Siemens exceeds profit forecast – net profit increases by 59 percent

The technology group was able to cope better with global delivery problems and increased material costs than some of its competitors. In the past fiscal year, Busch and his predecessor Joe Kaeser raised the forecast several times. Most recently, Siemens expected sales to grow by a comparable eleven to twelve percent and net profit of between 5.7 and 6.2 billion euros.

Busch has been at the helm of Germany’s largest technology group since February. He wants to increase innovative strength and speed up the group. At an internal management conference he recently demanded: “We have to become even more agile and faster.”

With the results now presented, Siemens at least partially exceeded the expectations of analysts. These had recently expected an average turnover of the industrial businesses of 58.4 billion euros and an adjusted operating margin of 15.4 percent in the group.

As expected, Siemens is preparing for a slowdown in growth in the new fiscal year 2021/22. But it should continue to go up. “We will continue with this momentum in fiscal year 2022,” said Busch. Siemens could benefit “from the major growth drivers of digitization and sustainability”.

According to the forecast, sales should increase by a mid-single-digit percentage in the current financial year. Earnings after taxes per share, before effects from the purchase price allocation, are expected to rise from EUR 8.32 to EUR 8.70 to EUR 9.10.

Growth across all areas

It is not surprising that Siemens is now preparing for somewhat more moderate growth rates. On the one hand, some customers may have topped up their stocks to be on the safe side. In addition, the risks are growing. The forecast is based on the assumption that “the challenges for our businesses from Covid-19 and bottlenecks in the supply chains will subside in the course of the 2022 financial year,” it said.

In the fourth quarter of 2020/21, revenues grew by a comparable ten percent to 17.4 billion euros. The operating result fell by 14 percent to 2.3 billion euros, also due to a one-off effect in the same period of the previous year.

Siemens was able to grow across all areas. Sales at the medical technology subsidiary Healthineers and the flagship division Digital Industries, which is the core of the new Siemens AG, increased particularly strongly in 2020/21. This came back to a proud margin of more than 20 percent.

Siemens is likely to have gained market share in some fields. Things also went well at Rockwell Automation – a competitor they are looking at very closely in Munich. The Americans were only able to increase sales in fiscal year 2020/21 (September 30th) on a comparable basis by around seven percent to just under seven billion dollars. The operating margin was just under 20 percent.

Rockwell is even more optimistic about the new fiscal year 2021/22. Sales are expected to rise by around 15 percent, and the operating margin is expected to rise to around 21.5 percent.

Schneider Electric is also an important competitor. The French are in some cases further ahead than the Munich-based company when it comes to switching to a “Software as a Service” rental model. In the first nine months, Schneider Electric was able to increase sales by a comparable 15 percent to almost 21 billion euros. The industrial automation division grew by a good twelve percent to almost five billion euros.

A few weeks ago, competitor ABB lowered its forecast for the full year, which it had only raised in the summer. The Swiss now expect a comparable increase in sales of six to eight percent for 2021 instead of just under ten percent previously. “The scarcity of supply chains goes beyond individual components. It hits us harder than we expected, ”said ABB boss Björn Rosengren.

In the automation and robotics division, ABB recorded a comparable twelve percent increase in sales in the first nine months to 2.5 billion dollars with an operating return on sales (Ebita) of just under twelve percent. Process automation stagnated at $ 4.5 billion with a margin of a good twelve percent.

Siemens shares have gained around 20 percent this year

The new Siemens CEO Busch had also raised the medium-term goals. The group is now expected to grow by an average of five to seven percent per year over the business cycles. The software and digital solutions business is expected to grow in double digits.

The operational targets have also been increased in some cases. In the future, rail technology should achieve an operating return on sales of ten to 13 percent, while the margin target for intelligent infrastructure with building technology is now eleven to 16 percent. The digital industries should continue to reach 17 to 23 percent. In the past financial year, only rail technology was just below the medium-term corridor.

The Siemens share has gained around 20 percent this year and thus developed slightly better than the Dax. Since the all-time high of a good 150 euros in September, the price has crumbled again somewhat.

The decisive factor for the investors will be how well Siemens manages the switch to “Software as a Service”. This step stabilizes sales, but for a short time they are lower because a license fee is not posted in one fell swoop. In addition, customers have to be willing to participate.

“The changeover is an opportunity for Siemens to expand the addressable market and, in particular, to win new customers in the medium-sized and small business sector,” said fund manager Vera Diehl from Union Investment. Siemens shareholders would “need a lot of patience and will probably have to wait another three to four years for significantly higher sales and the associated increase in margins”.

More: Siemens boss Busch swears his managers to a faster pace.