Munich Despite the global upheaval, Siemens achieved a record operating profit of more than ten billion euros for the first time in the past fiscal year. CEO Roland Busch said on Thursday in Munich: “The high demand for our hardware and software offerings continues, including higher than expected sales growth in the digital business.” He is also confident for the current financial year.
Since the spin-off of the low-margin energy technology, Siemens has increasingly seen itself as an IT and digital group. In the fiscal year that ended in September, sales in the new structure increased by a comparable eight percent to almost 72 billion euros.
On this basis, growth in the fourth quarter was twelve percent. The operating result in the industrial business improved by 17 percent to 10.3 billion euros for the year as a whole. That corresponded to a margin of a good 15 percent.
However, Siemens cannot get rid of the past entirely. Due to a write-down on the 35 percent stake in the loss-making Siemens Energy, net profit fell by a good third to 4.4 billion euros. Nevertheless, the dividend should increase from EUR 4.00 to EUR 4.25.
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With the results, Siemens was partly above the expectations of analysts, who had expected an average growth in sales of around seven percent and an operating profit of almost ten billion euros.
Overall, Busch is also confident for the new financial year. Siemens expects sales growth of a comparable six to nine percent. Earnings per share before special effects should be between EUR 8.70 and EUR 9.20. In the past financial year, this value was EUR 5.47 due to depreciation, compared to EUR 8.32 in the previous year.
Under Busch, the group is becoming more of a digital group. In the core business with the digital industries – which includes industrial automation and industrial software – sales in the financial year rose by a comparable 13 percent to 19.5 billion euros with a margin of around 20 percent.
Busch had announced that it wanted to increase sales of software and digital services by at least ten percent in the coming years. In 2021/22, this was achieved with growth of 15 percent to 6.5 billion euros.
Changeover to the new software business model is going “according to plan”
Siemens is currently switching to a “Software-as-a-Service” rental model. This is common in the software industry, many large providers have already switched. Sales should be stabilized and margins increased.
However, the change was difficult even for large software companies such as SAP. In the short term, sales will fall because the licenses are no longer sold in one fell swoop, and margins often suffer during the transition period.
Siemens boss Busch said: “The conversion of the business model is going according to plan, and our customers are taking advantage of it.” So far, 3100 customers have opted for the new business model. “Among them, almost 60 percent were new customers.” Small and medium-sized companies in particular are interested in software based on SaaS.
In the longer term, it will be decisive whether Siemens will establish itself on the market with its “Xcelerator” platform. Hardware and software modules from Siemens, but also products from other companies, are to be sold via this.
In the meantime, Siemens has found a number of initial partners. However, the hoped-for revaluation on the capital markets as an IT group has so far failed to materialize. In the past twelve months, the Siemens share has developed slightly worse than the Dax. In the past few weeks, the course had risen by more than 20 percent in view of the good business development.
The competition had also developed well recently. ABB increased sales in the first nine months of the calendar year by a comparable ten percent to $21.6 billion, with growth amounting to 18 percent in the third quarter. Schneider Electric increased its revenues in the first nine months on an organic basis by around eleven percent to $24.9 billion. From July to September, sales increased by twelve percent.
One of the most important competitors for the German group is Rockwell Automation. According to information from the Handelsblatt, Siemens has long been pursuing the plan to attack Rockwell’s strong position in the USA in sectors such as the automotive industry and aviation.
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Rockwell was able to increase sales in the past financial year by eleven percent to 7.8 billion dollars. In the fourth quarter, growth was more than 20 percent. The operating margin for the year as a whole was around 20 percent.
Roland Busch plans expansion in China
But Siemens is not only looking at the USA. In contrast to some other corporations, the Munich technology group is also expanding its China activities. With the “Marco Polo” project, Busch wants to double sales in the core division of digital industries in China by 2025.
Internally, this is not without controversy – after all, dependence on the increasingly authoritarian country is increasing. However, there is hardly any other choice in factory automation, says an insider, after all China is the most important future market here.
CEO Busch said that trips to Asia had encouraged him in the past few weeks: “We have to work together as equals in order to solve the global challenges of our time together.” In the past fiscal year, the technology group generated 13 percent of its sales in China.
More: How Siemens wants to massively expand its China business with the Marco Polo secret project