Siemens Q1 results beat expectations
27 Jan 2009
Driven mainly by its energy division, Siemens AG, Europe's largest engineering company, reported first-quarter profits (up to December) that beat market expectations. It also maintained its profit outlook despite the bleak global scenario, saying 2009 sales will at least equal last year's total.
The German company, which makes everything from nuclear power plants and train carriages to hearing aids and light bulbs, reported on Tuesday that total sectors profit - covering all three of Siemens' main divisions - rose 20 per cent to 2.005 billion euros ($2.64 billion), as it reaffirmed its full-year target of 8.0-8.5 billion. Quarterly sales ncreased seven per cent to 19.6 billion euros.
But new orders dropped eight per cent as its bread-and-butter industry division, which saw the sharpest order downturn of 11 per cent, felt the impact of customers holding back as demand for manufactured goods plummets across a range of industries. The difficult economic environment also hit its health care business, though it has done better than others like GE, the company said.
Net income also dropped 81 per cent to 1.2 billion euros in the quarter, following a year-earlier gain of 5.4 billion euros from the sale of its VDO automotive unit to Continental AG.
Chief financial officer Joe Kaeser told a press conference that the company's relatively positive outlook has been bolstered by orders from government economic stimulus packages for infrastructure, savings from purchasing improvements (like sourcing more components from low-cost countries), and its planned 16,750 job cuts.
Siemens chief executive officer Peter Loescher said meeting this year's profit target hinges on more efficient purchasing of components and materials, a responsibility handed to new board member Barbara Kux. The company had earlier announced plans to save 1.2 billion euros by 2010, as it targets margins equal to rivals GE and France's Alstom SA.
Loescher admitted that success would also depend on major customers securing the financing for projects and thus not having to cancel orders, as well as on prices holding up. Tumbling sales in the health-imaging market and other short-cycle businesses could lead rivals to drop prices and ''go hunting in a neighbor's backyard'' to bolster their orders, he said.
With cash to spend, Siemens views the global financial crisis as an opportunity to expand its main divisions through bolt-on acquisitions, Loescher had said at a briefing last month.
