very strong quarter. Revenue grew substantially by just over 27%, albeit versus a relatively low prior year base and came in at 2.8 billion, mainly driven by strong new unit business and of course our underlying service business. Profit increased sharply came in at just shy of 300 million, reflecting a 10.5% margin. The strong increase reflects a combination of higher revenue, an improved cost structure, really due to the hard work on many measures over the last years of the Gas Services team, strong execution, as well as a strong contribution from service. Moving on to Grid Technologies then on the next page, please. Orders

Christian Bruch: Thank you very much, Maria. I mean let me flag up the key points for 2023. I mean obviously we continue to focus on the fiscal year 2023 targets. The bars are higher, don't forget that, because we have raised our growth targets. Second, we are pushing for the change in the organization so that the new operating model, which we introduced back in last October, becomes a new way of working. We see a lot of boundary conditions in our favor. However, we're always aware this can rapidly change and we need to continue to work on becoming more leaner, more agile. But this will be an evolutionary process and not a revolutionary process inside the organization. No question, Siemens Gamesa remains the top priority for us. We need to turn Siemens Gamesa around and we want to progress rapidly towards the integration, particular on the corporate functions side. But we also very clearly have to say we are operating in a volatile environment still, right? 2023 is not an easy environment in which to operate and the wind industry has as a whole to continue to work on right risk and reward profiles for all participants in the market going forward. And fourth, we are in the middle of the process to capitalize on the market opportunities. As I mentioned briefly around IRA and the Net-Zero Industry Act, but we are strongly convinced that with our portfolio, we are in a prime position to build an energy resilient infrastructure. And Michael, over to you.

A - Michael Hagmann: Thank you, Christian. Thank you, Maria. As always, we now have Q&A. As I said, unfortunately we do have a hard stop. [Operator Instructions] As before, please for the beginning stick to one question if you can. The first three questions will go to Ben Uglow, Akash Gupta, and Alex Virgo. And with that Ben, please go ahead.

Unidentified Analyst: Oh, brilliant. Thank you very much. Hi, Christian, Maria, and Michael. So, sorry to begin on a sour note, but I did just want to understand some of the movements within the cash in particularly Siemens Gamesa. Maria, you currently gave us an indication of what was driving the 886 million cash outflow. I guess the question is, how much is pure operational performance, how much is onerous contracts? And am I right to assume that there's not a big impact of working capital in that number? And then the related question is, you're now, kind of guiding to a pretty neutral EBIT outcome in the second half for Siemens Gamesa, should there be a big variation between the EBIT outcome and the cash, i.e., what potential line items could make the cash much worse than the EBIT bearing in mind there was quite a big spread in the second quarter? Thank you.

Maria Ferraro: Thank you, Ben. Good morning and of course be happy to take you through a little bit of understanding of that free cash flow. I tried to elaborate that further also in the presentation, but let me take it a little bit like step by step. Of course the cash flow for Siemens Gamesa in the first half follows the profit. So, that’s a half, if you'd like, of that is related to the project. We do have onerous contracts so that is being executed and of course the cash outflow related to that also impacts us on a quarterly basis. Looking at operating net working capital anticipating this question a little bit, there's nothing – based on the backlog and the execution that needs to happen, there's nothing there that I would flag up as a concern at this point in time. It's really just part of their seasonality. If you see in the past, Siemens Gamesa does dip, let's say midyear, as well as they execute and I can't even say, there's no relevant impact from factoring or anything. It's really just executing on that big backlog. There are and there is CapEx impacts of course in there, Ben. Necessary of course to ensure that we're able to deliver on the backlog so that's also embedded. But again those are the main components for the free cash flow and certainly can provide further color if necessary, but that's it in a nutshell. Looking at, should there be different movements, could the cash become much worse? Maybe let's flip it around and look at in terms of our order intake and so on. If that continues to progress, there could be potential upside because of course, as mentioned earlier and looking even at the cash flow performance of our Grid Technologies business for example, this is following a very strong order intake. So, there could be some positive there. Again, I think both Christian and I have underpinned the volatility that continues to remain in Siemens Gamesa as we continue to ramp up and so on and I think that's fair and embedded in the second half as such.

Unidentified Analyst: Got it. And just one quick follow-up. On the onerous contracts, obviously these are thankfully, thank god running off. If we had to put a number on how much of those have finally gone away by the end of this fiscal year, is it 70%, 80%, 90%? I mean to what extent are we still going to be talking about onerous contracts in the next fiscal year?

Maria Ferraro: Thank you for that. I mean we mentioned that at the beginning of the year that the onerous contracts persist for another 12 to 18 months as we work our way through it. Looking out towards the end of the year where would we stand, I would say about 60% to 70% of that.

Unidentified Analyst: Great. That’s very helpful. Thank you very much. I’ll pass it on.

Maria Ferraro: Thanks, Ben.

Michael Hagmann: Thank you, Ben. Next question goes to Akash Gupta at JPMorgan. Akash, please go ahead.

Akash Gupta: Thank you, Michael and good morning everyone. My question is also on Gamesa and it's on the accounting side. So, Gamesa capitalized about half of R&D, while Siemens Energy has a much lower number. And as you plan to integrate Gamesa within the company, how this will going to change and if there will be a change from when that would be applicable? Thank you.

Maria Ferraro: Thank you, Akash, and thank you for that question. I mean at this point in time, as you know, I mean we follow the same guidelines and there is some particularity where Siemens Gamesa does have, let's say, partial capitalization. That's going to continue into, let's say, the midterm and run off. And look, we're still operating separate companies. We consolidate as such. But we're still separate companies and we need to ensure that what was already committed to in terms of the orders on hand continues to have comparative basis as we move forward. So Akash, I can't give you a specific date as such, but that will run off into the mid-term.

Michael Hagmann: Thank you, Maria. So the next question goes to Alex Virgo at Bank of America. Alex, please go ahead.

Alex Virgo: Thank you, Michael. Good morning, Christian, Maria. Thanks for taking the questions. So, I guess I wondered if you could talk a little bit more or give us a bit more color on Mistral and some of the KPIs. You mentioned a couple in your prepared remarks, but I just wondered if you can give us a little bit more detail around things that you can see that we can't that gives you confidence in that minus 11%, I guess that you picture on the margin improvement into 2024? And I wonder, just staying on that as a follow-up, whether you could just make a comment around the IRA domestic content rules that came out on Friday evening, whether you could give us any color around your footprint locally and whether or not you feel you're well positioned for those changes? Thank you.

Christian Bruch: Hi, Alex. Thank you very much for the question. First on Mistral, what is happening in the background is obviously also I would say, across the portfolio, managing differently to look about, let's say, all the blade type of structures within the overall company, looking from an onshore and offshore perspective jointly. So, you do see a different way on, first of all, how do we run technology and portfolio management. And the second piece is obviously how do we run the factories accordingly. The things which we do not flag up here is, numbers in the report, but which I obviously see as everything which is related to these type of things. So, how can you – this is why, I mentioned also things like rotor blade factory rework numbers and this I see going in the right direction. That said, you also have to see that obviously we look a lot and I have to say a lot really through all the quality issues and really try to understand carefully, bring all experts together. And this is why I said also sometimes you see and you have seen this in quarter two here and there also things where we say hey, we need to do this slightly different. So, you need also to continuously be aware that there is some volatility in working through it. But what I do see is a very diligent more consolidated approach to that and this gives me obviously the comfort that we are tackling the right things. But this is also why we continuously say hey 2023 will not be a straightforward home run. It will be puts and takes continuously, but I'm confident that we have the right organization on how to approach it. One thing you have to keep in mind also was Mistral. The other thing we're also doing is ramping up relatively fast increasing offshore business and this is obviously now completely the contrary in terms of hiring a lot of people, ramping up factory and doing all the like. Mistral helps there because all factories are managed under one person. That's good. But it obviously also means on the one side, we have to close down or change the footprint factories. On the other side, we have to open. So this is a lot of puts and takes and this is not so different from what you have seen us doing when we started with the company, what we did in generation at this time and industrial applications of really turning it around. But this is where I look on how people do things and what is the number of stable processes and so forth what gives me the comfort. On IRA, yes, we had – you might recall that we mothballed the two factories on the wind side what we had. We're obviously restarting these up because of the local needs. This is largely driven onshore, right, I mean and repowering type of activities. And then the other element is now with the offshore auctions, yes, and I think we have been vocal on this. We look in also then extending the factories for the offshore side in the U.S. I think in terms of the content rules, nothing really super surprising. So, obviously our planning going forward in terms of factories is encountering that. But obviously it will now all depend on how the auctions go and come and blend also in our books and this will still take some time to take a final investment decision there. But if so, if this all comes, we would extend also our footprint.

Alex Virgo: Very helpful.

Michael Hagmann: We've got six more people in the Q&A list so please stick to one question. The next three questions will go to Gael, Vivek, and Supriya. And Gael at Deutsche, please go ahead.

Gael de-Bray: Yes, thanks very much Michael. Good morning, everyone. Look, this was obviously another very strong quarter in terms of orders, but I'm sure you're now starting to see some capacity constraints in some of your businesses in particular in grid and with localization becoming increasingly important as well. Could you give us some update on the group's CapEx outlook and in particular on the potential investment plans in the U.S.? Thanks very much.

Christian Bruch: Maybe I'll start very generic and Maria goes then a little bit, let's say, more in detail. But absolutely, yes. However, first of all Gael, be aware we run 85 factories around the globe, so we have a pretty good infrastructure. And if you talk about grid and the growth there, a lot of this will be actually more people related, engineering related, and less factory related. Yes, we are looking in the U.S. also to extend some of our existing facilities, but this will be some investment, but not always massive investment and we also obviously look in there for support of these type of projects. But keep in mind that a lot of this will also be about people capabilities and this is not to be underestimated.

Maria Ferraro: Yeah, no, thanks Gael. And of course when we look at CapEx and we said that from the beginning if you remember, we're like 1 billion R&D, 1 billion CapEx more or less approximate where the CapEx is mainly not only, but mainly within the Siemens Gamesa area. I mentioned that earlier that CapEx is necessary, as Christian just alluded to, to support the contracts that we're executing to support the demand that we see and of course that is all embedded, if you'd like, into our guidance with respect to cash for this year. And do we see that further, let's say, expanding in the years to come? This is something that we need to watch very closely because I think this is not, how do I say, an inexhaustible source of cash, especially if we're looking at some of the demand that we see forthcoming that's quite significant. So, we have to ensure that we prioritize where our CapEx is spent and do that in-line with our cash expectations for ourselves not only for this year, but 2024 and onwards.

Gael de-Bray: And when it comes to the lease liabilities, the 200 million increase we saw in fiscal Q2, I mean is this the kind of things we should continue to expect in the future?

Maria Ferraro: Well, again I think that is in particular relating to certain commitments where we had to expand and so we've incurred that. Is this something that we expect per quarter? Of course not. I mean CapEx is not done smoothly, but we're certainly able to provide more detail on that if necessary, Gael, but my reaction there is, no.

Gael de-Bray: Thanks very much. I’ll get back in the queue.

Maria Ferraro: Thank you.

Michael Hagmann: Thanks, Gael. Next question goes to Vivek Midha at Citi. Vivek, if you go ahead please.

Vivek Midha: Thanks very much. Good morning. My question is on margins in the former Gas & Power business. So, you've raised revenue guidance, but no changes to the margin guidance in those businesses. If I look at the implied second half margins in for example Gas Services, Transformation of Industry, they look relatively low. So, is it driven by conservatism? Are there certain developments in project mix or services, equipment mix and so on? Thank you very much.

Maria Ferraro: No, thanks Vivek. And I hope, I'm sorry because it was a little bit difficult to understand, but I hope I got it. So, it's really looking at the fact that we continue to say for the SE without SGRE, we stay within the profit expectations as we proceed into, let's say, the next half of the year. And you mentioned the mix and you're fully right and I think I mentioned that earlier that we're seeing a nice progress not only in the new unit side, but also on service side. We saw a strong outage season in the first 6 months so we have to take that into consideration as we progress through into the next 6 months. We also have some FX positive impacts that we see tapering off into the next part of the year. So taking that all into consideration and I've mentioned this even last year if you recall that the mix of our revenue that comes in the last half of the year is normally such that we kind of taper off because there's a lot of the project revenues. Some of those in the past have been, as you know, some of our legacy projects; but that's generally the trend that we see in the last 6 months of the year. So, very much reflective of a mix.

Vivek Midha : Thank you.

Michael Hagmann: Thank you. And next question goes to Supriya Subramanian at UBS. Supriya, if you please go ahead.

Supriya Subramanian: Yes. Thanks Michael. Good morning, all. Maybe one very quick follow-up on Siemens Gamesa profitability. Given that the guidance implies broadly breakeven or close to breakeven for the second half of this year, is that a good benchmark to take for when we think about margin trajectory into 2024 and the mid-term? And then sort of my main question is on the – I just wanted to get your thoughts on the regasification capacity expansion market, especially in Europe given the strong growth. How is Siemens Energy really exposed to that end market, especially I guess maybe a bit more relevant for Transformation of Industries and are you seeing a good opportunity in that space? Thank you.

Maria Ferraro: Maybe I take the first one. Hello, and thank you for the question on the forecast and the profit trajectory regarding Siemens Gamesa. I think look, we're 6 months in and I think we've seen the profit so far. From an overall perspective, I think it's important that we reiterate that this year was and is meant to be the transformational year as we put all the pieces of Mistral together, as we continue to execute on the backlog, et cetera. The whole point of that is being that come 2024 and beyond, then we're in a more stable mode and I think that's important to understand the trajectory of the profit. Based on if you look at it just from this year's perspective, which I believe was also part of your question, then of course based on the back of the 6 months ended so far, then we expect again to move towards the overall minus 11% for Siemens Gamesa in the back half of the year. So, an improvement from the first half of the year.

Christian Bruch: Maybe to the first question. Look, I think you always have to be aware in the field particularly if it comes to Grid Technologies, this is very long running project. You also have heard I think Maria saying that obviously there was a big order at the end around 7 billion from Tenet, which only will be shown in the order intake to come. So, some of this delivery will be way beyond 2030. So, I think with the high numbers coming in and I believe, let's say, we will continue to benefit in the different areas from these things. We also have to see what is at the end the execution speed the industry can realize. And this does not just require Siemens Energy; this requires other suppliers to be in line, infrastructure to be available. This by the way underlines the logic of our company. What we are trying to do is ensure that we can use our execution capability across the different business areas, irrespective where the order comes that we can digest this order intake. But the question in terms of what speed will we and which area at the end be possible to realize as an industry is to be seen. I think we just see a massive demand and now the speed of execution will be key and this not just implies us, but what we do is, we build it on a very broad portfolio base. That is the logic of the company. So, we will have to see on how this now unfolds over the years to come.

Michael Hagmann: Will Mackie at Kepler is next.

Will Mackie: Hi, good morning to everybody. Thanks for the time. So, I guess my question would be related to your guidance around cash flow again. After the pretax outflow in the first half of 351 million, you're still guiding for a positive uptake in the second half of the year. Can you perhaps – could you please walk through your expectations of the drivers for the big pickup across each of the divisions, especially whether there is the sort of scale and the scope of a recovery in Siemens Gamesa? Thank you.

Maria Ferraro: Hi, Will, and thanks for the question. I think in-light of time, let me encapsulate why, let's say, some of the levers that we see and why we continue to maintain our guidance for the second half of the year and perhaps any of the more detailed topics we can take offline. Look, so again for the first 6 months of the year, I think we've indicated why and where the cash outflows are coming from, also the cash inflows. As we progress in the next 6 months, we see positive cash flow coming from all of the businesses; Gas Services, Grid Technologies and Transformation of Industry; and again that's also following the very strong order intake line. And of course if you look at the composition of our balance sheet right now, we're seeing a very high contract liabilities amount that exceeds actually our contract assets and inventory. And we see that actually trending towards and continuing in the next 6 months on the back of again the very high order intake, and of course not to be forgotten is that stringent cash and working capital management continues to be top of the agenda. Some of the areas that we'll continue to work on that will have impact in the last 6 months will be things like accounts receivable and inventories. We're looking at that constantly. For example in the first quarter, if you recall, I indicated I was not happy with where we were with respect to aging of accounts receivable and we're continuing to work on that very persistently, if you'd like. Quarter-over-quarter we actually see a bit of progress being made there even in Q2, but that will continue to persist in the last 6 months. So again, I think strong cash flows still expected across the board from the three Siemens Energy without SGRE and again SGRE that follows their profit and their CapEx requirements as we progress into the last 6 months. I hope that provides some color, Will. Probably not as detailed step-by-step as you wish, but happy to take that on later. Thank you.

Will Mackie: Great framework. Thank you.

Michael Hagmann: Thanks. And then the last question goes to Phil Buller at Berenberg. Phil, if you please go ahead.

Phil Buller: Yes, sure. Thanks. Maria, I hear your comments about mix in the Gas Services business and how that evolves over the course of the year, but given that, I'm surprised the margin range hasn't moved lower. So, how should we be thinking about the OE margin evolution? Is that spending ahead of expectations? And also, on the service side, are margins stable there or are they set to expand? Thanks.

Maria Ferraro: Thanks, Phil. I think I'd be happy to talk about that. I think again on the new unit side, we do see, and as I mentioned in our order backlog, we see progress there on the margin side not only in new units, but also in service where that remains quite stable. And I think this is something that underlines or underpins again the backlog that we have. And again I think with the market momentum, we are seeing a relatively positive pricing environment and that is also reflected through into the other parts of the business.

Phil Buller: Thank you.

Michael Hagmann: Right. Thanks, everybody, for participating. One minute for closing remarks and then ready for follow-ups later as you always know.

Christian Bruch: Thank you very much, Michael. And thanks to all of you for being with us while we obviously work through, let's say, the transformation of the company. I would like to hint really on the Capital Markets Day in November. That will be an interesting one and hopefully you all have the opportunity to join when we can lay out further in detail the plans going forward. And in that regard, stay healthy, stay tuned. Looking forward to talk to you. Thank you very much.

Michael Hagmann: Thanks, Christian. Thanks, everybody.

Operator: Ladies and gentlemen, that will conclude today's conference call. Thank you for participating. A recording of this conference call will be available on the Investor Relations section of the Siemens Energy website. The website address is www.siemens-energy.com/investor relations. Goodbye.