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Siemens profit ahead of forecast despite digital sector orders fall
Global Banking & Finance Review®
Company
By John Revill
ZURICH (Reuters) -Siemens reported first-quarter profit slightly ahead of expectations on Thursday despite the German engineering group seeing a slowdown at its flagship factory automation unit.
Digital Industries, which supplies companies with software and controllers to operate their production lines, saw new orders fall by a third as market conditions weakened.
Customers who built up stocks of components to avoid shortages last year also held off buying new equipment and decided to run down their stocks, Siemens said.
The downturn was seen most strongly in Asia and Australia, due particularly to weakening demand from China, it added.
Although the situation in China was improving from the previous quarter, Siemens said it expected conditions to remain tough in its third biggest market after the U.S. and Germany.
“We anticipate regional differences in the way customers ultimately reduce their inventories to normal levels,” Chief Executive Roland Busch told reporters.
“Depending on the speed and scale of its economic recovery, China might take somewhat longer.”
A stronger performance from its train-making Mobility business helped offset the downturn, while Siemens’s building automation arm Smart Infrastructure had its best-ever quarter.
Like other industrial companies Siemens’s results are seen as a proxy for the broader global economy.
Busch said the Red Sea shipping crisis was having “practically no impact” on Siemens, due to its local supply chains and experience in handling such problems.
Overall, Siemens reported a rise in industrial profit of 3% to 2.72 billion euros ($2.93 billion) for the three months to the end of December, beating forecasts of 2.64 billion euros in a company-gathered consensus of analysts.
Revenue rose 2% to 18.41 billion euros, below the 18.58 billion euros forecast after currency translation effects – mainly from a stronger dollar – reduced sales reported in euros.
Siemens confirmed its full year outlook, saying it still expected revenue growth of 4% to 8%, after divestments and when currency effects are removed.
The company’s were indicated 1.5% higher in premarket activity on the German exchange.
Busch pointed to an order backlog, which now stood at 113 billion euros as giving him confidence for the future.
($1 = 0.9276 euros)
(Reporting by John Revill; Editing by Miranda Murray and Alexander Smith)
Corporate profit refers to the net income a company earns after all expenses, taxes, and costs have been deducted from total revenue.
Digital sector orders refer to requests for products or services related to digital technologies, such as software and automation tools, from companies.
Revenue growth is the increase in a company's sales over a specific period, often expressed as a percentage compared to previous periods.
An order backlog is the total value of orders received by a company that have not yet been fulfilled or delivered to customers.
Industrial profit is the earnings generated by companies in the industrial sector, typically calculated after deducting operational costs from revenue.
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