Siemens reported a significant boost in its quarterly earnings, driven by strong demand for electricity infrastructure and production software. The German technology group saw an 11% increase in adjusted operating profit, reaching 3.0 billion euros ($3.3 billion) for its fiscal third quarter in April-June. This figure surpassed the analysts’ average forecast of 2.84 billion euros, per the group’s website poll.
Full-Year Guidance Maintained Amid Economic Uncertainty:
Despite the positive quarterly results, Siemens maintained its full-year guidance, cautioning that the surge in new customers for its microchip production and product design software was a temporary boost. The company expressed concerns over clients’ hesitancy to invest in factory automation due to uncertainty surrounding borrowing costs.
Siemens highlighted that Chinese customers and distributors are gradually resuming new equipment purchases while continuing to deplete their stockpiles. However, there are early signs of a recovery in demand from chemical manufacturers, which is often considered an indicator of the business cycle’s health.
CEO’s Perspective on Market Conditions:
Chief Executive Roland Busch commented on the cautious recovery, stating, “We are seeing very tender signs of a recovery in some parameters, but that’s far too early to proclaim summer from this swallow,” during a media call. Despite this, Siemens’ shares slightly declined 0.4% at 0815 GMT.
The company noted weak industry demand in its home region, with a key index of euro zone manufacturing hitting a seven-month low in July. Full-year revenue growth is expected to be at the lower end of the 4-8% range, adjusted for currency fluctuations, acquisitions, and divestments.
Profit Margins and Strategic Shifts:
Siemens anticipates profit margins at its Digital Industries unit, which produces software and equipment for process automation, at the lower end of its target range. Conversely, margins at its Smart Infrastructure unit, responsible for systems like ventilation, power wiring, and security at large facilities, are expected to be at the upper end of the target range.
In a strategic move, Siemens announced late Wednesday its plan to accelerate the transition to a technology-focused enterprise by expanding its management board from five to seven members. This expansion aims to bolster the company’s leadership and drive future growth.