Good morning, ladies and gentlemen, and welcome to Siemens Energy's 2021 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 risks and uncertainties.
At this time, I would like to turn the call over to your host today, Mr. Michael Hagman, Head of Investor Relations. Please go ahead, sir.
Thank you, Nadia. 7 on our website, and hopefully, you will have had some time to look through them. With me here are Christian Bruch, our President and CEO and Maria Ferraro, our Chief Financial Officer, and they will review the Q2 results and take you through the key messages. The call will take approximately 60 minutes and there will be time after Christian and Maria speak for Q and A. And with that, I hand over to Christian.
Yes. Thank you very much, Michael, and also good morning, everybody, from my side. I hope you and your families are safe and healthy. We're Thank you very much for joining, Maria and myself on our today's quarter 2 2021 call. We completed Another quarter where the team at Siemens Energy did an outstanding job to deliver a solid operational performance in a still challenging market environment.
After being now 1 year with the company, I'm very proud really what our people deliver day after day and how they continue to develop Company and keeping the balance between improving the profitability on the one hand, but also driving the energy transformation and developing Solutions with our customers together. And I really would like to thank everybody from our employees for their contribution and commitment. Let me get to some key numbers of quarter 2 to underline the solid operational performance. The orders rose for Siemens Energy substantially by 39% year on year to €10,500,000,000 driven by Siemens Gamesa Renewable Energy. Revenue moderately decreased by 4.4 percent to EUR 6,500,000,000 On a comparable basis, revenue was on prior year's level.
Adjusted EBITA before special items sharply increased to EUR 288,000,000 And the free cash flow pretax well back in a positive range of €433,000,000 as both segments Siemens Gamesa Renewable Energy and GGP showed sharp improvements year on year. Let me also address a couple of highlights and milestones from the last quarter. We had our 1st Siemens Energy Annual General Meeting on February 10, which also has proven a great support of our shareholders on all AGM agenda items. I believe it was a good first experience even so hold completely virtually, But we were very pleased by the support also we received there. We also had and I hope that a lot of you participated in Siemens Energy Hydrogen Day on March 19, we had over 500 webcast participants following our overview on our hydrogen business, not only obviously on green hydrogen, but also on all the other areas where we tackle hydrogen.
We're very proud that by March 22, we were included in the DAX, in the DAX 30, the last issue to be included in the DAX 30. And it's a great success for all of us 3 months after the inclusion in the MDACs and 6 months after our listing. And it's a great motivation really for the team to continue on the further increase of the value of our company. And we got and excellent ratings with Sustainalytics. I will separately talk about ESG and our ESG activities.
And as I said always in the last call, it's for us every quarter, one step after the other. And I was pleased to see that we came out number 7 out of 177 companies with Sustainalytics. We are in a market environment, which is obviously, as I said, still demanding. And we expect on the one hand large scale investments triggered by all the global stimulus programs we see. And as you have seen also by all the communications, the core of many programs is really decarbonization, Climate neutrality, how can we build up the infrastructure, then grids, how can we include more renewables into this, but also really on how do we cope with the increasing demand on electricity.
And this is really something which we want to bank on. U. S. Is back on stage in the fight against climate change. I really welcome this, I have to say, and also the 2030 targets of the Biden Administration.
China has the 30, 60 targets out. So the 2,030 carbon peak at latest and the 2,060 climate neutrality, including now the 14th 5 year plan. And obviously, we have the European Green Deal with the tightening of the climate target by 55% by 2,030. This is something which now obviously has to come into reality in projects and orders. This is not yet reflected in our numbers, but this is really forward looking where these similar programs have to convert really to order intake.
We have seen generally negative currency effects, and we see also still continuing COVID-nineteen impact on the business activities. We will talk about this, I think, more in the course of the numbers also and hopefully also with the Q and A. We have reviewed our guidance and the nominal revenue growth rates expectation for fiscal year 2021 is now in a range of 3% to 8% for Siemens Energy, previously 2% to 12% for Siemens Energy. You may have heard the Siemens SCAMESA Renewable Energy Guidance amendments on Friday. 2 comments to this.
Obviously, it's still Obviously, it's reflecting that we are further down the year that there was when we gave out the first guidance. It was not clear when some big deal is going to materialize or if so at all. We have a better visibility on this now. But at the same time, it's still a relatively wide guidance because we obviously Always have to remind, it's nominal. So we have seen currency effects in the first half years.
And obviously, we all I would say it's conservative guidance on how I look on it. The profitability outlook of 3% to 5% is confirmed for the fiscal year 2021 for Siemens Energy. With this, I would like to move to the current situation on COVID. And obviously, more than 1 year in COVID now. It is something where we have got used to work in a certain way.
However, obviously, we are looking forward for coming out of the COVID-nineteen crisis. The employee health and safety is our priority number 1. We obviously do a lot really to make sure that we can continue to work. We do a lot of testing. We have a lot of office staff still working from home wherever possible.
We are rolling out at the moment new work concepts, what we call better together, where we have obviously more flexibility between home office and office space, which is managed more flexible. In the long term, I expect this also having an effect on our office space, but this is really now in the making and step after step on how to move through the next month and years. All Siemens Energy plants and are currently operating, some at slightly reduced capacity. Obviously, we see with concern the development in India, The factory there dropped down below 50% simply of the current situation. Most of it is really globally in a relatively normal operation, and I think we learned how to handle the crisis there.
Most projects and service sites are also fully operational following the COVID-nineteen rules. It always depends a little bit on the country and the project itself. We from time to time do have temporary closures of project sites in some cases and then in opening up. But this is something where the organization does an outstanding job really to keep the projects running despite that. We have no major supply chain disruptions.
And obviously, we still see lower discretionary cost due to restricted traveling and entertainment opportunities in the current situation. Let me move to our strategy execution. And this is something what you have seen over the last quarters and obviously where we work through the package what we have given ourselves in terms of improving the profitability and obviously at the same time building the ecosystem and the innovations to really lead the energy transformation. And we are really well on track. As I said, I'm very proud on how the organization manages this, these 2, let's say, different elements.
And obviously, I'm very confident that we deliver what we promised. And One thing, obviously, is a focus on improving the business base. We commuted in February our restructuring program and reduction of around 7,800 jobs worldwide by 2025. This is, let's say, Advancing as planned, all in line. Obviously, in the in some areas of the world, we can execute it.
In some areas like Germany, we are still negotiation with works representatives. This works in a constructive environment. It's a difficult discussion, obviously, but we are very confident also that we get to a joint agreement as we planned this, but it's obviously a transformation for the company. We have started for Germany in alignment with the works representative a voluntary lever program, which was offered mid of April to German employees. And this is obviously a first phase and we are working through this.
At the same time, it's important for us always that we continue to develop also really innovations. I've communicated before that we are spending roughly €1,000,000,000 a year in research and development and want to continue to do so. But at the same time, The co creation with partners and customers is for us really, really important. I would like to give 2 examples Here, the one example is with Wattenfall in Berlin, a large scale heat pump at the Potsdamer Platz, where Today, there is Berlin's largest air conditioning system installed and supplying around 12,000 offices and 1,000 apartments. Today, the waste heat was not used really and we are integrating a new high temperature heat pump during the operation to optimize really heating, cooling electricity in a more resource efficient way.
These are exactly the solutions if you talk about Carbonizing the applications. What we also look forward to in the more, let's say, in the industry environment, where we really make sure that we balance heat and power. And with this, obviously, can save CO2 in our solutions. We also have launched an innovation center in Shenzhen in China with a focus on smart energy systems, advanced gas turbines and green hydrogen. This is an area the Innovation Center supports an area, the Greater Bay Area in China.
This is obviously what is Guangdong, Hong Kong, Scau Shenzhen. It's around 80,000,000 people population and it's integrated there in a close collaboration with local Chinese customers to really also in this area push for new Innovative Energy Solutions following also the 14th 5 years plan, which obviously very much also looks on getting CO2 down, and this is obviously one of the elements we are driving. I would like to give 2 examples on the Energy Transformation portfolio. We did it always in the last calls, and I would like to give today 2 examples out of the transmission area, out of Infrastructure side and the grid. The one is around reactive power compensation.
So how do you stabilize a grid once you have more feed in from renewable and more volatile power sources. And we have a joint project with the Los Angeles Department of Water and Power, where obviously we are stabilizing the grid through this reactive power compensation. We see the grid and the transmission products and also the solutions we develop as one key element for the success of energy transition worldwide, and we see ourselves really pioneering this solutions. And in this regard, I think this is a super example on how to bring together the different parts of producing energy and distributing energy. Similar to the second example, which we launched on the Hannover Fair this year, the industry fair, where we presented new digital power transmission technologies based on edge technology, which means computing directly at the component itself.
So at the transformer, which obviously for grid components is relevant because particular of cybersecurity, which is then more efficient than sometimes cloud based solutions, and we launched really a new complete suite of products there and will push also for the digitalization solutions in this area. Let me give you a couple of examples for awards and milestones in the quarter 2 of fiscal year 2021, Also demonstrating the energy transition towards decarbonization or CO2 reduction. And let me start on the upper left site with a project in Cyprus, where we are converting power production from heavy oil towards natural gas. The space for wind and solar is limited on the island. So in this case, it's a good example where This transitional solution of natural gas is really critical and still to improve CO2.
We provide the technology, the equipment and the long term service for the 1st private gas and steam power plants on Cyprus with 2 60 megawatts. So it's a combination of our very successful SGT 800 turbines and obviously the steam turbines and the generators. The CO2 emissions going to be down 50% compared to before and power cost going to be reduced. So I think this is exactly these type of solutions, which we would want to push. If I move to the right hand side, on the upper slide.
There's an example for transmission solution in China connecting an offshore wind park, which is the 1st really commercially operated offshore wind farm in China. This is in the Pearl Delta there or close to the Pearl Delta, installed capacity of around 300 megawatts and also they're supplying around 240,000 households in China. If I move to the lower left side, Saudi Arabia, this combination of the Generation and Industrial Applications division. Also this is something what we try to push more really this cross divisional collaboration, orders from the largest oil company Saudi Aramco. Very pleased that we got awarded 21 locally assembled compressor units for natural gas storage project in the country, also a combined equipment and service contract, really there.
And Suezmax also in Skamessa Renewable Heads, particularly on the offshore side, the order for the 100 wind turbines of the 14 Megawatt class, including a service and maintenance contract for the world's largest offshore wind farm, Sofia, off the coast of the UK. Big success, I think, for the new product also. And we are pleased also to see the record order intake in the quarter 2@siemens Gamesa Renewable Energy. Let me come to ESG. As I said the last time, it's one element which we want to talk about really in every quarterly call.
It is integrated really in our strategy. It is a journey for us because obviously we are turning around the company. But I'm very pleased that also science based target initiative confirms the Siemens Energy CO2 saving targets in line with the Paris agreement. That is something which really underlines our ambition and the hard work our people are doing. We communicated before that we convert our own electricity consumption to 100 percent green electricity by 2023 and want to have a carbon neutral own operation by 2,030.
At the same time, we are now addressing, obviously, what is called the Scope 3 emissions and working through this and managing also the CO2 emissions over the lifetime of our products. I'm also pleased that we got the top rating by Sustainalytics, And we will continue really to work on it. You've seen maybe the inclusion in the S and P Global Clean Energy Index. And this is something what really motivates us every day to continue on our journey. With this, I will hand over to Maria to talk more about the financial numbers of 2.
Please, Maria.
Thank you, Christian. Good morning. A warm welcome also from my side. I'm very pleased to share with you our quarter 2 results. Please on slide 10, let me start where I finished at our Capital Market Day back in September.
Segment. At the CMD, I talked about 3 things. 1 is our strong business foundation, which is built on our larger backlog and our resiliency in our service business, our path to margin improvement, talking about with respect to our ongoing cost programs, etcetera, and of course, asset excellence and the rigorous working capital management within Siemens Energy. I will always address these three areas and hopefully do so consistently to show you the progress we make in each quarter. Now going to slide 11, we start with Siemens Energy Group at a glance.
On the left hand side, orders at the Siemens Energy Group level were substantially up at €10,500,000,000 or 39 percent, with the highest ever quarterly order intake at SGRE at $5,500,000,000 We finished the quarter with a very strong order backlog of $84,000,000,000 which marked a new record high. Revenue for Siemens Energy was moderately down 4.4% on a reported basis. Excluding currency translation and portfolio effects, total revenue was in line with the prior year quarter at minus 0.1%. SGRE achieved a clear increase of 6%, while GP posted a decline of 9.7%. Book to bill for Siemens Energy was especially strong at 1.62%.
Adjusted EBITDA before special items increased sharply and reached $288,000,000 with the prior quarter being at $200,000,000 With a margin of 4.4%, sales. This reflects a rise of 150 basis points. This improvement was primarily driven by SGRE, which came from 1% to 4.8%. GP's margin was 20 basis points higher than in the prior quarter. Adjusted EBITDA before special items was 12,000,000 lower year over year.
After an exceptionally strong Q1 in terms of profitability with many one time effects, Q2 is also very solid and in line with our expectations. Free cash flow pretax came in at 433,000,000 with both segments showing sharp improvements year over year with a higher contribution coming from Gas and Power. 43% on a comparable basis, again driven by a sharp increase at SGRE. Orders at GP decreased slightly year on year on a comparable base, just shy of 2%, but continued to show a healthy and solid run rate at just over 5,000,000,000 Orders at SGRE rose by 150% versus prior quarter as a result of large order intake. This increase was predominantly driven by EMEA, Europe, Middle East and Africa region, where orders nearly quadrupled year on year, including 3 large orders worth approximately $2,800,000,000 for offshore wind farms, including associated service in the UK, the Netherlands and France.
Order intake in the recent quarter and the trend year over year does reflect the volatility as you can see here in the quarterly results of the offshore market. We are very happy with the order intake at SGRE. Looking at revenue. Revenue was flat year over year in the quarter on a comparable basis. At GP, we were down 9.7% nominally and 5.6% comparable against a very strong prior year quarter.
In SGRE, revenue increased by 10.5% on a comparable base. This revenue increase was across the board with the service business also contributing the highest in percentage growth. EBITDA before special items was in line with our expectations. In GP, we benefited from operational improvements and savings from restructuring measures, but we also had net positive one time effects, for example, from projects and other items. Segment.
Such effects are partly COVID driven, for example, lower discretionary spending, but also in the very nature of our project business. Segment, for example, customer settlements, project terminations, hedgings, etcetera. The profitability in SGRE was supported by a solid operational performance in the wind turbine generator business and the service businesses and including reassessment of the marketability of inventories. The prior year quarter, if you recall, was impacted by negative effects related to the COVID-nineteen pandemic. We previously said that Q1 was exceptional and that Q2 would be lower and that given the nature of our business, it was more relevant to measure progress on the half year as a whole.
So during the half year, EBITDA before special items rose from $126,000,000 to 654,000,000 Please going to the next slide, slide 13, looking at special items now. For Siemens Energy, in total, we ended up at $91,000,000 in special items for Q2. The $47,000,000 restructuring you see here and integration costs at GP takes into account the further progress we made on our restructuring measures. This is anticipated to increase in the second half as expected and as we roll out the Accelerate Impact program. Standalone costs, expenses that are associated with setup of the standalone company stood at $17,000,000 in the quarter versus $53,000,000 in Q1.
Q1, if you recall, was burdened by non recurring costs for the spin off incentive, and we indicated that this number will come down in the following quarters accordingly. In strategic portfolio decisions line, we show a positive special item in the amount of $47,000,000 In the course of the silent wind down of the AGT business, which we announced last year, inventory positions, which held valuation allowances, could be sold again above carrying value rather. So in summary, in Q2 fiscal year 2021, Siemens Energy was able to win a customer project for the delivery of 7 new unit turbines for A45, which led to an inventory write off reversal. So the net impact, as you can see here in special items, was $47,000,000 in the quarter for this matter. We continue to drive and execute our competitiveness program in relation to our transformation.
This is expected to have impacts on adjusted EBITDA in the second half, and this will be predominantly reported within special items, for example, personnel restructuring costs. Now going next please to the net income transition on slide 14. As you know, we don't stop at EBITDA, it goes to net income. So let me take you segment. Looking at the major items here, PPA is slightly lower, driven by the impairments associated with the strategic portfolio decisions we made in the prior year in our Gas and Power segment.
The financial result from operations, segment. For example, interest income related to receivables from customers, from cash allocated to the segments and interest expense on payables to suppliers is mainly driven by FX effects and is part of our adjusted EBITDA. The financial result in Q2 came in at $32,000,000 slightly lower than in the prior year quarter. The financial result is impacted by interest expenses slightly lower than prior year and currency effects. We also had an effective tax rate of 36% in the first half year, which is slightly higher than the expected medium term rate of 25% to 30%.
At SG and A, for example, the effective tax rate is burdened by a negative EBT that does not allow for capitalization of deferred tax assets, for example. And lastly, looking at our net income, this rose to $31,000,000 in Q2 driven by GP. So next going on to the cash flow statement please. CapEx rose by $17,000,000 in the current quarter. For GP, CapEx was down and the increase here is driven by SGRE.
Free cash flow pretax for Siemens Energy showed sharp improvements year over year from minus $254,000,000 in Q2 to plus $433,000,000 in the current quarter. This is almost a $700,000,000 change. The sharp year over year increase in GP was due to higher project related cash inflow, improvements in payables and contract asset contract liabilities. The improvement in SGRE was mainly supported by stringent asset management. As a result, for the first half, we broke even as a group on cash flow, which is an improvement over half of last year, when we had cash outflow of $159,000,000 In particular in GP, we had a very healthy free cash flow performance in the first half, reaching $582,000,000 versus $106,000,000 during the first half the year before.
Also to note, we finalized our share buyback program in the Q2. This effect is shown here in the cash flow from financing activities, purchase of treasury shares. In total, 16,900,000 shares were bought back at an average share price of 23.21 in the 1st 6 months ended March 31, 2021, around 4,900,000 treasury shares were transferred to employees accordingly. 2019. As you can see on the left hand side of the slide, we have €4,570,000,000 in cash and cash equivalents and €79,000,000 receivables from the Siemens Group for a total liquidity of €4,650,000,000 EPS guidance.
This is €110,000,000 higher than at the end of the Q1. We also have €2,900,000,000 of financial debt, and of that €2,000,000,000 is long term in nature. This is €550,000,000 just over €550,000,000 higher than at year end. We have a liability to Siemens of approximately €136,000,000 for a net cash position of €1,600,000,000 And lastly, during the quarter, Siemens Energy provision for pension and similar obligations decreased from $1,026,000 as of December 30 to $906,000,000 as of March 31. This is mainly due to a lower signed benefit obligation as a result of applying a higher discount rate.
This all results to our net cash after pensions of CAD 670,000,000 So now please going to the next slide, slide 17, let's take a look at Gas and Power. In our Gas and Power segment, we showed a solid development in orders and were moderately down comparable versus to a very strong prior year, But we see and we do confirm that the run rate is solid. Revenue was down 9.7% nominally year over year and 5.6% comparable. Service revenue was down 8.3%. On a comparable basis, this is approximately 4%, while new units revenue was down 10.2%.
Nominally showing that service revenue, as I've indicated, is more resilient than new units, certainly in this quarter. In our IA business. In Q2, we saw some minor project delays into next quarters. Some are attributable to COVID-nineteen, but some are simply the nature of our project business, where projects are moved back and forth. Orders exceeded revenue, results, resulting in a positive book to bill of $1,200,000,000 and leading to an order backlog of $51,000,000,000 which is well above our prior quarter end.
Adjusted EBITDA before special items was nearly on prior year's quarter's level, which given the lower revenue reflected a rise in the margin from 4.5%. As indicated earlier, the free cash flow pretax of CAD481,000,000 for GP came in very strong. Now looking at it from a quarterly perspective, please. We see a solid order intake of $5,000,000,000 in orders, sequentially moderately down comparable versus the strong prior year quarter. If you recall, sorry, the decline was due to lower volume of large orders in the EMEA region.
We also have FX headwinds in our orders of over 4.6 percentage points. We do had or did have growing orders in the transmission business, but this could not offset the decline in generation and our industrial applications business. Looking at our rotating equipment new unit business, we were in Q2 at a low level for our large gas turbines. Those are those greater than 100 megawatts with 3 booked units. Whereas for our industrial sized gas turbine business, we were able to confirm again our strong competitiveness with 19 gas turbines sold in the range of between 8 100 Megawatts.
Looking at revenue, this was down to $4,200,000,000 compared to a very strong prior year quarter. Last quarter was a pre year onset COVID quarter with strong revenue across all businesses. Negative currency translation effects impacted our top line with 4.1 percentage points. This is mainly due to our long position in USD. Adjusted EBITDA before special items came in at $187,000,000 Here we see operational improvements and savings from restructuring measures as well as net positive one time effects from projects and other items, again partly COVID related rather and partly project driven.
The net impact from one time effects from projects and other items in Q2 is smaller than what we have seen in our Q1. If you recall, that was a high double digit amount. And when you compare Q2 this year with Q2 of prior year, the net impact from one time impacts is about the same. On the negative side, lower volume has an impact, of course, on the profitability. In any case, GP adjusted EBITDA before special items rose in the half year from $267,000,000 to 454,000,000 this reflects a rise in the margin from 3% to 5.4%.
This has been helped as indicated by some positive one time effects, But here the strong message is that EBITDA rose despite the underlying decline in revenue. So our cost out measures are working. This is also in line with the $200,000,000 commitment we made for savings in fiscal year 2021. So we are on track and can again say this in our most recent quarter. Overall, and I once again would like to point out that this was a second solid quarter, and this is another signal that we deliver on what we promise even with a backdrop of a market environment that continues to remain challenging.
And with that, that concludes my part of the presentation, and I hand it back to you, Christian. Thank you.
Thank you very much, Maria, and I would I'd like to conclude with the key messages for the quarter. And as mentioned before, we adjusted our revenue growth rates, nominal revenue growth rate expectation for 2021 in the range of 3% to 8%, previously 2% to 12%. GP nominal revenue growth rates expectation now 2% to 6%, previously 2% to 11%. I mentioned before the view obviously that keep in mind this is nominal. So currency out.
Maria had commented on the impact. And obviously also, we expect also COVID still raising some uncertainty, even so we are confident that it's in some areas also brings us now back in the second half with regard to the orders. Profitability outlook remains unchanged for Siemens Energy 3% to 5% adjusted EBITA margin before special items NGP 3.5% to 5.5% adjusted EBITA margin before special items. We will obviously, going forward, continue to execute our accelerated impact program. We are on good track there.
We continue to manage the COVID-nineteen crisis. At the moment, we assume that, let's say, we are on the way out of this now. But obviously, we all don't know what's coming, and we are committed to keep the lights on. And with this, I would conclude the session and look forward to your questions.
Thank you, Christian. Thank you, Maria. We've now got about 20 minutes for Q and A. So to be fair to everyone, Please limit yourself to one question and maybe a short second question. If you want to add yourself to the queue, as you know, Ed, you need to hit Star 1.
If you want to remove yourself, you have to hit the hash or pound button. So with that, I would hand over
Morning, everyone. I hope that everybody is well and thank you for a fairly detailed opening presentation. A couple of questions. Christian, can you just give us a feeling for the tendering environment, Particularly in the, let's call it, larger gas turbine area, 100 megawatts and up. When we think about bigger prospects, Say, euros 200,000,000 to €500,000,000 for the sake of argument or even some of these white elephants, How is that tender pipeline stacking up?
And obviously, as COVID goes Is the funnel looking any better? So that's my first question. And then the second question was kind of related to that. Can you just give us an update on pricing conditions, particularly in the larger thermal unit area? How does it compare with, say, 18, 24 months ago, please?
Yes. Good morning, Ben. Good to hear you. 1st of all, with regards to the tendering environment and obviously, the bigger projects you mentioned above 100 megawatt, it's stabilizing or it's solidifying, let me call it this way, the visibility gets better. There is some bigger prospects in the market in Americas and EMEA.
I'm always careful because we celebrate them once we have them, not before. But there are some The White Elephant is not so much in the market at the moment, but it's really some bigger projects out there, which could materialize still in 2021. So I see it, as I would say, solidifying pipeline now. And I'm also clearly have to say, looking back on the first half of twenty twenty one, I'm really slide on what our generation team did. You have seen I mean, the last quarter was a generally low quarter in the large gas turbine.
We have secured 3 out of 11 in the market. We are confident that gradually we can also get our market share Back up again. I said at end of last year, that is our ambition. But in this regard, positive. I also would like to briefly comment.
You said large gas turbines. We always also look on the 10 to 100 megawatt, which is for us really a success route, right? We are strong number 1. We had another good quarter in there, secured around 14 units there. So this is, let's say, all in line.
On the pricing itself, large gas turbine, I would call it stabilizing on a lower level. I said it before, We expect it to remain strong competition, but I also expect the price level to remain stable. We have in the, let's say, midsized ones seen even some slight improvements if I talk about the STT 800. And this is roughly where we are at the moment.
That's very helpful. And in the interest of time, I will pass it on.
Thanks, Ben. Thank you, Ben. Next question goes to Simon Tonneson at Jefferies. Simon, if you go ahead please.
Yes. Good morning, everyone. I hope everybody is well. And my first question is on free cash flow. Maria, correct me if I'm wrong, but if I take the free cash flow in H1 for the group at negative 175 And I add back the SG and A free cash flow that they disclosed.
So probably taking reconciliation into account. I get to GP cash flow probably including reconciliation of around €260,000,000 odd in H1. Consensus, I think, for E and R ex SGRE looks at sort of EUR 280,000,000 for the full year, which implies around sort of EUR 20,000,000 free cash flow in the second half. Can you comment a bit on what you expected in the second half for particularly the GP business versus H1? And is it fair to assume that Q4 will probably seasonally be one of your stronger quarters throughout the year.
And then I have a quick follow-up, if I may.
Okay. Okay. Maybe let me take the let's say, make a comment on the tax rate to start with. So the Q2 ETR, as you can see, you're right, it's high at approximately 60%. I think it reflects the increase of the year to date ETR from 22% in Q1 to now 36% in Q2.
This increase in the effective tax rate simply comes from the income situation SGRE, which you've pointed out, where we have a high negative effective tax rate. In Q2, SGRE had a negative income in contrast to a small profit. And if we look at the quarter to date figures, this negative income impacts SE Group's income to a greater degree than in the year to date figures. I know that's is pretty, let's say, long winded. But again, we still confirm our fiscal year 2021 anticipated effective tax rate of 25% to 30%.
With respect to the free cash flow and how that looks as it proceeds throughout the year, you're correct. You know that generally we do see, let's say, an uptake in Q4. But I should perhaps bring it back into and reflect this from a full year perspective. We had a very strong half year on free cash flow and we do expect that in the next 6 months There will be uses of cash. We have indicated that over and over that the last 6 months of the year will be, let's say, a heavier one on our balance sheet with respect to our contract assets and liabilities as we execute through our very large order backlog.
Correct. Did
I answer the question correctly? Yes.
Okay. Yes. Thank you, Mario. And then secondly, if I may, just quickly On GP Margins, first half, 5.4 percent sort of at the top end of the guidance. If you Were to achieve the midpoint of your guidance, second half would be rather sort of 3.5%, I.
E. Quite a significant deterioration H2 versus H1 and I know there's been some one offs obviously in the Q1, but how do you think about generally H2 versus H1 and also taking some of the one offs into account?
Thank you.
Thank you. Yes, I mean, as we said, we had a very strong Q1, an exceptionally strong Q1. We had, let's say, all tailwinds and we went through that in quite some detail in Q1. As I also mentioned, Q2, we had some one offs both ways, both positive and negative. And we do expect things to taper off as we go throughout the year.
We are continuing to execute on programs as mentioned, but also have We are a project based business where there is volatility quarter by quarter.
Thank you.
Thank you, Simon. The next question comes from Vivek Mehta at Citi.
Vivek? Hi. Thanks very much for taking my questions. I'll stick to one. I just wanted to follow-up on the comments on stimulus packages.
To what extent do you see any risks from faster decarbonization, particularly to your service fleet and generation? Thanks very much.
Hi, Vivek. Thanks for the question. No, I do not see this. I mean, we said it before, we are confident in our service development going forward. And we always have to see, obviously, why we're transitioning to a more, let's say, climate friendly world.
We will obviously need backbone assets who are continued to operate and we are obviously doing refurbishments and efficiency increases. So I Do believe that this is a consistent situation. We also see, as I said, still despite all discussion around stimulus programs, We should never forget that we also have a coal to gas transition still ahead of us. I do see this discussion in China. I do see it in some parts of Europe.
I mean, you know Poland sits on 80 And coal fired still, and all this has to come. And in this regard, the stimulus program rather support our thinking and strategy than raising a concern. So I feel confident on where we are at the moment.
Thanks very much.
Thank you, Christian. Our next question comes from Gaele Brey at Deutsche Bank. Gaele, please go ahead.
Thanks very much. Good morning, everybody. So the first question I have is on the revenue guidance for GP. If I take the midpoint of your guidance for the full year, it implies a revenue growth of more than 20% in H2 versus H1 and it's probably also equivalent to 14% revenue growth on a year on year basis. So after the relatively weak performance in the first half, I mean, what's driving your confidence that you're going to see such a strong pickup in revenues in the second half of the year.
Maybe if you could give us a little bit more comment and or color around which segments in particular should drive the pickup. The second question is around raw mats. SGRE management already indicated that they no longer expect to be able to fully offset The negative impact from the rise in raw material cost in the coming quarters. So my question is obviously for GP Now, How do you see the price cost spread going into the remainder of 2021 2022?
Hi, Gail, and thanks for the questions. Maybe let me start and Maria will more detail on the revenue piece. But absolutely, I mean, your analysis You're right. We obviously expect some recovery there, and Maria can go through the logics there a little bit. On the raw material, just let me do one comment For GP, this is something where we do not see such an impact in 2021.
We have long term sourcing contracts, which we feel comfortable with. So I wouldn't have the same concern on the GP segment side. I think it's all important to underline Because I've seen this relatively intensively discussed in the market. Maria, would you like to comment on the revenue elements?
Yes, absolutely. No, thank you, Gail. And I think, again, your observation is correct. We do expect a recovery in the second half with respect to revenue both on the new unit side and on the service side, but specifically looking at service, we indicated some lightness there in quarter over quarter. We're now entering the service outage season and we do expect not only from a generation standpoint, but also industrial application standpoint for this to pick up in the last 6 months of the year accordingly.
Okay. So it's primarily service related. So I guess it should be rather positive on the mix.
I said both new units and service. Yes, I should really reflect that. Of course, as you know, we also have our project business, as I mentioned earlier, executing in the last 6 months of the year also impacting our free cash flow.
Thank you. Let's move on to the next question, and that comes from Iris Chang at Credit Suisse.
Thank you for taking my questions. Yes. Thank you for taking my questions. Can you hear me?
Yes, we can. Thank you.
Is great. Yes. I've got one question on the transmission business. Now obviously, the order intake grew very well for the business. And I wonder how much of it is relevant is because of the synergies with SGRE.
And also more looking forward, thinking that SGI should continue to benefit from renewables growth and therefore with order intake growth. So how much you think that the transmission business could benefit from that?
Yes. Hi, Iris, and thanks for the question. It's not so much SGRE, it's wind in principle or renewables in segment. What transmission growth drives is particular also the HVDC connections and really how to distribute big chunks of power. And this is what has is continuously and has been driving up the order intake.
And in this regard, we are benefiting from all the installation, not only SGRE. Obviously, it's good to have the joint customer inroads and customer contact and having particular on the offshore side, the strong reputation also from SJE. But this is, let's say, a principle now to the industry change. This is what I would say. And it's not only the connection of things like offshore wind farms.
We are at the moment obviously also involved in the in country links like is done. I hope, obviously, that transmission can benefit from.
Great. And any indications Sorry, I was wondering if there's any indications on maybe how much of the transmission business is going to the customers together with SGRE?
I mean, this is not only transmission, right? This is all type of products, right? This is hydrogen. This is even obviously sometimes gen if you combine it. On the overlap of the customer from the top of mind, I couldn't even tell you.
But it's a fair amount of customers because at At the end, it's the energy industry. It's the RWEs, it's the BPs, it's the Total. It's all the same companies, which at the same time are really energy companies.
Sure. Thank you.
Thank you, Iris. And the next question comes from Sean McLaughlin at HSBC. So Sean, please go ahead.
Good morning. Thank you for taking my questions. Just firstly on Services, Just understanding a little bit how you expect the mix to develop through the year And given, I think, some of the headwinds we're seeing on the new unit growth, I mean, how are you thinking about the defensibility of that service going forward? Secondly, just thinking more broadly about portfolio Adjustment. I mean, are you happy with the pace of change?
And how are you thinking potentially about more exits or adjustments to help further improve profitability?
Yes. Thanks for the question. In terms of service, I mean, it's particularly if I look to industrial applications. I mean, this is where we obviously expect a service uptake. And I think we echo what also some competitors say.
We see a second half there improving. Generally, in terms of the service to new units share, not necessarily see a big change there, But obviously, industrial applications, which had a low service business in the first half, is expected to pick it up. And as Maria said before, for the second half of the year, we are now entering the turnaround season, which will have Obviously, also some uptake there. It's at least what we expect. As you know, we have around 60% in IA service business, around 50% in Jan, and this is something what we still would expect also going forward in the short term.
In terms of portfolio adjustments, something what we continuously look at, It could always be that there is smaller here and there, let's say, changes. But this is something which we would work through as we walk along to really make sure also that we spend the focus where it needs to be. But this is, as I said, work in progress. We will update you once we take a decision.
Thank you. And the next question comes from Jonathan Monsey at Exane. Jonathan, please.
Hi, thank you. Good morning. Yes. So first question, maybe just an update on your relationships in China, particularly the extent of technology transfer, Where you are with that? And also what the revenue opportunity is, say, on a 3 year view?
And then maybe Staying on the IP topic, there was obviously the issues with GE a few months ago. Just wanted to get an update on that. It's all clear now, the dispute is over. We can update there as well, please.
Yes. Thank you very much. And on China in terms of technology transfer, I mean, first of all, maybe to China And we had it also on the prospectus. We still have to complete the transaction on Shanghai Electric. The steam turbine business, this is still also there, this entanglement From Siemens, this is ongoing.
This is impacted by COVID. And let's say, we are still in the midst of it. In terms of further discussion within China, let's say, we are let's say, on the discussion on how to best capture for the market. And we have, obviously, a close partnership with companies like SPIC. What you have seen from the announcement, the UTTC activity, this is progressing as planned.
So this is really the working teams on it. And as I said before in the presentation, we also now drive to develop more integrated Solution. How you combine a gas turbine with, let's say, Energy Management with then the next step to inject hydrogen into the gas turbine and so forth. This is ongoing. We do expect a positive impact from the 14th 5 years plan.
We look Let's say, we are confident on this year's performance in China. So we expect a good year in China, but this is something what Cannot really comment on it because this is still, let's say, ongoing. The How you say in English, the injunctions? No, how you say? Injunctions, right?
Let's say, off now and we are let's say, have been agreed between the parties not to pursue. And now we're waiting for the normal classical trial. And I think this week, we will See further dates coming out, but this is work in progress.
Thank you.
Thank you. And the next question comes from Sebastian Growe at Commerzbank.
Good morning, everybody. Yes, quickly from my side on orders. The first question is on if you could provide more color around the book to bill rate within the GP segment. You gave a couple of comments on Gen and transmission in particular. But would it be fair to assume that all segments were clearly above 1 in the quarter?
And more generally speaking, on the pipeline, your comments would have suggested a €5,000,000,000 rate is what you would be confident with when it comes to the second half, if that understanding correct? And then lastly, that links it to that €5,000,000,000 run rate, You haven't touched really the midterm targets yet, the flat to 3% on the top line. Obviously, the world is gradually leaving corona behind Siemens Gamesa is growing 10% plus the €5,000,000,000 potentially order run rate AGP. When should we expect an
Yes, go ahead.
Please. Yes. Maybe with the, let's say, Further breakdown, I mean, obviously, we don't give it in detail, but I can confirm your assessment in terms of really all divisions above 1 in terms of book to bill, which is Something which is obviously very positive and seeing also the strong order backlog. And really also, let's say, Second half of the year corona impact, yes. But this is all speculation, right?
I mean and We don't know and I got a little bit cautious on predicting something with corona. We are, let's say, Giving a wide range. It's conservative on our side, clearly. But we are hoping for a rebound in the second half. But I don't know how many waves more we have to see until it's really behind us.
No, no. I think we let's say, I mean, as Marie indicated sorry, Sebastien, we had a difficult voice quality here. The 3% to 5%, no, this is why we also Left it there. And once again, I mean, step after step, our business is not quarter driven, it's long term driven. The weapons with the program, we want to deliver on what we say and this is a track we keep on.
Thank you. And the last question of the day comes from Andreas Willi at JPMorgan. Andreas, if you go ahead, please.
Yes. Good morning, everybody. Thanks for fitting me in. I have a question on following up on some of the earlier questions on the second half margin development in Gas and Power. You talked about the sequential increase in revenues, the improvement in the service business.
Your cost savings are ramping up. So if we ignore onetime items kind of in both the first half and the second half, It would normally make sense to assume the second half should have a reasonably meaningfully stronger margin than the first half. Is that correct? In a normal year with those backdrops?
Yes. Hello, Andreas. Good morning. And thank you for the question. One thing I do want to clarify, as I don't believe it was just as clear as I would have liked it to have been.
In terms of the revenue mix going into the last 6 months, we do, as Christian mentioned and as I mentioned, we do expect as we go into the outage season And with the COVID deferrals that we referred to also in this quarter, we expect an uptake in service for the last 6 months. That is correct. We also expect the mix to also be predominantly in the new unit business. So therefore, all things remaining equal, Andreas, like you said, as we then convert our legacy order backlog on the new unit side, you know we will have a mix impact in the last 6 months. And I really want to make sure that that's not misunderstood from my earlier comment.
Yes, that clarifies it. Thank you. And the second question on sourcing. Obviously, you mentioned the contracts. I forgot exactly which year it was, but somewhere around 2007, 2008, we had a situation where we also Got the comment, yes, we have contracts, but then customers or suppliers basically faced huge pressures on their side.
And Siemens back then could either bail out suppliers Order suppliers will go bankrupt if you enforce your contract. Are we anywhere near situations like that where, yes, You have a contract with supplier for materials and components, but if you enforce them at the existing prices, the supplier just basically doesn't make it.
Maybe I'll take it, Marius. For GP, I do not see that.
Does that mean that to risk
the year is that? I cannot judge 2007 situation, but I can always say, I don't see this at the moment.
Yes.
But what about SGRE then, if you said you don't see it for GP or
Yes. There I would hint really to the SGOE colleagues really making sure that you get it really hot off the press from them directly. And so I would hint you to Andreas and the colleagues. Yes.
Thank you very much. Securities.
Thank you.
Thank you, Andreas.
Thank you, everybody. Thanks for taking the time to participate Throughout the rest of the day and of course throughout the rest of the week and whenever. Anyway, have a good day. All the best. Bye.
That will conclude Chordays Conference Call. Thank you for your participating. Ladies and gentlemen, 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 hyphenenergy.com/investorrelations. Thank you.