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Abu Dhabi, UAEWednesday 19 December 2018

Siemens gains from rebounding global economy

Orders surged 14 per cent in the fiscal first quarter, driven by demand for rail carriages in the US, wind turbines and automation software

Joe Kaeser, Siemens chief executive. The firm's profits jumped in the first quarter.  Christof Stache/AFP
Joe Kaeser, Siemens chief executive. The firm's profits jumped in the first quarter. Christof Stache/AFP

Siemens is riding a booming global economy that’s lifting orders for its factory, transport and energy equipment and giving the chief executive Joe Kaeser support in his mission to reshape Europe’s largest engineering company.

Orders surged 14 per cent in the fiscal first quarter, driven by demand for rail carriages in the US, wind turbines and automation software used to keep production humming. Sales advanced 3 per cent, the Munich-based company said Wednesday. The stock rose as much as 1.5 per cent.

Mr Kaeser, a Siemens veteran who has been CEO for four years, has championed the company’s engineering prowess while simplifying its byzantine structure, paring back in areas like lighting and healthcare systems, which Siemens is spinning off.

He’s also cut thousands of jobs at its gas-turbine business, once a top performer in the portfolio and now a drag on earnings as utilities cut back orders for huge power-generation equipment.

“The strong order intake in the first quarter is particularly gratifying,” Mr Kaeser said at a press conference in Munich, ahead of today’s annual meeting with shareholders. “A look at the figures our competitors have released so far shows we’re gaining further market share.”

Mr Kaeser burnished his role as the standard bearer of German industry last week, when he sat next to the US President Donald Trump at a dinner at the World Economic Forum in Davos, Switzerland, highlighting the company’s US achievements and plans to invest. His comments about a factory in the US drew the ire of local workers back at home in Germany fretting over the future of their own jobs.

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Siemens stock is up 5.2 per cent this year, giving the company a market cap of €104 billion (Dh75.56bn). Orders up 14 per cent to €22.5bn, while revenue climbed up 3 per cent to €19bn. So-called profit from industrial operations, however, fell down 14 per cent to €2.21bn. While that surpassed estimates, the results included a net benefit of €437 million from revaluing Siemens’s future US tax obligations. Transport orders rose 49 per cent; digital factory was up 31 per cent; and wind turbines up 103 per cent.

The positive momentum at Siemens’s rail, wind-turbine and digital factory units was surprising, said Bankhaus Metzler analyst Jasko Terzic. Strength in those divisions served to offset drops at power-and-gas and at the US-reliant Healthineers business, which was hampered by currency headwinds amid a falling dollar.

Mr Kaeser announced in November that Siemens would cut 6,900 jobs from its power-and-gas and process industries units, half of those in Germany. That’s generated criticism from unions and employees, who are wary of his plan to reduce the industrial conglomerate to a collection of semi-autonomous units. Here, too, he may get some cover from the economy’s momentum, as German joblessness falls to record lows.

Talks with unions on the job cuts are progressing, Mr Kaeser said, and should be finished by the end of the fiscal year, which for Siemens ends on September 30.

In addition to healthcare spin-off, Mr Kaeser is merging Siemens’s rail operation with that of Alstom. It joined its wind power division with Spanish company Gamesa in 2017. Mr Kaeser declined to comment on plans to sell the company’s Flender unit, which makes mechanical drives. He said the business’s turnaround has been impressive, since it was previously considered an underperformer.

Updated: January 31, 2018 04:02 PM

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