Siemens Gamesa Renewable Energy, S.A. (OTCPK:GCTAF) Q3 2022 Earnings Conference Call November 10, 2022 2:30 AM ET
Company Participants
Cristina Perea Saenz de Buruaga – Head of IR
Jochen Eickholt – CEO
Beatriz Puente – CFO
Conference Call Participants
Vivek Midha – Citi
Supriya Subramanian – UBS
Akash Gupta – JP Morgan
Gael De-Bray – Deutsche Bank
William Mackie – Kepler Cheuvreux
Cristina Perea Saenz de Buruaga
Good morning, ladies and gentlemen, and thank you for joining our fiscal year 2022 presentation. Before we start, I would like to highlight our disclaimer in Page two of our presentation. After we conclude the presentation, we will have some time for Q&A.
And with this, let me hand over to our CEO, Jochen Eickholt. Jochen?
Jochen Eickholt
Well, thanks, Cristina, and a very warm thank you to all of you for joining this call. Also, at this point of the day, it’s rather early for most. So I’m happy to be joined today by our CFO, Beatriz Puente, and together, we will take you through the company’s results for the full fiscal ’22. We will be happy to take your questions at the end of the call.
So with that, let’s take a look at the highlights for the fiscal year. We were able to book a record order backlog in the range of €35 billion. And we also are happy to see that there is an ongoing improvement of the ASP, the average sales price for the onshore turbines, which is a metric which sometimes is being looked at. This takes us to an overall installed volume of around 127 gigawatts, 106 gigawatts our fleet installed in the onshore field and a little bit more than 2021 in the field of offshore.
We had a, I think, challenging fiscal ’22. But the performance in the end of the day was described by a €9.8 billion revenue. And as far as the EBIT margin is concerned, we ended up at minus 5.9%. That, of course, is a, if you wish, continuation of the discussion we also had this event here had earlier. So the EBIT is, of course, impacted then by higher-than-expected, direct material cost inflation and also some quality related issues. In the end of the day I believe however really in line with what we said before.
We continue to have a strong access to liquidity. Our debt profile takes us to minus €1.2 billion after the sale of our wind farm development portfolio.
Now going forward, also fiscal ’23 will not be without challenges. It will be a year of transition. And of course, we observe like everybody else, elevated inflation. We see the continuous need to deliver on our so-called onerous projects. And we, of course, have in the end of the day, a situation where we face a couple of challenges and the benefits from Mistral. Our program will not have really materialized.
Mistral as such is on track, acting on the ongoing headwinds and the internal challenges. And in our view, it’s really the key lever to deliver on the long-term vision.
The new operating model was announced. The new organization will have various facets, but one of that also was that we announced an overall linear organization and that lets — that comes along with a headcount reduction of around 10% or slightly more.
The overall outlook on the sector is supported by the ambitions to the climate change. And in the end of the day also, the increasing need for energy independence. So in that sense, I believe the overall midterm outlook for the sector is improving and getting better.
One thing which is really close to our heart is the ESG performance, and we’ve seen a top ranking from all major agencies. So FTSE Russell for instance, but also all the others, including the stocks, ratings take us into a very top position, if not the top position of our industry space or for our industry sector. It’s going to be important for us also in the future, and we will continue to work to improve our ratings here.
So when it comes to the commercial activity, as I was trying to indicate earlier, our order backlog went up 7.7% for the entire fiscal year with an order intake of €11.6 billion. We have to observe that specifically Q4 also was strong for us. You perhaps look at this chart. And there you see a book-to-bill ratio of 1.3. I think in total, a quite remarkable quite remarkable development, and it confirms a little bit what I was trying to indicate earlier. The business space as such is developing very nicely. And also from a regional perspective, I see, again, from our view, a rather increasing success in the continents outside of Europe.
Next, please. So if I move on to the onshore business, we had an order intake of 4.6 gigawatts in the fiscal ’22 and it reflects in the end of the day, a couple of things which come together. Please remember that we’ve been much more selective on our site going forward. We wanted to make sure that the price which we obtained for our products has to be adopted to the current market environment, and that oftentimes leads to longer, less simple, if you wish, discussions with our customer base.
So that means specifically to be mentioned here when it comes to these numbers, our ASP went to 0.83 as that metric is a global metric though. And we have, perhaps, other than others, a much larger portion of our revenue coming from India. We perhaps may share with you here that excluding India, we went up to 0.95, which is I think — I’m not sure if it’s the highest ASP in a decade, but it’s clearly a strongly positive development. So in total, we are not entirely dissatisfied. It’s just the opposite.
In offshore, we continue to defend our leading position. We’ve had a little bit less of an order intake in comparison to fiscal ’21. But please remember this sector is really driven a lot by large projects, and those large projects sometimes can be signed in any one quarter or not or sometimes a little later. So I think it’s more than yearly average, which matters in this context.
It has to be seen that our order backlog here end of this last fiscal year was 8.5 gigawatts. And we have a pipeline, a very strong pipeline, of 7.5 gigawatts also coming along. And on the right side of the chart, you see some of the elements here. So the preferred supply agreement for us typically have quite a central role. And perhaps it also can be specified once more that specifically after the CFD Round 4 in the U.K., we were able to book a very nice development in this context.
We have to say there is something which we are very proud of, and that is more than 50% of our group backlog come from service. And it was possible to have a continued strong position on this. Please remember that the service activity or the service activity together with the customer is something which confirms a little bit the attractiveness of what we’re offering. We now have a little bit more than 82 gigawatts of the fleet under maintenance, and the retention rate remains to be at a level of two-thirds, which we think is rather positively remarkable.
Also here, we have had a strong book-to-bill in total, 1.3 for the total fiscal year, I think, confirms the attractiveness of the offerings of our service colleagues.
Next, please. So with that, we’re going to some — next, please. Numbers. Bea, please.
Beatriz Puente
Thank you, Jochen, and good morning, everyone, and thank you for joining us today. If on this page, you have the key financial performance of the company. I will start with revenue figures for the year, a decline of roughly 4% to €9.8 billion after also the 4% [ph] on Q4 with an increase of 18% to roughly €3.4 billion. In comparable basis, revenues for the year declined roughly 7.5%, slightly below or better than the target that we have for the year.
But if you recall, it was roughly minus 9%. And the annual revenue decline is the result of a combination of supply chain disruptions. We continue to see a lack of our critical components, also late deliveries and lower-than-expected ramp-up of our platform on the 5x that, of course, is affecting our manufacturing activity, also credit execution installation and commissioning. The impact of our external supply chain has been both in onshore and offshore. And I would say that a higher than expected in offshore.
For Q4 performance on the revenue side, we have the contribution, as we already communicated to the market of the disposal of the wind farm solution business that has contributed in revenues with roughly €613 million. At EBIT level, the group ended the year with a negative EBIT of €581 million, an implied margin on EBIT, PPA and integration and restructuring cost of minus 5.9%. And as Jochen has stated, slightly below the company target for the year. But if you recall, was minus 5.5%.
The positive contribution of the fourth quarter with EBIT of €375 million is mainly due to the contribution of the wind farm solution business, disposal plus also the strong performance of service. I would say that — I will cover more detail on the next page on the 14 page, so let’s move for below the EBIT line.
I will highlight integration and restructuring cost of roughly €137 million, roughly €40 million in the fourth quarter. And the restructuring costs reflect the company’s efforts to adapt, I would say, the capacity to the market demand. We have seen that in Spain, Morocco and also U.S. And integration cost is mainly related to digitalization activities of the company that will be critical or very important for the future.
In terms of net financial expenses through the year, we have the positive impact of updating the provisions due to the higher interest rates. So in the year, we have €67 million and roughly €20 million in the quarter.
Tax expenses amounted to €25 million and roughly €3 million in the fourth quarter of the year. And the annual tax expense is a consequence of losses in countries where we have non-capitalized tax assets and also together with profits in other countries where we have higher tax rates due to the minimum tax rates that we have. As a result, our reported net income amounted to a negative €940 million in the year.
If we move to next page, just to cover the balance sheet and also on the cash flow — key metrics, sorry, if we — this is — if we move to the page where we cover kind of also the cash flow here. The company has invested, and it’s very important for us, €783 million in the period with roughly €280 million in the fourth quarter. It is in line with expectations that we provide to the market of roughly invested 8% of the revenues of the company.
And I will highlight also that we have invested roughly 70% of the CapEx in offshore business, which in the end for us is critical to maintain the key competitive advantage about the group in a significant growing market. Net debt of the group stand stood at a negative €1.2 billion and our working capital at €2.8 billion.
So now we move to the revenues because despite Jochen has covered the key metrics, I will highlight that the revenues has decreased roughly 4% on the year to €9.8 billion. The impact of our supply chain disruptions and the ramp-up of the 5.X has impacted us because of the late deliveries on the projects and also, of course, that has an impact on the revenue decline.
That WTG activity. We measure that in megawatts has gone down roughly 26% with a double-digit decrease in both onshore and offshore. In the case of onshore, the effect of the supply chain disruptions was compounded by the delays of the ramp-up of the 5.X. This is reflected in a decline of 27% in the period. And in the case of offshore, the decline in manufacturing has been lower than in the case of onshore, but also I will say that was ahead of our expectations in the year and not being able to recover the decline that we have in Q1 during the second half of the year. The main reasons for that has been a combination of customer planning delays in APAC and also the challenges, the standard challenges when you ramp up a new platform as we are launching the new SD11,
This, of course, has been compounded with the situation that we face on the supply chain and also that, of course, causing us still lower revenues than expected. On the other hand, installation activity has been growing during the year. And also, as Jochen also highlighted during the last quarter of the year.
Service revenue quite strong through the year and also in the fourth quarter. And it’s very important because that is mainly due to both some growth on the maintenance contracts but also — and you can tell that by the increase on the average fleet, roughly 7% growth, but also with very high growth in value-added services and also aftermarket sales.
Q4 revenues was up 18% and a year-on-year to roughly €3.4 billion. And as I stated before, it’s a combination of the contribution of the wind farm solution business disposal and also very strong service performance in the quarter.
So if we move to Page 14, you have more color on the reasons of the decline on the EBIT. I will not cover all because we have also repeated that, but in the end, on ramp-up of the 5.X, we currently ignore also the cost inflation that the industry is suffering not only in raw materials but also in direct material components, also energy and transportation costs. Higher-than-expected cost on the component failures that we have in repair of the onshore legacy platforms and also higher-than-expected cost in introduction of a new platform in offshore.
Of course, the lower revenues has impacted us also because we have idle capacity and lower absorption of the fixed cost. And last but not least, the positive contribution of the wind farm solution disposal in the quarter. So we closed the year with a negative minus 5.9% EBIT margin, as we said, slightly below our initial target of minus 5.5%.
So if we move to next page, Page 15, I cover the main highlights of the cash flow, but I will repeat that, of course, through the year, cash will reflect the operating performance of the business. Also, the investments that we have made, €783 million, and has been partially offset by both working capital levels and also the contribution of the disposal of Windfarm Solutions business.
In Page 16, and you have detail of the liquidity of the group, roughly €4.4 billion of credit lines and loans. We have — we draw roughly €1.6 billion at the end of the fiscal year, and we have cash available of €1.2 billion, therefore, available liquidity of roughly €4 billion. It’s important to highlight that we extended throughout the year, the maturities. Important, you see by 27, we have extended the maturity of the syndicated loan, €2 billion. And also throughout the year, we extended roughly €675 million of maturities that we used to have in ’22. Now is due by the end of ’23, beginning also of ’24.
I will also highlight that the company has no covenants associated to also the funding lines. So in the end of €4 billion of available liquidity.
And after covering the highlights of our results, now I will pass on to Jochen to cover the outlook of the industry. By the end of the call, of course, very happy to answer any questions that you might have. Thank you.
Jochen Eickholt
Well, thanks, Beatriz. Let us look a little bit forward now and let’s look at the market. As you all are aware, there is this increasing trend, this increasing view that energy independence and energy security play a much more important role going forward, leading them to various effects. In our view, this means that, for instance, the overall view on wind as a substantial contributor to the energy system of the future will be enforced. We see a much stronger element for wind. We see much stronger role for wind in conjunction with grid. And then also, obviously, with other renewable energies like photovoltaics. We see that as strong pillars of the energy system of the future.
As a consequence, we also see a lot of guiding and supportive action coming from the politics of this world. It is mentioned, and it is more than once discussed that we have seen a positive impact so far from the IRA from the United States, the Inflation Reduction Act. And we’ve also seen that the European Union supports the development of renewable energies by up to 45% in the RE power plant from Europe.
We had an update of the British Energy security strategy, which was presented, and that led to an overall increase of the discussed volumes. And even China, in our view, certainly will contribute also to an extension of the wind capacities going forward. That means that we foresee for the global wind installations, growth, obviously, in the future, mostly really driven by the offshore growth. We see that the annual installations will continue to grow in a single-digit growth range. And going forward, I believe that can even change.
We, of course, will do foresee supply chain challenges and various risks, and those are the risks which were discussed and mentioned before. And in the end of the day, it has to be said that the industry, I believe, is going to do everything they can in order to meet the upcoming demand. It has to be seen, however, that most of the bigger players these days are negative, as you are aware. And we need to make sure that at the end of the day, the compensation for the wind turbine makers and also the compensation for inflation is something which does need to materialize. I spoke about the fact before that we are in various discussions with our customers and will continue to be so.
After ’24, the growth, in our view, will be really driven by kind of a massive development on the side of offshore, probably going up to a growth of almost 10x. The average annual installation will be substantially growing in the second half of this decade. And we expect it to reach the offshore 30 gigawatts really by 2030. The strong demand is also visible in various auctions, which are ongoing and which are planned up to 2027. And this all comes in front of the background that our current plans, the current political plans, the current consensus on those plans, if you wish, for striving for net zero in 2050, right now would require about 4 times the installation of what we currently have.
So there is a massive ramp-up to be foreseen. And of course, the question is how this works. Again, the major turbine makers right now are not really in the best shape, and that includes us certainly. So it will require some changes to the overall concept of the supply chain.
Next, please. When it comes to the overall general situation of inflation, I have to say that the market dynamics remain to be challenging. We have to see that various indices are continuing to increase until the first half of this year or so. We mostly spoke about the price development on the side of the raw materials. I think most recently, many of us did observe kind of general inflation as a phenomenon. Here, we see some of the parameters, which are indicative of this. So we have to see how we get this under control.
In my view, the commodity pricing and shipping also going forward are certainly secured. This is what we also have committed to in the last sessions and also in the last communications. But in our view, this discussion and this development also needs to be observed very closely.
Before we come to Mistral, perhaps one comment additionally. This typically is also the space to provide guidance. We do normally do this at this occasion here exactly at this point of the presentation. This time, we cannot provide a guidance. Please remember that since the beginning of this week, the announced offer of Siemens Energy is approved by the CNMB, the Spanish Finance Market Authority. And this means we are now in the middle of a takeover process. I think going forward, there is a vital role for us in this context to be seen in the guidance of Siemens Energy. And all the related information, written information regarding us, is part of also the public communication of Siemens Energy and the CNMB. So there, I think more information can be found.
When it comes to Mistral, we are on track. The 5.X platform is on track as far as the announcements are concerned, and we continue to work further on this. Obviously, variance for the variance will be developed. But in principle, this is a confirmation of what was announced on the 5.X.
Regarding the selective sales strategy, we have to make sure that we will continue to focus on price increases and new contracts. And the process the process of doing so continues in our view and will have to continue in order to help us to develop to come into a new EBIT position.
Very vital for us is the new operating model with a strong focus on processes to improve the organizational efficiency. And it is important that we have now set up and are about to set up the COO and the CTO teams in order to accelerate the harmonization and the standardization across the entirety of Siemens Gamesa in the technical departments. Please remember that there was a lot of discussion also on the integration of Siemens Gamesa into one company basically starting in the 2017 with the formation of the joint venture. That this integration never really happened. And we are now, if you wish, kind of trying to rectify that situation. The new CTO will be based in Spain in Pamplona, and Spain will continue to play a big role in this context.
In the end of the day, I also spoke about a leaner and simpler organization and also when it comes to staffing, the planned headcount reduction is on track.
So with this, I would like to thank you once more for joining the call today. Beatriz and myself are happy to take the questions you may have. Thank you very much.
Question-and-Answer Session
Operator
[Operator Instructions] The first question comes from Vivek Midha from Citi. Please go ahead.
Vivek Midha
Good morning. My question is on free cash flow for the year and the balance sheet. So your working capital to sales ratio has reached a new level at negative 28.7%. How sustainable do you see this development? Thank you.
Beatriz Puente
Thank you, Vivek, for the question. As you clearly stated, we closed the year with a negative €2.8 billion, so employee ratio is the one that you said. It’s a combination, of course, of very strict policy that we have continued throughout the year. We started at the beginning of the year, working on every single item for the working capital, inventories, collections, payment terms and so on. How sustainable it is?
We don’t foresee. Of course, we can maintain that for the long run, but we also need to consider that in the coming months and the next year as well, we have worked with our clients on prepayment terms that are very much linked to the volume that we have. So that also has helped us on ’22 as well. Saying that, of course, as we are not providing any guidance for the year for ’23, I cannot provide any color on the working capital as such.
Vivek Midha
Thanks very much.
Operator
The next question comes from Supriya Subramanian from UBS. Please go ahead.
Supriya Subramanian
Yes, hi. Good morning. Thank you for taking my questions. Two questions from my end. One is on pricing. So at these current levels are slightly in the onshore equipment business, do you believe that most of the cost inflation that we have seen so far has been offset? So all incremental orders are at benchmark margins?
And second question is into 2023 and I appreciate of course that will have not given any formal guidance. But just wanted to get your thoughts on what would be the moving factors to affect top line margins in 2023, what we need to keep in mind for us yet.
Jochen Eickholt
Well, thank you very much. So if I’m allowed to start with the second one, please forgive me, we’re not giving guidance for ’23. However, the principal direction which we indicated for our company in the past events of this nature they continue to be valid and we continue to work on sort of optimizing the overall structure.
When it comes to the pricing, specifically in onshore, there’s a lot of compensation happening, if you wish. And that will definitely contribute to our positive, hopefully, business development in this context. The principal thing, however, is that an order intake of today typically has a revenue impact in ’24 or end of ’23. So the duration, the typical project duration in onshore typically is between 12, 18 months, sometimes a little bit longer, sometimes a little less.
So that means in the end of the day, we have to continue to work on optimizing our structures. But of course, it will be extremely beneficial. And we will continue to drive actually this trend. That means prioritization of the, if you wish, attractive project. So selectivity in this context will be of the essence and not every offer can be taken.
Supriya Subramanian
Okay, perfect. Thanks very much.
Operator
The next question comes from Akash Gupta from JPMorgan. Please go ahead.
Akash Gupta
Hi, good morning, everybody and thanks for your time. My question is on your recent press comment on Chinese competition and asking for production quota in Europe for locally made turbines. The question I had was that, was that a preemptive move to create a level playing field in Europe, or have you seen something on the ground in terms of like behavior of your customers or maybe aggressiveness of some of these Asian competitors that prompted that sort of reaction? Any clarity on that would be great. Thank you.
Jochen Eickholt
So it’s good that you mentioned that. The press release was slightly inaccurate in this matter. What I was asking for is a level playing field between global competition, and the level playing field for me has to do with the way of how companies in their development sometimes are supported, sometimes are even subsidized. Please remember that sometimes the Chinese competitors receive about 10 times as much support for innovation development. So in that sense, I was asking for a level playing field, not for quarters.
I continue to observe, however, an increasing awareness also on the side of politics on the questions around energy independence and energy security, if you wish.
When we look at our business space, we typically consider that as something being vital for the energy system of the future. Energy system of the future for me is something which is happening in 2040 or perhaps even beyond. And that contains as far as renewables are concerned, I think a couple of vital elements which needs to be expanded. That is wind, that is photovoltaics, that is obviously the connecting grid, and sometimes you may even contribute or can’t storage here in this context. So that wants to be developed.
And in my view, also in Europe, the question has to be answered. To what extent we, in this matter, can become dependent on others. And the question, of course, is, if we discuss this dependence, it typically means for me, the know-how, which we have on our ground, if you wish. Please remember that specifically wind, then all the major developments on wind came from Europe, and then to some extent, it also covers the capacities to install the related systems. And in this context, I think we would be well advised to bear these criteria in mind.
If we set up the energy system for the future and when it comes to competition between different parts of the world, like for instance, with the Chinese, I am asking for a level playing field, which means advantages on the other side or on any 1 side typically should be compensated for because we need to make sure that also the other criteria for setting up the energy system of the future need to be met. That was a little bit the context.
Akash Gupta
Thank you.
Operator
The next question comes from Gael De-Bray from Deutsche Bank. Please go ahead.
Gael De-Bray
Thanks very much. Good morning, everybody. I have, I think, two questions in one on the margin side. Could you provide a bit more color on the sequential margin development in fiscal Q4 versus fiscal Q3 for both offshore and onshore, adjusted for the capital gain? Basically, I’m trying to see if there was a bit of progress sequentially because it is hard to see that there was actually any. And then maybe in relation to this, I think if I exclude the capital gain, the underlying margin was around 6% for the group in fiscal Q4, minus 6%. So do you actually see a bit of upside to this going in 2023? I mean do you see it as a flow or not even necessarily?
Beatriz Puente
Thank you, Gael, for the question. We provide the numbers so you can do kind of that kind of pro forma, imply margin without the disposal of the wind farm solution business. The EBIT contribution on the quarter was €565 million. We recorded that within the WTG segment. And as we stated on the Q4, we have two impacts on the WTG segment. One is coming from the inflation that we are seeing. And therefore, we, as always, closed the books with the best estimate on the cost side. We are about to close on the volume of ’23. Therefore, we updated the onerous provisions for the backlog. That also has been recorded in Q4.
We also, in Q4, as I highlighted, we have a higher cost than expected on offshore on the introduction of a new platform, and also that was recorded on that quarter. And on the other side, we have a very strong performance of our service, as you can see as well, with very strong EBIT margin because on Q3, we were also heavily impacted on service bias amounts on some quality issues that we have. So that explains kind of the trend on Q3 to Q4. We don’t provide any breakdown between onshore and offshore. So that’s the reason I cannot provide you that specific detail. But as I said, you can run the pro forma EBIT margin in Q4.
And regarding the implied EBIT margin on the year, if we consider the minus 6% as something reasonable for the coming years, again, we need to come back to the same answer that we provide before that we don’t provide a guidance for ’23 saying that as Jochen was saying, our priority is to bring this group to profitable levels, and of course, for that purpose. And if we maintain the long-term view of the group, which we strongly believe is reachable. Of course, there should be a path to profitability and achieving our long-term goal.
Gael De-Bray
Thank you for this. Could you actually quantify the updated onerous provision you had in Q4? And also looking at the overall provision you now have at the end of September, I mean, how much of that do you expect to be cashed out in 2023?
Beatriz Puente
The impact of roughly the allocation that we have on Q4 for the reasons I mentioned that was roughly €120 million on Q4. And again, regarding the outflow of cash out for ’23, we prefer at this stage not providing any guidance of cash flow on ’23 as well. As we are not providing EBIT, we are not providing no cash one.
Gael De-Bray
Okay, thanks very much.
Operator
[Operator Instructions] The next question comes from William Mackie from Kepler Cheuvreux. Please go ahead.
William Mackie
Good morning, thanks for the time. So my sort of central question, I guess, to you, Jochem, is what the sort of message is or how you’re managing and communicating to your sales teams and production teams how to balance the demand for higher prices to offset inflation against the need for volume to fulfill or fill your capacity. So how do you offset those two opposing forces through the commercial team and through the production teams.
Jochen Eickholt
Yes, well the technical answer to that is that — and that we referred to in the past as well, we have set up a much more stringent approval process for any one project, and that approval process is based on the contribution of those central functions, which we have in the company. So there is then the sales side who propose something. And there is then the manufacturing side who say, well, this is the cost, and this is how we will have to look at it. And that comes together in an approval process. And this approval process, in my view, is much more stringent than in the past. Please remember that we have set up also hurdle rates, internal hurdle rates for accepting any one of these offers.
Now there is a fundamental thing in this because, obviously, inflation is something which is being looked at as a standard, if you wish, in some parts of the world and some other parts of the world, like our part of the world here. There, it is not the thing. We are coming from 2 or 3 decades of price stability.
I think we have to make sure that the instruments which are used for compensating for inflation effects that those instruments need to be applied in the Western world as well. So that means, for me, North America and Europe. And in the end of the day, it means that if we, to some extent, foresee this, which always is rather tricky, then it can be only answered by price adders or variable components of the agreement.
We are these days pretty much in favor of variable components because we don’t want to speculate about the effect of these factors going forward. But of course, at the end of the day, it’s also relevant for us that we keep our market share also and that we in the end of the day, are also sufficiently attractive for the customer.
But we are these days really advocating for a inflation compensation, which covers for fixed and variable components of it. And that is the discussion we right now have with our customer base. And I think it needs to be established more as a standard because there is no benefit in us trying to estimate the development in the future and then adding some risk at us on that as well. This, in my view, makes things only more expensive.
William Mackie
So if I can just follow up on that, I mean, historically, it’s not been an industry norm to include a wide number of indexation clauses within Ts and Cs. So to what extent would you describe your success in implementing variable and indexation clauses within the contract terms with the current sales and commercial initiatives?
Jochen Eickholt
We are focusing on that. We do see a success. We sometimes or in most cases, to see a partial success because, obviously, then there may be another opinion on the other side of the table, but we continue to drive for this, and we do see success. And in my view, this is earlier or later the only way of how to handle these issues. So we need to help a little bit also the sector to understand that what is typically in other sectors and in other parts of the world needs to become the standard in our sector as well.
William Mackie
The last final short follow-up is that PwC have conducted an extensive valuation exercise on behalf of the prospectus for the group, which incorporates a combination of forward-looking statements about the prospects for Siemens Gamesa. So the simple question is would you say that the projections within the external report fairly reflect your internal review currently of the future, or would you say that PwC has deviated from your own expectations of the future?
Jochen Eickholt
No, I think this is something which is not so easy for us to comment because we’re now referring to information sources where we’re moving in circles. And in the end of the day, we provided our statements. We provided our input to those analysis. The analysis then were discussed, finalized, and this is perhaps if I’m allowed to — this is my comment to it. We provided our input. And in the end of the day, the report as such was not subject to the approval of Beatriz or myself.
William Mackie
Thank you very much. Understood.
Operator
The next question comes from Supriya Subramanian from UBS. Please go ahead.
Supriya Subramanian
Yes, thank you for taking my follow-up. Just a very quick one, and apologies if I missed this earlier, just wanted to check if you have already commented on why was the €613 million booked in order intake as well as revenue?
Jochen Eickholt
You mean the…
Beatriz Puente
Are you referring to the wind farm solution business? Because for us, it’s part of the business. We clearly stated that in the past, we were consistent on that criteria where we have different cases. It’s not the first time that the company has sell wind farm solution projects. And that’s the reason. And we also for the market to have a full information on that, we pretty disclose all the numbers. You have access to everything impact on order entry, revenue and EBIT and cash.
Supriya Subramanian
Yes, no, I was just wondering why is there an impact on order intake since it was just purely…
Beatriz Puente
Oh, inventory. That’s the reason.
Supriya Subramanian
Okay, alright. Thank you.
Operator
Ladies and gentlemen, there are no further questions. I will now give back the floor to our speakers. Thank you.
Jochen Eickholt
Yes, then it’s up to me. So I would like to thank you once more for the attendance at this point of the day, at this time of the day. So thank you very much for joining us that early. We were hoping to provide useful and beneficial information. And I believe it’s also understood that at this point in time, guidance for us is a difficult thing. We cannot give a guidance.
So with that, I’m looking forward to further staying in touch with all of you, and thank you very much for this dialogue, which we had over the last half an hour or so.
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