Siemens again raises the annual forecast – quarterly profit triples to 3.6 billion euros

Dusseldorf After a strong quarter, Siemens has once again raised its forecast for the current fiscal year. “Siemens has significantly increased its clock frequency,” said CEO Roland Busch on Wednesday morning. The order backlog is higher than ever, the core divisions Digital Industries and Smart Infrastructure achieved record results in the past quarter.

In the first half of the current financial year, the digital business increased from 3.0 to 3.4 billion euros – although the group is currently switching to a “Software-as-a-Service” rental model, which is initially depressing sales.

Busch now expects sales growth of up to eleven percent for the entire group in the current fiscal year. The group is thus on the way back to its old size. Before the announcement of the spin-off of the low-margin energy business, the Dax group had sales of around 83 billion euros in the 2017/18 financial year.

About 30 billion euros went out with Siemens Energy. Some feared marginalization of the remaining Siemens AG, which initially had sales of a good 50 billion euros. The group could now generate around 80 billion euros again in the current financial year even without energy technology.

Siemens shares rise at the start of trading

The trend was right in the past quarter. Siemens sales increased slightly more than analysts had expected, by a comparable 15 percent to 19.4 billion euros. The operating result improved by 47 percent to a good 2.6 billion euros. The high growth was also due to the fact that the Russian sanctions had depressed the results of the train division in the same period of the previous year.

Profit after tax rose from 1.2 to almost 3.6 billion euros, mainly due to the price recovery at Siemens Energy. At the start of trading on Wednesday morning, Siemens shares rose by up to 2.8 percent to around 154 euros.

Busch wants to further sharpen the portfolio and align it even more towards digitization. The core of his strategy is the “Xcelerator” platform. Siemens intends to use these to sell hardware and software modules in the future and at the same time connect external partners. This should create an ecosystem and a digital marketplace with open interfaces. According to Busch, just under a year after the start, 70 external partners offered 91 applications and 333 products via the Xcelerator. The number should increase significantly.

>> Read also: Siemens wants to double the share of software and digital businesses in the long term

According to information from the Handelsblatt, Busch recently presented his strategy in detail to the supervisory board in a so-called “deep dive”. There are no revolutionary steps, said one inspector, some are waiting for the one big step forward – such as a major software acquisition. But perhaps in the current uncertain times, continuous development is just the right thing. The numbers would prove Busch right.

Harald Smolak sees it that way too. “Busch does not allow himself to be driven or put under pressure by investors and their demands,” says the partner of the management consultancy Atreus, who used to work in Siemens management himself. “ The combination of traditional product and new platform solution business offers attractive opportunities. The CEO has a feel for trends. However, Siemens is in competition with tech giants such as Alibaba and Google. “The speed against these tech giants must be further expanded.”

Ex-Siemens manager and consultant Smolak also warns that Siemens must be at the forefront, especially when it comes to artificial intelligence. “Siemens has to keep up with the latest leaps in innovation, such as ChatGPT.” This market should not be exclusively dominated by US and Chinese competitors. “It may be necessary to form new partnerships here.” Siemens recently announced a cooperation with Microsoft.

Medical technology subsidiary suffers a setback in robotics

Originally, Siemens had forecast sales growth of six to nine percent for the fiscal year, but then raised the range by one percentage point in February. After the second forecast increase, Busch now expects sales growth of nine to eleven percent for the year as a whole.

The forecast for earnings per share before special items is now between EUR 9.60 and EUR 9.90. Initially it was 8.70 to 9.20 euros, after the first increase it was 8.90 to 9.40 euros. Including the special effect, it should be 11.61 to 11.91 euros.

Siemens had made a high write-down on the 30 percent stake after Siemens Energy’s share price crashed. After an increase in the price, Siemens was able to write again. This now brought a tax-free profit of 2.6 billion euros. The group wants to decide this year on the next steps to exit the former energy technology subsidiary, said CFO Ralf Thomas on Wednesday.

>> Read also: Siemens Energy expects increasing losses for the year as a whole – wind power is dragging the group down

Business has been very solid across the board in recent months. However, the medical technology, spoiled by success, had to struggle with problems. The exit from the business with robotic systems for the treatment of heart problems led to high write-downs, and the drastically reduced demand for corona tests also made itself felt.

The bottom line is that Siemens Healthineers’ profits fell by 81 percent to 108 million euros.

Competitor Rockwell had also increased significantly

The flagship division Digital Industries was able to increase sales by 23 percent to 5.5 billion euros. Incoming orders fell by ten percent because the industry cooled down somewhat. The operating result increased by 57 percent to 1.3 billion euros, which corresponded to a margin of 23.5 percent.

For comparison: The big US competitor Rockwell Automation increased sales in the past quarter by a comparable 27 percent to 2.3 billion dollars. Operating profit even rose by 70 percent to $484 million, which corresponded to a margin of 21.3 percent.

Siemens’ European competitor ABB also had a good start to the new year. Revenues increased 22 percent to $7.9 billion in the first quarter. The Swiss improved the operating result (EBITA) by a third to 1.3 billion euros. This meant a return on sales of 16.3 percent. “Customer activities in the first quarter were lively,” said CEO Björn Rosengren – and raised the forecast for the year as a whole.

At Siemens, Chief Financial Officer Ralf Thomas expects growth momentum to continue in the coming months. However, the geopolitical and economic environment remains uncertain. “We remain vigilant to respond quickly to changes if necessary.”

More: Siemens starts selling airport logistics.

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