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Financial Times, January 26, 2010 article


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Siemens beat analysts’ estimates on Tuesday with an 11 per cent increase in its operating profit in the first quarter, as Europe’s largest engineering group vowed to slash costs further.

Siemens Q1 2010 results
Sales Net profit Earnings per share Dividend
€17.4bn €1.531bn €1.70 -
↓8% ↑ 24% €1.43 in 2008 -

Cost cuts and a shift into higher-margin service businesses helped lift the German industrial group’s operating sector profit to €2.3bn, from €2bn in the final period of the previous fiscal year, which ended in September.

The company added to a more positive sentiment in the industrial sector when it said orders, which fell 11 per cent to €19bn year on year, had risen slightly when compared with the last quarter.

The results came after main rival General Electric had displayed an optimistic medium-term outlook and as earnings by Philips Electronics easily beat investors’ expectations on rising demand for televisions and lighting.

However, Peter Löscher, Siemens chief executive, added a much more cautious note when he said: “The crisis is not over yet.”

He added: “It will take a long time until we will come back to the old level [before the crisis started]. I do not believe we have seen the end of volatility and uncertainty.”

The Austrian-born chief executive vowed to slash costs further by cutting more jobs in the industry business of the group. The sector has underperformed in recent times, which has spurred calls from analysts and investors for a further restructuring.

Mr Löscher said the group would undertake “punctual measures at single locations” of the sector, adding that details would only be made public after talks with the works council this week.

Siemens launched a programme to slash administrative and sales costs two years ago, which yielded €2bn in savings in the past fiscal year and helped to lift the company’s profit higher in the first quarter, in spite of a fall in revenues and orders.

“The actions we took at a very early stage are now cushioning us from the ongoing repercussions of the global recession,” said Mr Löscher.

Siemens said revenues rose by 8 per cent to €17.4bn in the first three months.

Net profit increased by 24 per cent to €1.531bn, while earnings per share increased to €1.70 from €1.40 in the year before.

Siemens posted a slightly higher €83bn order backlog at the end of the first quarter, and its new orders exceeded revenues by 1.09 per cent.

Joe Kaeser, chief financial officer, reiterated the company’s outlook for the full fiscal year. Germany’s largest engineering company expects an operating profit in its three sectors – energy, healthcare and industry – of between €6bn and €6.5bn.

“It is clear that after the good first quarter it has become easier to reach the forecast for this year,” said Mr Kaeser. He said Siemens would review the forecast for 2010 after the second quarter.

The sector profit in the first three months already accounted for more than a third of Siemens’ full-year aim for 2010.

Siemens figures came as the company braced itself for its annual meeting on Tuesday, where it expected key votes – and some shareholder criticism – on its remuneration system and settlements over damage claims reached with several former managers over a multibillion-euro bribery scandal that has rocked the group in the past few years.

Some investors have in the past weeks voiced their opposition against the settlements, which could be blocked if shareholders with more than 10 per cent of the company’s capital oppose it.

Gerhard Cromme, Siemens’ chairman, urged shareholders to accept the settlements and draw a line under the scandal over bribes paid to win contracts all over the world.

“This will bring a close to a dark and problematic chapter in the company’s history”, said Mr Cromme.

The Munich-based company this week sued former chief financial officer Heinz-Joachim Neubürger for €15m and Thomas Ganswindt, another former executive, for €5m in damages.

The former managers, who have always denied any wrongdoing, had opposed a settlement with Siemens.

© Copyright The Financial Times Ltd 2010.



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