Good afternoon. Thank you for joining the call today at this somehow inconvenient time, which is due to a board meeting held earlier today. We appreciate you dialing in, and we will endeavor not to delay your weekend plans too much. I'm joined, as always, by our CFO, Beatriz Puente. We will provide you with an overview of our full results for fiscal year 2021, and our guidance for fiscal year 2022 and beyond. We will then be happy to take your questions. Fiscal year 2021 was a complex one, with the effects of COVID-19 lasting longer than expected, with shortages of certain components and sharp increases in commodity prices, transportation costs, especially in the second half of the year. Let's look at the key points for this financial year, 2021.
First to the facts: revenue of EUR 10.198 billion with an EBIT margin of 0.9%, both in line with the low end of our guidance announced in July 2021 for the full year. Fiscal year 2021 results were clearly impacted by the challenging conditions of the supply chain and the higher ramp-up cost of the Siemens Gamesa 5.X turbine that we already saw in our Q3 results. We continue to deliver an extremely strong execution, both in offshore and service. Point two, all the action taken for 2022 and beyond. We have put in place different actions to tackle the supply chain challenges and drive the recovery, like all of these included in the LEAP program. We are reaching the final stages of restructuring in India and are also making extremely good progress consolidating our capacity in EMEIA.
We have launched different measures, from cost out programs to enhanced procurement and pricing practices, to address the challenges in the supply chain on the cost inflation pressure. We've also put in place specific actions on cost out and supply chain development regarding our Siemens Gamesa 5.X turbine. I would like to insist also in the strong momentum in renewables, as we are currently seeing these days, especially during the COP26 in Glasgow. Only in offshore there will be an added capacity of 32 GW coming from auctions in 2021 and 2022. We are well-positioned to benefit from that growth, as you can see if you look at our order backlog of more than EUR 30 billion and more than EUR 12 billion in order intake in fiscal year 2021. That brings me to the key message three for today, our guidance for 2022 and beyond.
Whereas the short-term dynamics will have an impact on our results in fiscal year 2022, the prospects to achieve our long-term visions, our long-term vision are good. In detail, we expect fiscal year 2022 revenue guidance between -7% and -2% growth rate. Fiscal year 2022 EBIT margin guidance between 1% and 4%. Despite the short-term challenges, we maintain our 8%-10% long-term vision. Reaching it under current circumstances is likely to take longer than originally expected. I will explain more in the outlook section of our presentation. Now I will go quickly through some good examples of our strong execution and technology. We recently announced the rating increase of our 5.X turbine to 6.6 MW, which means that is the largest turbine in the industry.
We have also, I would say, close to perfect execution in the installation of our more than 10 GW offshore direct drive turbines. More than 98% availability of our offshore direct drive in fiscal year 2022 for the fleet that is maintained by Siemens Gamesa. Our LEAP program has also seen very positive progress since it was launched in 2021. Sorry, since it was launched in 2020. It has supported the innovation in our newest onshore and offshore platforms. It has improved our productivity and asset management with different measures, like a simplified onshore organization, a capacity in EMEIA that is now driven by demand, cost out measures to gain productivity, and a working capital of -24% of revenue.
LEAP has boosted operation excellence by rolling out a standard project management book, by making our Vagos plant the global lead factory for onshore blades, and by improving supplier quality management. Fiscal year 2021 has also seen the near completion of our Indian restructuring with the successful introduction of the SG 3.4-145 turbine, among other actions. Fiscal year 2021 has also been outstanding in terms of ESG performance. We've achieved top ratings in the sector by the main ESG agencies. We are first in the FTSE Russell, in ISS ESG, and second in Vigeo Eiris. We've also reached top percentiles in almost 100 different ratings, with a very high score of 84% in the case of S&P Global. We continue to work to become a global sustainability leader.
We have already achieved ambitious targets, like the launch of the first recyclable blade, being carbon neutral or being powered 100% from renewable sources. We have recently set new targets for 2040, like net zero emissions, including our suppliers, a completely recyclable wind turbine, and 30% women in leadership positions by 2030, among other actions. Let us now take a more detailed look at the commercial activity of the fourth quarter of this year. We maintain a high order backlog of more than EUR 32 billion, 7% higher year-on-year. Order intake of EUR 12.2 billion in fiscal year 2021, a reflection of the company's commercial strategy focused on controlling risk and prioritizing profits in the projects. Order intake of EUR 2.8 billion in Q4 with strong performance by service and offshore.
The chart on the right shows that the EMEIA region continues to drive the order backlog with a growth of more than EUR 2.5 billion in fiscal year 2021. Thanks to the high order backlog, we have now reached more than 90% coverage of fiscal year 2022 revenue guidance. More than 80% of this order backlog is related to markets where execution is strong with growth prospects above average. In onshore, we have seen a low activity and lower order intake volume due to our selective commercial activity with a focus on profitability over volume. Q4 order intake was impacted by a slowdown in the Siemens Gamesa 5.X sales and an impasse in the U.S. and Spain.
Americas and EMEIA remain the main drivers of our onshore commercial activity in the last year, with the largest contributors being Sweden, Brazil, U.S., and Canada. India represented 46% of the order volume in Q4. Turbines of 4 MW or greater account for nearly 70% of all orders in the last year, a year-on-year increase of 23 percentage points, with the Siemens Gamesa 5.X platform accounting for 30% or a total of 2.2 GW. Pricing continues to be stable with increases in the second half of the fiscal year. The ASP was negatively impacted by the currency effect, the smaller scope of projects, and the dilution from larger ratings. The positive impact came from taller towers, regional mix, and price increases. Although the impact of price increases cannot be seen in the ASP, we continue to make progress on this front.
This can be seen in Q4. In Q4, prices were impacted by the large contribution of nearly 60% from India. Excluding this Indian share of our ASP would have increased our ASP to EUR 0.71 million per MW, which is at 10% higher than the Q4 2020 ASP, also excluding India. This is not to say that we're implementing a double-digit price increase in all our contracts, but we are clearly passing through inflation progressively. In offshore, we maintain our leadership with 7.5 GW in order backlog and another 7 GW in a very diversified pipeline, as you can see on this map. Order intake of nearly 3.5 GW in fiscal year 2021 is slightly lower than in fiscal year 2020.
In fiscal year 2021, we landed two new preferred supplier agreements in Taiwan, 230 MW in Hai Long 2B and 500 MW in Hai Long 3, both equipped with the Siemens Gamesa 14-222 turbine. The order intake and the pipeline for our latest SG 14-222 in total accounts now for 5.1 GW. As you will surely have seen today as well, we've also signed a new MOU to license offshore technology to a new partner, United Power, in China. Lastly to service, which accounts for half of the total group backlog, with around EUR 16 billion, nearly EUR 17 billion, 11% higher than a year ago, with EMEIA consolidating its leading position with a growth of almost EUR 1.2 billion.
Almost 80 GW under maintenance at the end of fiscal year 2021, an increase of 7% with 11 GW in third-party technology. An order intake of nearly EUR 3.5 billion, with a year-on-year comparison impacted by the strong service activity in fiscal year 2020 related to, at that time, large offshore orders. The extension of East Anglia ONE from five to 15 years had a significant contribution on the order intake in Q4 2021. With that, I now hand over to Beatriz to give you a closer look at the financials.
Thank you, Andreas. Good afternoon, and thank you for joining our results presentation today. I will cover the key financial performance of the group during the fourth quarter and also fiscal year 2021. As Andreas has mentioned, 2021 has been a challenging year, especially during the second half of the year due to the delivery constraints and rising logistics and commodity costs that are expected to continue during 2022. Saying that, the company focus has been to address the current supply chain and cost inflation issues, improve project execution and risk management, and all these measures are expected to bear fruit in the coming years.
In this challenging environment, the company has been able to deliver revenue and EBIT margin in line with the low end of the guidance that we provided to the market in July. Group revenues came at EUR 10.2 billion, an increase of 8% year-on-year, in line, as I said, with the low end of the guidance. Q4 revenues amounted to EUR 2.9 billion, mainly flat.
Revenue growth for the year was supported by both offshore and service, while onshore revenues suffered from the delays in the commercial activity during the first half of the year and also some execution and supply challenges during the second half of the year. Fiscal 2021 revenues has been also negatively impacted by currency, roughly EUR 200 million. Mainly driven by the position of the U.S. dollar, also the Brazilian real, and to a lesser extent, the Indian rupee. This has happened during the first, I would say, nine months of the year. 2021 EBIT, PPA, and integration or restructuring cost amounted to a negative amount of EUR 96 million, equivalent to a negative EBIT margin of 0.9% of our sales.
With the fourth quarter negative EBIT of EUR 177 million, heavily impacted by the challenges that I have mentioned before. After a strong performance during the first half of the year, the second half of the year also has been impacted by the accrual of a provision for onerous contracts amounted on the second half of the year to EUR 298 million, out of which EUR 69 million were booked in the last quarter of the year. This provision, as we already covered on the nine-month results, reflects the impact of on the profitability on our WTG or the backlog, due to the longer time and higher ramp-up cost on the 5.X, and also the increase of price escalation on the raw materials prices and also our logistic cost.
We kind of ignore that both has been also compounded, I would say, you know, by the pandemic situation. We'll go in more detail on page 18, but it's worth highlighting that also the group both in offshore and also service activities continue to perform very strong despite current market conditions. Integration of restructuring cost for the group amounted to EUR 197 million in the year, and EUR 48 million in the fourth quarter. We have executed less than planned, that we originally planned, but the effort will continue during 2022. Net interest expense amounted to EUR 41 million, and EUR 9 million in the fourth quarter.
I will highlight that the decline in the net interest expense has been possible despite the higher leverage of the group, thanks to different cost management initiatives that we put in place throughout the year. The tax expense of the group amounted to EUR -72 million in the year as a consequence of losses in certain markets where the company couldn't capitalize the deferred tax assets. As a result of that, the reported net income of the group amounted to a loss of EUR 627 million in the year, and loss of EUR 258 million in the last quarter.
Moving to the balance sheet and the key metrics, I will highlight that the company has invested EUR 677 million in the year, out of which EUR 255 million has been invested in the last quarter of the year. Roughly, 30/70 between product development and manufacturing capacity, tools, and equipment. The more important thing to highlight on the CapEx, I would say, is that 60% of that CapEx has been invested in offshore to really benefit from the future growth of the market. Andreas will cover that, you know, in the outlook, but I would like to emphasize the ever-increasing potential of offshore with strong structural growth drivers.
Also more important, our leadership, you know, supported both by the installed capacity and also the proven technology. Now, as you have seen in our presentation, with new investments on the 14 MW platform. To finance that growth, it's important that the company has a very strong performance in our asset management initiatives and programs with negative core working capital of EUR 2.4 billion. We will continue, you have our commitment, we'll continue to maintain a very strict control of our working capital and also achieving benchmark levels. If we move to page 16, and I will focus on the revenues of the group. The revenues for the year grew 7.5% year-on-year, supported by both offshore and service.
At constant FX, group revenues will have grown roughly 9.5% to roughly EUR 10.4 billion. If I focus on service revenues reached EUR 1.9 billion, an increase of 9% year-on-year, and also including the integration of the acquired European service operation of Senvion well on track, as expected. In Q4, revenues reached EUR 571 million, an increase of 5% year-on-year. Offshore achieved EUR 3.3 billion in the year, an increase of 16%, and is the main driver of the group of the, sorry, of the growth for the group this year. Both because of the high level of manufacturing activity and also because of the high level of installations. In the fourth quarter, offshore revenue growth was flat with EUR 829 million.
As we explained at the beginning of the year, it was planned the introduction of the manufacturing of the 11 MW platform. The ramp-up has been smooth and has been completed successfully and also in line with our cost estimates. The group will start execution of projects of our 11 MW platform next year. Given the challenging market conditions, working on more than eight projects in Europe and Asia during the year and meeting the delivery deadlines with the ramping up of the manufacturing of our new turbine is a very good example of strong offshore execution and also operational excellence. Moving to onshore, revenues reached EUR 5 billion, a decrease, up two percent, you know, year-on-year, an increase.
Onshore revenues has been driven by increase in both manufacturing activity volumes and also installed volumes. Saying that, onshore has been by far the market with the strongest impact from supply chain bottlenecks, late deliveries on a specific component, and also the increase of the freight cost and the lack of capacity. This has been reflected also on the top line, especially in the fourth quarter of the year, with revenue down 2% and sales volume down 8.6%. Moving to page 17 and focus on the EBIT performance of the group. As I mentioned before, EBIT margin for the full year stand at -0.9%, in line with the low end that we provide to the market.
As explained before, our performance on the 2021 year has been impacted by the onerous provision that was allocated by the group on the second half amounted to EUR 298 million. Again, for the fourth quarter, close to EUR 70 million. This, the impact of the onerous provisions also has been partially compensated by efficiency measures, as Andreas covered through our LEAP program. Also, we have lower failure rates, and, therefore, you know, the release of also ordinary warranty provisions, and also the reassessment of market availability of some inventories on the WTG segment. Both impacts that was covered also during the first half of the year. Nothing significant on the fourth quarter.
On the Service Division, I will highlight that it continues to deliver a very strong performance with a margin on the Q4 of 21.2%, and for the full year, roughly 21.8%. Moving to the leverage of the group on slide 18, I want to highlight that cash flow generation, financial discipline and also, of course, a strong control of the leverage of the group continues to be the top priority of the group.
Net debt position stood a negative amount of EUR 207 million at the end of September, an increase of EUR 150 million, but I will highlight the significant decrease on the fourth quarter, more than EUR 600 million. The net debt increase is related to the CapEx investments, of course, the profitability of the group, CapEx investments and increase on lease liabilities. As I mentioned, you know, CapEx has been EUR 677 million, and the total lease liabilities for the group by the end of September amounted to EUR 829 million.
The impact of CapEx and increase on the lease liabilities has been compensated by a strong working capital level with a positive cash variation of EUR 560 million in 2021, thanks to the execution of the asset management program and the strict control of the working capital. The company also generated, as you see on the slide, EUR 881 million in gross operating cash flow in 2021. The increase in gross debt of roughly EUR 497 million were due to the full withdrawal of the European Investment Bank loan that we have signed in February, and also that has allowed us to replace all the, you know, more expensive bilateral lines and also reduced our interest cost.
Moving into 2022, I want also to emphasize that cash will remain a priority for the group. We will continue with a very strict control of the working capital levels, maintaining also benchmark capital levels, as I mentioned before, and also, as Andreas will cover, exploring selective asset disposals. Last but not least, also the group maintains a very solid funding position with EUR 4.4 billion in credit lines, out of which you see on the slide, EUR 1.4 billion has been drawn. We have, at the end of September, close to EUR 2 billion of cash. The company therefore has available liquidity of roughly EUR 5.1 billion.
Also it's very important, as you see on the graph, that there is no significant maturities in the short term that to face. More important, we have secured the liquidity on the long term for the group. With this, let me hand over to Andreas to cover the outlook of the group. I'm very happy to answer any questions that you might have.
Yeah. Thank you, Beatriz, and let me give you an outlook and conclusion of today's presentation, including our guidance, and more details to the guidance and beyond for 2022. In the last year, we've seen higher renewable targets across the globe, as we can see in that slide 21. With the decarbonization commitments and the green recovery programs encouraging clearly the wind industry in general, globally, we see 1 trillion annual market opportunity for renewables with a significant boost by offshore wind auctions in the coming years. In the European Union, the Fit for 55 package includes a target increase for renewables share of total energy of 40% by 2030. Looking at Germany, having an onshore target of 70 GW by 2030, and an offshore target of 40 GW by 2040.
Another country to give an example, the U.K. aims to reduce its emissions by 78% by 2035, the world's most ambitious climate change target. With 40 GW in offshore, the U.S. aims at somewhere around 50% emissions reductions by 2030. While in Asia, Japan, South Korea, and Taiwan will significantly increase their wind energy capacity, especially in offshore. This strong commitment and ambitious targets all around the planet show the strong potential for wind demand in the long term. As you can see in this slide, page 22, the annual installations are expected to grow by 33% in the second half of this decade, with offshore more than doubling, reaching 20 GW in 2025, and close to 40 GW by 2030.
Especially if you look at the net zero targets of the IEA, the last bar chart, a significant number about the potential of wind energy. The current level of annual wind installations will need to grow by 4.5x by 2030 to reach net zero by 2050. If we look at the short-term dynamics, we see many challenges with low visibility regarding the supply chain normalization. As you can see in the charts on the right side, the increase of steel, copper, and maritime freight over the last year have been very significant, having a great impact on the wind turbine cost.
The market outlook for the period 2021 to 2023, as you've seen on the previous page, has changed and affected by these disruptions in the supply chain, the increase of raw material prices, the freight cost, also the high electricity prices and manufacturing activity shutdowns in China, that combined with trade tensions and inflationary risks. The market is expecting the situation will change and will go back to normal, but we surely don't know exactly when this will happen. These short-term dynamics will have an impact on our results in fiscal year 2022, but the prospects to achieve a long-term vision remain good, as I also said in my key point three. Fiscal year revenue guidance between -7% and -2% growth are a consequence of market regulation, delays on customer investment decisions, and the current disruptions of supply chain.
The fiscal year 2022 EBIT margin guidance between 1%-4% is impacted by the supply chain capacity constraints, raw materials, and freight cost increases and trade tensions, as well as lower fixed cost absorption on the back of lower revenue. On the positive side, we will have savings from the LEAP program and restructuring. In 2022, our CapEx to revenue ratio will be around 8% due to the offshore investments that also Beatriz has already mentioned. Despite the short-term challenges, we maintain our long-term vision. Reaching it under current circumstances is, as I said earlier, likely to take longer than expected. Nevertheless, our long-term vision, achievable in the years 2024 or 2025, is based on the onshore turnaround, the sustainable profitable growth in offshore, and service.
This will lead to a revenue growth above the market and an EBIT margin of 8%-10%. More specifically, all the measures to support this guidance are included in the LEAP program. Strengthen mechanisms to protect profitability from raw material prices and transport cost volatility. Cost out programs and new technical features on our wind turbines portfolio, especially on our 5.X turbine, aiming at LCOE competitiveness and an investment plan. We expect to achieve a positive progress between fiscal year 2022 and our long-term vision, and this progress will depend on market regulation and its impact on onshore demand, and also, as mentioned now a number of times, on the supply chain and their normalization with raw materials and freight cost. Let me finish by quickly going through our three business units and how the three of them support this long-term vision.
Our Siemens Gamesa 5.X will be key to consolidate our onshore operations. The two prototypes have now been successfully installed and tested in Spain and Denmark and reached a nominal output of 6.6 MW already. I can confirm, and we have also confirmed that again by numerous facts, it is the right product. It offers a higher power to deliver a lower LCOE. It has an optimized performance under various wind conditions, greater AEP, and optimized CapEx through a modular and flexible design. We've also launched programs to tackle these challenges of this platform. The cost inflation impact on bill of materials has been addressed, including a multiyear cost-out roadmap to allow the competitive introduction of new features via the cost-out program.
We have also increased the investment in the development of the supply chain and the pre-series production, while the first commercial units are installed as we speak in Sweden, and task forces are in place to manage the project execution. We are also getting ready for the strong demand increase expected in offshore from fiscal year 2025. We have already 15 GW in our backlog and pipeline, but the opportunity is huge with 146 GW in this decade. To make sure we benefit from this growth, we are investing in our footprint, upgrading our factories for new products, like the extension of Hull in the U.K. We open new facilities in Le Havre, France, where we will start to produce early next year. Also in Virginia in the U.S., securing supply volume and finding the right balance between local content and low cost production.
We are also investing in leading products that allow us for continuous cost out and significant AEP improvements with reduced risk and time to market. This brings me to the SG 14-236 direct drive offshore turbine. With up to 15 MW, with Power Boost and a rotor diameter of 236 meters. This turbine, I'm convinced, will consolidate our leadership in offshore. We are preferred supplier for the Norfolk projects with Vattenfall in the U.K., with a capacity of 3.6 GW, and I think this is a clear proof of customer confidence in that machine and in Siemens Gamesa. We are also confident that service will continue to outperform the market and deliver profitable and strong growth, with an EBIT increase of over 20%.
Our service has a growing backlog and a global presence in around 60 countries, with the great potential to grow and achieve synergies. Our service offering is competitive, as shown by the renewable rate of more than 80% in fiscal year 2021. We have an excellent operations team with great capabilities that can maximize the performance for our customers, as you can also see in the lost production factor below 2% for all the direct drive turbines maintained by Siemens Gamesa. This puts service in a very good position to benefit from the expected market growth. I'll finish with the program I started with, the LEAP program, the restructuring and other actions we are implementing. In the area of innovation, we are developing new features for the 5.X to address key markets.
An enhanced SG 14-236 Direct Drive, and we are developing a decentralized solution integrating Siemens Energy electrolyzer into the wind turbine. We also optimizing our productivity through cost out and product upgrades, and we are coordinating procurement and sales to protect our profitability. We also focus on product cost out and staff cost improvements. Regarding asset management, we maintain benchmark working capital levels and explore selective asset disposals. Finally, we work to achieve operational excellence through continuous focus on quality and health and safety by adapting also our onshore footprint to supply chain bottlenecks with hubs in America, EMEIA, and APAC, and through the globalization, as I explained on the offshore growth of our offshore footprint. With that, thank you very much for your attention, and we are now of course ready to take all your questions. Thanks.
Ladies and gentlemen, the Q&A session starts now. If you wish to ask a question, please press zero one on your telephone keypad. To cancel your question, please press zero two. We would kindly ask you to make a maximum of one question per participant. Once again, we kindly ask you to limit your questions to one per participant. Thank you. The first question comes from Vivek Midha from Citi. Please go ahead.
Thanks very much, and good afternoon. Could I ask a question, sticking to one question, on the revenue assumptions within the fiscal year 2022 guidance? Could you maybe talk around the assumptions around onshore versus offshore revenues, embedded within the guidance? Thank you very much.
Yeah. Thank you for your question. Of course, within our, you know, guidance on revenue, we have taken into account the challenging, you know, environment. Straight to your question, what we foresee is that the decline will take place on the Onshore Activity segment, because of course all the challenges and decisions by customers delayed that might take because of changes in regulation. Also, supply chain constraints and of course higher, you know, logistics cost. Offshore revenues are expected more to be stable. In the case of service, I would say that we are expecting to continue growing at a high single-digit. That will be the implied assumptions in the revenue guidance.
Okay. Understood. Do you expect any, I mean, I get the visibility on this is very limited, but in terms of that customer sentiment in your conversations with customers, I mean, do you expect that to improve next year? Thank you.
Sorry, you mean whether we continue to sign orders in onshore despite of the raw material issues? Sorry, I didn't get the question fully, Vivek. Could you kindly repeat that?
Sorry, understood. In terms of the effect of the raw material increase-
Yeah
logistics challenges and the like, I mean, how are you seeing that impacting customer demand? Or rather, how concerned should we be that these issues are going to start causing demand destruction? Thank you very much.
I think what you can clearly see also in our order intake, that negotiations take longer because the customers have their own business cases, and with the effect of raw materials or pass-through clauses or escalation clauses, of course, that has an influence on the customer business case and customer decisions. Nevertheless, I believe that the overall demand that we see, and that is what I highlighted also in some of my pages, in onshore will continue by the general demand that is there for wind and that this will even out.
Thank you very much. Ladies and gentlemen, we kindly remind you once again to limit your questions to one per participant. The next question comes from Gael de-Bray from Deutsche Bank. Please go ahead.
Good afternoon, everybody. My first question is about the margin bridge. Could you help us understand what the EBIT margin would have been excluding the impact of the manufacturing ramp-up of the 11 MW turbine in offshore? I know it's a purely theoretical question here, but the idea is to try and better appreciate the ramp to the 2022 margin target.
As I said, you know, we are referring to the change of the 11 MW platform in offshore. As I said, it was done successfully and very in line with our expectations on the fourth quarter, and that had an impact on the margin. You can count on, you know, maybe circa EUR 60 million-EUR 70 million on the fourth quarter impact because of that change. That will be it.
Sorry, you said EUR 60 million, EUR 70 million?
Yeah.
Okay. All right. In terms of the assumption you've used in the guidance in terms of the higher cost for steel in particular, could you help us understand what the impact of steel is gonna be on next year's margins, all else being equal?
Of course, this is very, I would say, confidential. I can answer, you know, in a different way to give you some comfort. For 2022, of course, as we said, during the presentation, all the effort of the group has been focused on enhancing our procurement, you know, strategy. Of course, also trying to pass on to our clients, you know, enhancing also on the new contracts, you know, indexation clauses and of course, making sure that whenever, you know, we get a new product in place, we have the cost covers to cover a potential increase. Regarding, you know, steel, what we can for the tower steel, we can give you some coverage, you know, for 2022.
The group has already coverage for that, you know, roughly 70% of the volume. Of course, we cannot cover all, because of course for the new products on the copper, we have already covered roughly 80% of the volume on 2022. Saying that, of course, there are other, you know, materials that you cannot physically cover or just hedge. On the steel tower, those are the numbers, and for the copper is the one I mentioned.
Thank you. The next question comes from Akash Gupta from JP Morgan. Please go ahead.
Yes. Hi, good afternoon, Andreas and Beatriz. I have a follow-up on guidance and one question on cash flow and working capital. Coming back on the guidance, I mean, thanks for providing color between segments. If I just come back on margin guidance, and you have 300 basis points wider guidance than 200 basis points that we have seen in the past. Is it fair to say that this entire range is driven by onshore, or is it also because of offshore that you have some uncertainties that is leading to higher range?
That, you know, higher range, as you said, you know, is of course due to the market, you know, environment that we have. If we have to split that, you know, it's more concentrated on onshore, you know. That is spread on guidance, as I said. Also the revenue drop is on the assumption that we will be more focused on onshore than stable, you know, offshore. Saying that also of course, higher cost on logistics also might have an impact on the offshore projects as well. More, you know, on the onshore.
Coming back on cash flow and working capital, and maybe if you can help us with the cash flow bridge. I mean, at the midpoint, you are guiding 2.5% EBIT margin. If I look at restructuring, that would be a cash out. Provisions from last year would be a cash out. Your CapEx would be significantly out of depreciation for another year as you invest in offshore. Finally, on working capital, it is 24% of revenues, which is very high level compared to what we have seen in, both before as well as at competition. Any comment on cash flow bridge for fiscal year 2022? Thank you.
Thank you, Akash. As you said, of course, some impact on restructuring is also will come in 2022. It's important for the group to continue optimizing the footprint of the group and also reducing the structural cost. Regarding the cash flow assumptions, what we can tell you is that we are committed to financial discipline. We are committed to maintain the investment grade of this company. Of course, for doing that, you know, it's important that the leverage of the group will not be higher. How we will achieve that, you know, with that CapEx is a combination of maintaining a strict control of our working capital. You have seen that we have been able to do so in 2021.
As Andreas has mentioned, we are analyzing different strategic alternatives of selective assets also to contribute to finance that, you know, let's say CapEx as well.
Maybe, Akash, if you allow one specific investment or this, investment that we are looking at is our development pipeline that we worked on over the years, and we are currently seeking to monetize that.
Thank you.
Thank you. The next question comes from Mark Freshney from Credit Suisse. Please go ahead.
Hi. Hello. Thank you for taking my question. Regarding, you know, you spoke on the last call, Andreas, about going through contracts and putting escalation clauses in. It seems like most contracts are now, you know, protected in that or they have a much higher degree of protection. Can you talk and confirm that that's still the case? Look, if commodity prices do roll over, as I think you allude to, or normalizes as you allude to somewhere, or even, you know, roll over, I guess, then, presumably, you know, there would be a benefit. Would you, Siemens Gamesa, be able to capture any of that benefit, i.e. charging clients for steel that you actually procure at a lower cost on the downside? Thank you.
Thank you, Mark, for the question. I don't think there's a general answer to that. Your assumption that in all the new contracts, we have a much better coverage by various means, and we explained that, Beatriz and I, in Q3. As well, we have different means to cover that. Escalation clauses or pass-through clauses, hedging with suppliers, or taking higher risk contingencies in the project. So there's a mix of measures to cover for that. We also must not forget that 2022 will be a mix of backlog contracts without that, and also, new contracts where these with these additional measures are fully in place. Therefore, it's very difficult to say.
To the second part of your question, whether we can benefit if the prices fall, that depends exactly on which type of clauses we have implemented in the individual contracts. If we have normal escalation clauses in the customer, the benefit is then shared, then we wouldn't fully benefit. If we have fixed prices established, which is not the case in many contracts, and then the costs go down, then we would benefit. It's very hard to say in which portion and how many contracts. Also, as I said, and as Beatriz also mentioned, we still have to wait and see how the commodity prices develop in the next year.
Thank you.
Thank you. The next question comes from Ajay Patel from Goldman Sachs. Please go ahead.
Thanks. Good afternoon. My question is around assumptions as well, but on guidance. Your steel price is elevated, copper elevated, maritime freighter elevated. Is the guidance set on these, the current situation lasting throughout 2022? Or is there an assumption of it backwardating? Just to give us a feel of what drives the 14% margin target here. Any clarity there would be really helpful.
Thank you. I mean, regarding that question, of course, we have considered, you know, higher cost of steel, you know, and copper and also freight, for the 2022, of course. What we have not considered is that what we have seen in the last weeks, you know, that has been quite intense and very, very high, you know, freight cost will continue throughout the year. What we have considered, of course, that is going to hit us, you know, on the first quarter and second quarter is going to continue to be pressure on cost inflation. We have not considered that throughout the year, the whole year, we are going to see what we have seen in the last two, three weeks, say, or last month.
That's specifically on freight, right? Steel and copper, you're making the assumption that it stays elevated. Then maritime freight, you're assuming you get hit in Q1 and Q2, and then there's some form of backwardation or fall. Is that the right way of thinking about it?
Yeah. Alright, you know, of course, as I mentioned before, it's important for the raw materials. When we speak of raw materials, we are saying, you know, we have a potential to cover, you know, a steel tower. We also have for copper. We don't have all the coverage, you know, for the rest of the components. What I was saying before is what we have seen in the last, you know, month is like shortage of a specific component that has also added to the constraints on the supply chains that has hit us on the execution, as you have seen in the fourth quarter. That effect has been compounded. We have not taken the assumption that throughout 2022 that will continue.
Now, Ajay, if you allow me just to add to what Beatriz highlighted, what we've seen in the last quarter is not only the cost assumptions that you can take for raw materials or freight to be considered, but also logistics costs, but simply getting the parts from A to B and getting the parts in time into the factories and into the projects. That is what we mean when we say supply chain capacity constraints. It's not only a capacity, but simply due to the logistics. You see the harbor congestions that the parts, even though we have them, we know where they are, they don't arrive as planned. That is simply also putting quite some stress and burden and simply uncertainty on our 2022 situation.
Okay. That's clear. There's one bit that just didn't make sense from earlier, but I'm sure that it's obvious. I think you said that 70% of the volume of steel is covered and 80% of the copper. I'm just wondering, how do I think about that in regards to next year? Do I take where steel and copper is now, and then anything lower than this could filter through as a benefit, equally anything higher than this is a negative? Or is it a number that is much lower than where we are now? Was this as of prices at the end of Q3 or end of Q2? I'm just trying to understand how to frame that, if you can help.
I think I would like to refer to my previous answer. There is no general answer to that. The remaining percentages of steel and tower steel that Beatriz mentioned, and copper, it all depends how the associated customer contract looks like. Whether it has a positive, negative or neutral influence on the results. That depends really on the individual situation of each project.
Okay. Thank you very much. That's very clear.
Thank you. The next question comes from Ben Heelan from Bank of America. Please go ahead.
Evening, guys. Thank you for the question. First question is on onshore profitability. You'd said in the past, you were targeting breakeven by the end of 2022. Obviously, that got pushed out. Can you let us know kind of your updated view on when that onshore business can be breakeven? Secondly, I think in the presentation you said, the medium term margin guide of 8%-10%, that's obviously been pushed out. Can you give us an update on when you actually think that this is an achievable target? Thank you.
Ben, I would like to start then with the second question, connecting then back to you with the onshore question. As we say in the long-term vision update, we expect that we can get into the 8%-10% corridor in 2024, 2025. With all the uncertainty that we see in the short to mid-term, that is simply not possible to say exactly when that will be. That also brings me back to the onshore turnaround. The onshore turnaround to bring onshore back into profitability is one major ingredient or major success factor into that. We are clearly improving the onshore profitability from last year over the next year in the coming years. When exactly we reach breakeven with all the uncertainty is hard to say.
Well, the 8%-10% is then based on the onshore turnaround being successful, offshore growth coming, and then the relatively stable more than 20% of service to continue at good growth.
Okay. Just a quick follow-up just on that last question. It sounds as though it's gonna be very second half weighted, the year in 2022 because of the logistics issues that you're obviously facing. Is that how we should think about things? Kind of losses in the first half of the year, recovering in the second half of the year? Thank you.
You mean going back to the guidance that we have provided, which is the EBIT? Yes, of course, if we are providing, you know, a guidance between, you know, 1%-4%, you know, the profitability of the group is going to be backloaded, you know, on that rather frontloaded, because of the issues that we see in the current environment.
Okay. Okay, thank you very much.
Thank you. Ladies and gentlemen, once again, we kindly ask you to limit your questions to one per participant. The next question comes from Sean McLoughlin from HSBC. Please go ahead.
Question about your onerous contracts. You had reassured us at the Q3 stage that you'd covered all the 5.X projects. I'm just wondering, these extra EUR 69 million, are they related to the same projects? Has there been an increase in provisions on these same projects, or is this a new set of projects?
Thank you. As we highlight, you know, on the activity report, this increase of close to EUR 69 million in the fourth quarter has been related to the same, let's say, issues, mainly higher, you know, freight cost, mainly also delays on execution. This is more concentrated on two main projects.
Can you give reassurance that we won't see any more onerous contracts related to the 5X ramp?
What we can give you reassurance is very important, as Andreas said, that the 5.X technology, you know, has been proven, you know, with the two prototypes up. That the company has put in place a significant plan to take the cost out of the 5.X. Also that we enhance the procurement, you know, processes to avoid the situation that we face in Brazil. Therefore, you know, all the focus of the company is, as you said so, to take the cost out of the 5.X and avoid that situation. Also, the focus of the company has also been risk management improvement as well.
Thank you.
Sean, just to give you a very practical example, you know, from the Q3 numbers, where the main impact came from the Brazilian project, we do now weekly reviews of the Brazilian project. It's every Friday. We did that today again. Whereas most of the elements of the Brazilian project are at the moment stable, like production, also the progress, the starting progress at site, we of course still see, and then it's always back to the same, the logistics, that also in Brazil, for the remaining part of the project will still be a challenge. Do we get the parts and everything to the site as planned?
At the moment it looks like, but that remains to be seen and depends on how this whole logistics situation develops over the next few months. Otherwise, I think we stabilized the project. I'm quite satisfied with the development, still with the uncertainty that is there.
Thank you.
Thank you. The next question comes from Supriya Subramanian from UBS. Please go ahead.
Yes. Hi, good evening, and thank you for taking my question. I have one on medium-term guidance, more on the top line where you say that you expect to go faster than the market. Just wanted to check over the next three to five years, given that you're likely to have more selectivity in the onshore business and potential market share losses in offshore, you know, being the market leader but still maybe around 45%-50%, how do you plan to achieve above market growth? Second is maybe a little bit more theoretical. As you know, raw material prices go up and potentially it eventually, let's say, gets passed on to the customers and in offshore of course you do have pass-through clauses as well, how does you know these material price increases impact the LCOE for wind?
Do you think that could be potentially a dampener for, you know, the volume growth, at least in the near to medium term? Thank you.
Yeah. If I start with the second question, whether the raw material price and therefore the resulting effects in LCOE will have a dampening factor. Overall, I don't see that at the moment because the demand for wind in the long term are clearly growing rapidly, especially in offshore. We've achieved now LCOE levels in onshore and in offshore that are lower than any other generation cost. While the LCOE might increase a little, and still to be seen how much that is, because we can also compensate by technology improvements, I don't see that in general that will slow down the demand side.
Also when you look at all the top reports that are currently issued by consultants, you don't see that as an effect that is major. That is of course different in the short term. As I said, if there's already a customer business case, a tariff, an auction where our customers are locked in and they cannot pass that on into a tariff or into a PPA, that is of course a slightly different situation. You asked us about market growth. I would like to start there with offshore. Clearly, we maintain our target to have more than 50%, and the growth there is clearly driven by the demand growth.
As I showed also, even though onshore is flat, in the next few years, in offshore we clearly see a market growth and with, I think it's around 32 GW in auctions that will be auctioned out in the next two years. We expect a strong growth in that. Also in onshore, maybe even not next year or the year after, but also there growth will come back. Then on top of that you have our increased installed fleet and the service revenue growth that is also extremely satisfying and promising.
Great. Thank you very much.
Thank you. The next question, the last question comes from Deepa Venkateswaran from Bernstein. Please go ahead.
Thank you. I had a question about the offshore versus onshore. You've talked about all these supply chain bottlenecks, and so have your competitors. It seems like offshore doesn't seem to be hit by these. Is this just a timing issue, and would we see things like this happening next year, or has it got something to do with the footprint of how components are made for offshore wind? Maybe it's more Nordics focused. Is that driving a difference? Would you comment on that? A small clarification on the guide, long-term guidance. The 8%-10% by FY 2024-2025, I mean, that clearly would imply that onshore should not only have broken even but should be contributing. Presumably by implication, the break even should at least be a year early.
Maybe just a clarification on that. Thank you.
Maybe if I start with the implications or in offshore and onshore whether they're the same, and Beatriz, if you could take the very last question then for this evening. In offshore and onshore, the situation is slightly different in offshore than in onshore, mainly due to the, I would call it project cycle times that are different in onshore and offshore. In offshore we quite often produce way ahead of time, and therefore we are not that impacted by the shortages, and especially the projects are not impacted by it. Whereas in onshore, we are much shorter project execution times, and any delays in components in some cases or in more cases hits even the delivery and the project.
That is simply a major difference between on and offshore. Also in offshore we have to always be on the safe side. We've also normally started production relatively early to make sure that we have the components, blades and towers in time when the installation starts. That is, I think, the main difference. But on the other hand, as Beatriz also said, the logistics shortages or the logistic cost increase also hit offshore. We also need to transport offshore equipment, and that has hit in an equal way once we transport the equipment. Then I think the break-even question for offshore.
Yes. I mean, you make, you know, kind of a good assumption. If of course we are providing a long-term guidance range, 8%-10% on the low end, 8%, you know, onshore will be contributing with a small amount, let's put it this way. On the upper range, you know, the contribution will be higher. Of course, depending on the timeframe that we do so, depending if we achieve that range on 2024 is because of course the profitability and the break-even point is there on onshore. If we achieve that on 2025, that range is because it comes a bit later.
Okay. Thank you so much.
Good. Thank you, Beatriz. With that, I would like to finish the evening for many of us with a few concluding remarks. First, many thanks for all your good questions. We of course more than happy and look forward to answering these questions more in the upcoming road shows. After such a challenging year, and also with the new guides, I'm sure there will be lots of discussions and many good questions, and hopefully equally good answers from our side. I would also like to say, I think for all of us in this industry, this has been a very interesting week, ending now Friday evening at 7:00 P.M. whereas the world meets in Glasgow. As I also shared with you, enormously exciting outlook for this industry.
At the same time, you have short-term effects like the share price development this week. This only shows how, on the one hand, interesting, on the other hand, challenging this industry is. Especially, I think everyone here at Siemens Gamesa, we are firmly committed and we believe in the long-term outlook. Therefore, I think one has to be a little patient here and especially this week. Many thanks for your attention, and I look forward to meeting many of you then in the near future. Thank you very much.
Thank you.