GCTAF - Siemens Gamesa Renewable Energy S.A. (GCTAF) Q1 2023 Earnings Call Transcript
Siemens Gamesa Renewable Energy, S.A. (GCTAF)
Q1 2023 Earnings Conference Call
February 02, 2023 02:30 AM ET
Company Participants
Cristina Perea Saenz de Buruaga - Head of IR
Jochen Eickholt - CEO
Beatriz Puente - CFO
Conference Call Participants
Akash Gupta - JP Morgan
Vivek Midha - Citi
Lucas Ferhani - Jefferies
William Mackie - Kepler Cheuvreux
Sean McLoughlin - HSBC
Rajesh Singla - Societe Generale
Matthew Donen - Morningstar
Presentation
Operator
Ladies and gentlemen, the First Quarter 2023 Siemens Gamesa Results Presentation Conference Call has started. Now I would give the floor to Mr. Jochen Eickholt.
Jochen Eickholt
Good morning to everybody, and thank you all for joining this call at early times, in some parts even of Europe, it's still very early. I have the pleasure of being joined here today this morning by our CFO, Beatriz Puente. And together, we will take you through the company's results for the first quarter of this fiscal year. And as always, after that, of course, we shall be happy to also take questions.
So if I may move us to the key points, Chart #4. Many of those key data already were communicated over the last couple of days actually. The order intake for Q1 was in the range of €1.6 billion, that led to a totaling of a backlog of €33.7 billion. For the onshore side, perhaps relevant information is that we continue to see the pricing levels in our -- moving into our direction, we had the so called ASP in the range of €0.95 million per megawatt. And if we compare it for the entire fiscal year, we then have €0.88 million per megawatts.
The commercial activity does reflect the impact of the overall environment our clients are in. And we continue to have negotiations in onshore which are longer than anticipated. And we also have in offshore, a kind of standard volatility, and we'll come to that a little later. Of course, it needs to be mentioned that we continue to drive actually for the increasing level of protection of our contracts versus the inflation effects.
On the performance side, Q1 revenues of €2 billion and the EBIT pre PPA and I&R of minus €760 million that was communicated on, of course, that was then showing the impacts of our periodic monitoring of the situation of the installed fleet, and we had to observe some increasing failure rates there. So, part of that also, I mean, from an accounting perspective needs to be considered as lower revenue. The impact is mainly on the service side.
The overall picture of Q1 is showing that we are, as planned by the way, impacted by the -- by higher cost levels as planned. But of course, some discussions on inflation compensation also continued to take place. The execution of the projects is taking us to some difficult questions around the onerous project and we'll come to that a little later on.
The Mistral program is moving forward in the end of the day as planned. So, the 5.X is moving or the development of the 5.X, the development of the maturity of the 5.X when it comes to industrialization and manufacturing that is going on as planned. We spoke about the Mistral program with new organizational concepts behind it that was introduced January the 1st, and is in full swing and up and running. And we also make progress as planned on the restructuring part.
One element here is that also it was publicly communicated that we reached the agreement in Spain. Last week, we had the approval of the EGM for the delisting. So that process also is in the end of the day, moving on as planned. And I have to repeat that, of course we do foresee strong long-term prospects for the wind industry. But of course short-term, the situation for us continues to be difficult. And there is in many cases further activity needed to optimize that situation.
Perhaps, on the next page is perhaps relevant for these discussions continues to be that we indeed have a high recognition for our ESG performance. We've had top rankings by quite a number of different rating agencies. We can say that in those top rankings, we also sometimes are really leading or really among the leading groups. So Sustainalytics or Standard & Poor, the sustainability assessment that led to substantial performance indication for us. And that continues to be the case, and also our activities will focus around those parameters which are behind that.
So, if I then move on to the Page 7, we mentioned that in the end of the day, the backlog on the right side remains more or less stable, some slight changes, but I think that is nothing unusual as such. You also realize if you compare the order intake of the Q1 of '23 versus the Q1 of '22, a slight decrease.
However, again, may I remind us that in the offshore side, for instance, one single project typically is in the range of above a gigawatts and therefore, also relevant revenue behind that. So if one project shifted, then obviously, the effects are a little bit like shown here. The volatility, which we observe is, however, standard, nothing extraordinary.
If I may take our view onto the onshore business, we here see that indeed, also on the order intake side, we have a slight decline. Again, this is nothing too concerning for us. But it's also reflecting our approach towards being slightly more picky to be slightly more selective and to continue to drive for protection of our contracts. 74% of the Q1 order intake actually was based on the Siemens 5.X platform.
If you just look at the average selling price, the average selling price is an important parameter, and it's going forward and it's developing nicely. However, we also have to see that the ASP as such is not the only parameter we need to look at. If we want to assess the advantage or the -- if we want to assess the attractiveness of a contract.
So depending on region and scope, we can see fluctuations in the sales price of more than 30%. While in that sense, leading to the same profitability. So the ASP is an important parameter. It's not the only one, which is needed to assess the attractiveness of an order intake or offer contract.
If we move on to offshore, again, nothing too extraordinary to be mentioned. We last year had substantial order intake. We foresee that also for the current fiscal year. Q1 here did not lead to contracts. However, it should be remembered that we continue to have a substantial order pipeline of 7.5 gigawatts. And that's also currently in, how shall I say, in the status where we try to develop the maturity of that towards the contracts.
52%, that is Page 10, 52% of the Group backlog comes from service and that continues to be the case. And we now have 83 gigawatts under maintenance. Out of that 70 gigawatts are in onshore and 13 gigawatts are in offshore, the retention rate is 64%. So that also in -- is kind of in line with our expectations. And also on the order intake side, we sometimes have more volatility than typically expected at all times. However, again, in my view, nothing really concerning at all.
So then we come to the numbers, which is Page 12. And with that, I turn it to Beatriz.
Beatriz Puente
Thank you, Jochen. Good morning, everyone, and thank you for joining us today. If we go to Page 12, we have a summary of our financial performance for the quarter. As you can see no changes on the numbers that we provide at preliminary results. Group revenues increased roughly 10% year-on-year to €2 billion. In comparable basis and excluding the currency impact, revenues will have increased circa 9%.
Offshore WTG with revenues at nearly double year-on-year was the main source of growth at Group level as we can see on the next page. Revenue growth as we have explained also has also been impacted by the outcome of our periodic analysis and technical assessment of our component failure rates in our installed fleet in the amount of €687 million, out of which you do have the breakdown. 104 have impacted the service business and the rest remaining mainly onshore. This impact is the result of course of following our POC accounting.
The Group ended this quarter with negative EBIT of €760 million, reflecting the severe impact of this technical evaluation which impacted at group level, up €472 million. And beyond this impact, the Group performance of EBIT level continues to reflect what we already anticipated, which is higher cost based on the execution of our WTG projects. And we will have more information on Page 14.
Below EBIT, the parameter integration and restructuring costs amounted to €63 million in this quarter. And the cost increase reflect what we explain is the progress in the restructuring program that we have. As you know, we have already reached a pre agreement in Spain. Financial expenses increases to roughly €26 million -- has increased, driven mainly by higher average interest rates and of course, the gross debt levels in the core.
In the period, our tax income reflects a positive €21 million, is driven by our operational performance and also the capitalization on our specific deferred tax assets. As we reported, our net income amounted to negative €884 million in the quarter. Moving to a specific as parameters on the balance sheet on key cash flow metrics. Siemens Gamesa has invested in the period €166 million in CapEx. The CapEx is roughly a split 30% to 70% between product development and manufacturing capacity on Tucson equipment.
And important to highlight that we continue to invest roughly two-thirds in offshore. This is in line with our strategy, of course to invest for the future growth of this sector and us living with our offshore capabilities. We've got a net debt of the Group, it stands at €1.9 billion and a working capital negative €2.7 billion. If we move for more to give more color on the revenue performance of the Group in Page 13. As I explained before, offshore revenue growth was the main driver of the revenue growth of the Group with a increase of 80%, with total amount of €829 million.
You probably recall when we explained also the results of our last quarter, last year that our activity in offshore was heavily impacted by the supply chain disruptions and also the lack of our key components in our manufacturing facilities. This has significantly improved, saying that is still the supply chain has not been fully normalized.
Revenue growth in off shore, as I explained, also reflect significant growth both in terms of revenues and also manufacturing activity that nearly tripled this quarter. So now 250 megawatts to roughly 698. The decline in onshore revenues, roughly 20%. Revenues decline comes from the combination of lower manufacturing activity and installation capacity. As we explained, also geographical mix also impacted the revenues with a higher contribution from APAC, and therefore also the lower scope in the project. And that has been also lower average selling price.
And also the negative adjustment I already covered, that has impacted this segment. Revenues remain flat year-on-year which amounted to a period of €428 million. So as I said, is heavily impacted by the reduction of our revenues because the periodic technical evaluation that we did roughly for reduction of €104 million. Excluding that, of course, you can see that there's still a strong underlying performance on service growing over 20%, driven a combination of higher post-warranty growth in our warranty fleet, and also under maintenance and also higher spare parts and sales, which is important for us, for the growth prospects of service.
If we move to Page 14, not, again, providing the numbers of the impact of our assessment on the install fleet has been roughly €472 million, out of which €187 comes from the revenue adjustment that I mentioned before. And the rest is impacting also of course, EBIT and is here impacting the service division with the total amount of €346 million.
Beyond the impact that I explained, as we have explained in the Activity Report, the main reasons of the EBIT performance are aligned with our expectation on higher costs inflation that we have seen for the last 2 years. Also, the execution of the onerous project in on shore, and also the impact of course of ramping up our facilities and our new capacity in offshore. All these elements have has been partially compensated by the positive impact of higher pricing. And that is, of course, our priority as Jochen has explained. And also higher revenue and also productivity gains.
Despite the performance that is impacting us on EBIT, it's worth mentioning, as Jochen has said, that Mistral is well on track, helping us on the short-term to have the path to profitability of the company and also to stabilize the 5.X platforms and also dealing with of course, challenging market conditions.
In terms of also addressing, the supply chain challenges, our priority continues to be to improve the terms of the contract. As Jochen also cover and also of course, to have higher protection against inflation, and that applies to both new orders for onshore and offshore. Later on, Jochen will cover the status of Mistral program.
If we move to Page 15 to cover also the Group leverage. Cash generation and our financial discipline continues to be, of course, our priority. As we anticipated, also cash flow generation in '23 will be impacted by the operational performance of the Group and also the priority to continue investing for the growth of the company.
The cash impact of the outcome of our installed fleet evaluation for '23 will be limited, where we will provide our best estimate, which is mid to digit figure in this year. And the cash outflow per year in the coming years will be very much dependent on, of course, the action plan and also the alignment with our clients from that plan, because we want to make sure of course that will guarantee the best performance for our clients.
Net debt position of the core is still around €1.9 billion. And the increase is mainly driven by the operational performance with negative gross operational cash flow of roughly close to €500 million, €497. And investment on CapEx as I mentioned before. We continue to maintain a very strict control of our working capital, as it reflected also on the balance sheet. And despite the net debt increase, of course, for us, it's important to maintain the liquidity of the company.
We have €4.4 billion of trade lines. We have thrown roughly €2.3 billion. We maintain on the balance sheet cash at the end of the period of €1.2 billion and under for total liquidity available for the group €3.3 billion. And now after coming in the key of isometrics, I’m of course happy to answer later on any questions you might have. Please let me hand over to, Jochen, to cover the outlook of the industry very positive, and also our mistral status. Thank you.
Jochen Eickholt
Thanks, Beatriz. So if I may take us to Page 18. Our view onto the market is and continues to be very positive. We see all the signs of political will and also in the markets. The demand and what is typically communicated on is a massive increase of wind installations. What we continue to observe as well is that there are some difficulties in translating that into, how shall I say, real positions in our order book. So short-term, there continue to be difficulties and we'll come to that a little later.
But mid to long-term in my view, the market perspectives remain to be outstanding. In the end of the day, those targets which are communicated, which continue to be communicated on in relation to both energy sovereignty and the climate change, those targets will lead to a substantially positive development in the market.
If I may take us to Page 19 then. There's of course a couple of things we need to be looking at. Please remember that not only we have difficulties on our profit line, but also our competition has similar effects. To date, our industry the development has been characterized by slow permitting, we continue to observe grid constraints, we continue to have regulatory uncertainties in many cases and also the auction mechanisms still do not focus enough on the overall political target, which is behind that.
So that means that in total the OEMs have seen sizable losses. We have had reduction in employment in many cases. And we also observe that investment decisions are slowed down or the speed of that is slowed down or investment decisions are postponed. So, so far we continue to observe that the political will, which I expressed all over are not really materializing.
So, if we would want to make to move forwards in line with those targets, in our view, it needs to be understood that wind is a pillar in the energy system of the future, an important one. And the size of that pillar continues to be too small in relation to our overall ambition level. We need to consider our industries, when it comes to other aspects of the political discussion these days. We need to consider our industry as of strategic importance.
In other words, we need to make sure specifically in Europe, that the knowhow on innovation and the resources for scaling up the -- the wind pillar, that -- those structures are in place and so far, it continues to be rather difficult. We have to make sure that the targets really turn in real opportunities. So permitting needs to be accelerated.
There is -- for instance, European Union member states, a rather fragmented view on these situations. And also when it comes to auctions, which are one way to define which developer is looking after which wind farm. This needs to be made clear that secondary effects like those ones related to manufacturing and employment also can be considered. We need to make sure that the supply chains continue to be stabilized. We need to make sure that inflation compensation, specifically in terms of higher inflation, is an integral part of the agreement of all levels of the supply chain.
Specifically, also when it comes to off take agreements for project developers, because what we do observe is that also on our customer side, there is an increasing level of concern around the viability of the agreements which are offered in auctions. We want to make sure that domestic innovation and technology competence are really supported.
We want that to be part of the auction criteria when it comes to auctions. And in the end of the day, it also needs to be stated once more that we are in global competition. And we need to make sure that actually we operate on level playing fields, because in some parts of the world, there are mechanisms, support mechanisms for some of our competitors in place, which make it very difficult to compete at equal levels if you wish -- level playing fields.
If I may turn to Page 20 and summarize it rather quickly, you please remember our Mistral program, in all the dimensions we are making progress and with the end of the day as planned, so the 5.X platform we are making progress also when it comes to installation volumes and delivery times. The new contracts I told that or I said that we are going to be slightly more picky even slightly more selective. So there is a better protection against volatility and inflation.
The new operating model is running actually very smoothly since the beginning of January. And the simpler leaner organization and the optimization of our structures, of our cost structures also moves ahead as planned.
So with that, I would like to say thank you once more for your attention and we're happy to answer questions. Please go forward.
Question-and-Answer Session
Operator
[Operator Instructions] Thank you. Our first question comes from the line of Akash Gupta from JP Morgan. Please go ahead.
Akash Gupta
Good morning, Jochen and Beatriz. Thanks for your time. My question is for Jochen. You have been demanding state intervention and policy support since quite some time and yesterday there were some proposals by the European Commission to relax stated rules and to accelerate renewable deployment. What is your initial take on the proposals? And do you see any need to adapt to your Mistral plan, particularly on the restructuring side, given you may be able to get some state support in near future? Thank you.
Jochen Eickholt
Sure. In my view, the discussion around the most recent days, in fact, are to be seen in connection with the overall response from Europe towards the IRA. We feel that this has gone in the right direction, but perhaps not sufficient yet. This is one miss probably my view continues to move on in the original -- in its original design. Thank you.
Operator
Our next question comes from the line of Vivek Midha from Citi. Please go ahead.
Vivek Midha
Thanks very much, everyone. Good morning. I had a question for Beatriz, please. On the working capital, I noticed that there's been a step up again, in the contract liabilities, even though the order intake in this quarter doesn't appear to have been too high. Is this a reflection of the order intake in Q4 delayed slightly or something else? Thank you very much.
Beatriz Puente
Thank you, Vivek. Nothing extraordinary on this Q. I mean, as we know, we continue working on, of course, cost control, and also, of course, on some working capital, measures that we put in place last year. Also, of course, the adjustment that we made on the books, adjusting for the hit that we have on the €472 million, a portion of that is also impacting us, because a portion is short-term. As I said a small amount of the €472 million for the reasons I mentioned. And then you also have the long-term, so it's impacting us well. Prepayments for us, it's standard on the bigger contracts on offshore on, it will be a significant contributor on the cash of this year.
Operator
Thank you. Our next question comes from the line of Lucas Ferhani from Jefferies. Please go ahead.
Lucas Ferranti
Good morning. Thanks for taking my question. And this is regarding the change in contract terms. And we've discussed this before, but I wanted to know if you could provide maybe a bit more details around what shareholders are you able to really put new term indexation on? And also, how much longer do you think those negotiation will have an impact on order, because you do know that this has weighed on the ongoing tech, thank you.
Jochen Eickholt
Well, thank you very much. In the end, thee negotiations are individual. And in the years also, then the contracts have an individual scheme. However, we have to perhaps remember that when it comes to raw material and the discussion we had until the middle of last year, we are exposed to raw material fluctuation by about 1/3 of the cost level. Because as you will perhaps also remember, I mean, there's many things are many times where we buy raw material at some later value at stage, if you wish, so we don't buy raw materials at all times. Now the inflation takes us takes us beyond that level of raw material protection. So we need to be protected in other cases for a variety of reasons there as well. And we of course targets to have as much as possible, of the overall cost base protected against then inflation. So that leads to additional inflation protection, when it comes to securing the volumes against current -- currently discussed indices. And the range is going to be substantially higher. We're going up to 80% of that cost level. Thank you.
Operator
Thank you. The next question comes from the line of William Mackie from Kepler. Please go ahead.
William Mackie
Hello. Good morning to you all. Thanks for the time. I will ask my question relating to cash flow for next year or for the '23, '24 period. Could you please break down how you see the main elements of cash flow developing into 2023 to incorporate more specific comment around your central assumptions for capital investment, working capital movement and provision utilization? Thank you.
Beatriz Puente
Thank you, William. It's a very good question. But we don't provide as you recall guidance for '23. And, of course, that's pretty much -- your question is pretty much linked to performance of the company, and of course, cash. What we can tell you is -- what we have said in the past and we've proved to do so that we maintain a basic control of cash flow, of course, maintaining the liquidity and now fully alignment with Siemens Energy for that purpose, and that we continue invest in on the future of the company, of course, aligned with the profitability of the business. So we will continue to invest it as far as we can afford that. And we have proved in the past that that we have been able to manage that.
Operator
Thank you. Our next question comes from the line of Sean McLoughlin from HSBC. Please go ahead.
Sean McLoughlin
Good morning. Let me ask one question then on the U.S. I mean, we're hearing that maybe we have to wait until the end of Q2 before we have all the details from the tax authorities around the U.S IRA. I mean, where are negotiations on the U.S? And at what point will you be pulling the trigger on expanding capacity in the U.S? Thank you.
Jochen Eickholt
Well, the timing you provide on the IRA, in my view, is perhaps even rather optimistic, so it made last longer, but that remains to be seen and that is pure speculation. What we do observe right now is that the IRA leads to a much higher level of, if you wish, fantasies on several customers. And therefore the discussions become much more future oriented towards them also projects which are both new and also the retiring ones. And in this context we already have taken the decision that the hibernation of our two manufacturing plants in the U.S that this decision is reversed. We are about to reopen those factories earlier than anticipated because we see a stronger demand in the U.S. So right now there is nothing around pulling the plug or something, we see the opposite trend. Thank you.
Operator
Thank you. Our next question comes from the line of Rajesh Singla from Societe Generale. Please go ahead.
Rajesh Singla
Hi. Good morning, guys. Thanks for taking my question. A couple of questions, basically. So one is on your performance of your WTG segment. So if I look at the profit margins in that particular segment, even excluding the exceptional items, so it was one of the worst quarter you had in that particular segment, despite a sharp increase in your offshore business. So can you please comment a bit more on that? Because last year you made significant amount of provisioning for onerous contracts. So how does that matches with this performance? If -- and if you look at the provisions, so there is no major decline in the provisioning as well. So that is the first question. And second, I will ask you after this one.
Beatriz Puente
Question regarding the performance of the WTG, of course, as you said, even excluding the impact on the technical assessment that we did. It's also impacted, but what we said higher cost base that was expected. We, of course, did the assessment for our plans on Q1, and we will continue on that. So that is playing that. And that's the reason we continue to protect our contracts going forward. And also the execution of the onerous contracts in our show as well. And if you see the underlying performance of Q1, it is quite similar to the underlying performance on our Q4 last year. So not simply unexpected for us. It is more continue execution of our trades with, of course, a higher cost base that we have.
In terms of operational performance, as we have explained, the installation of the 5.X. And of course, the output production of also of our facilities in onshore is well aligned with our expectations, even slightly better as well.
Operator
Thank you. Our next question comes from the line of Matthew Donen from Morningstar. Please go ahead.
Matthew Donen
Good morning. Thank you for taking my question. I just want to [technical difficulty] whether you're seeing any improvements in the permitting process within Europe during the last few quarters. And if so, could you please highlight which countries you are seeing the situation improved? Thank you.
Jochen Eickholt
While we do see a more explicit political will in improving that. And the concept of overriding public interest and some related questions, we believe will certainly take us forward. And we had seen those effects in Middle Europe. So we saw that in Germany, we see them in the northern countries. We see similar trends coming up in South -- Southern Europe as well. But there we are lagging behind a little bit. I would reckon that takes another quarter or two. And then we have to see that in some cases, we operate permitting in federal structures. So even if central governments then kind of pave the way towards improvements here, we still have to see that on a regional or county basis, even permitting also needs to be speeded up. And that is sometimes the difficulty which we are confronted with. Thank you.
Operator
The next question comes from the line of William Mackie from Kepler. Please go ahead.
William Mackie
Yes. Thank you very much for the follow-up. I just like to ask if you will share your expectations around volume, installation volumes for onshore or offshore in '23? But if you're not happy to talk about that as a forward-looking statement, can you please put more color on the reasons why or the areas where you found increased costs to complete your service contracts? And why we should now be confident that you have put this issue behind us? Thank you.
Jochen Eickholt
Well, thank you very much. Yes, so forgive me, forward-looking statements and guidance is what we cannot provide today. On the occurrence of the service related issues, this indeed is a broader scope of things on installed fleet, taking us back sometimes to even prior to 2010. And there was a reassessment on those things we did. Now it's not so easy for me to speculate on things I don't know of. What I can tell you is that it's nothing where we can have highlights or lowlights, if you wish, around specific components or platforms. This is not the case, it's a broader variety of things. We will tackle those in line with our obligations. And on those things we detected, I'm confident that this is it. But again, it's very difficult for me to speculate on things I don't know.
Operator
Thank you. Our next question comes from the line of Rajesh Singla from Societe Generale. Please go ahead.
Rajesh Singla
Hi. Thanks for the follow-up question. So this is regarding the better protection which you guys are building in your pricing and contract. So can you please share some more insight like are you guys now better prepared in dealing with the similar kind of circumstances which we faced in the last couple of years for the future?
Jochen Eickholt
In my view, absolutely, yes. We've first of all increased risk contingencies in our projects all over the portfolio, yes. But then again, we put much more focus on T's and C's on resulting liabilities. And we also put much more focus on, as I said, inflation compensation effects. And they may come -- these inflation compensation effects may come at various levels. So, it can be around the material discussion, it can be around the pricing discussion with the customer. It can be a mix and we tried to apply all levers which we have at our disposal.
In the end of the day the previous discussion -- in my view of the previous discussions we had around, if you wish a fixed price project, can only be answered positively if certain provisions are then taken. And that may, however, have some impacts on the pricing which is then needed. So in my view the contract we want to go for going forward has to have these variable elements in it. And they have to be dimensioned adequately in order to cover for those effects. And we are increasingly put that in place and increasingly successfully.
So in my view going forward, this is why I'm referring to also to look at the entire value chain and perhaps also sometimes have a look at our customers. Also their -- in their off take agreements my recommendation is that provisions for inflation compensation need to be taken right from the very beginning, otherwise it will be difficult. And we see that trend, we see that thinking. We're making progress here. But of course, it's not implemented everywhere and in all places, but this is what we're working on. Thank you.
Operator
Thank you. Our next question comes from the line of Lucas Ferhani from Jefferies. Please ask your question.
Lucas Ferhani
Thank you for the follow-up. Just wanted to ask about supply chain, you do highlighted for the offshore path where you have a lot of components. Do you see a real improvement you think is going to impact the entire year on a couple of quarter? What kind of visibility do you have on supply chain here? Thank you.
Jochen Eickholt
Well, we've put rather systematic mechanisms in place in order to monitor the, how should I say, the rise of a risk of under supply at early stages and we've put task forces in place to make sure that this kind of is mitigated. We use all levers here as well. So sometimes we also continue to have, how should I say, joint procurement efforts, for instance, with Siemens Energy and sometimes even with Siemens. So these things are all being used. And, again, the number of critical components went down dramatically. It's not zero and going forward, I reckon that to continue to be stabilizing because in the end of the day the supply needs to be there, otherwise, the whole supply chain will kind of fail. I do not see that. I see that component wise we're making progress.
Operator
Thank you. Our last question comes from the line of Sean McLoughlin from HSBC. Please ask your question.
Sean McLoughlin
Thank you. Just a follow-up on that -- just to understand you say in the release new order signed have much greater protection against inflation. Can you give us an indication of how many of the Q1 orders have that? Does that then now apply to every single new order, 100%?
Jochen Eickholt
Well, at former events I spoke about the -- how should I say much more stringent, much more strict approval process we have in place. I would be -- it's difficult for me to say how many percent that is in terms of order intake. But in total, as I said, we continue to design our approval process in a much more selective manner. And therefore the trend is increasing. Often I find it difficult not to have -- to respond on clear numbers of volumes and stuff. Yes, thank you.
Operator
Thank you. Ladies and gentlemen, there are no further questions. I will now give back the floor to our speakers. Thank you.
Jochen Eickholt
Well, thank you very much then. Thank you very much to all of you for again, being here at early times of the day. And as always, I find the quality of the exchange remarkably sophisticated. So thank you very much for this intensive and good dialogue. We stay in touch in many cases. Thank you very much to all of you for attendance. Bye-bye.
Beatriz Puente
Thank you.
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Siemens Gamesa Renewable Energy, S.A. (GCTAF) Q1 2023 Earnings Call Transcript