Siemens Q3 results beat expectations despite China weakness

Group sticks to full-year outlook, reports solid results in six of its eight divisions

German trains-to-turbines group Siemens beat expectations for its third-quarter results and stuck to its full-year outlook on Thursday despite weakness in China.

The Munich-based group reported solid results in six of its eight divisions, with industrial software and healthcare in particular lifting profits to counter declines in gas turbines and transportation for the quarter to end-June.

Siemens said it continued to target a full-year profit margin of 10 to 11% from its industrial businesses after lifting it to 9.5% in the last quarter, from 9% in the second quarter, still far behind its key rivals.

"We expect to maintain our momentum with a strong closing quarter for fiscal 2015," Chief Executive Joe Kaeser said, noting, however, a softening market environment on the back of weaker Chinese markets.

 

Finance chief-turned-CEO Kaeser, who has run Siemens for almost two years, introduced the industrial margin measure as a way to benchmark the company against competitors.

General Electric for instance improved its industrial profit margin to 16.2% last quarter, while Swiss power and automation group ABB's core operational margin was 11.7%.

Siemens' sales in China fell 8% in the quarter and Chinese new orders slid 2%. The group noted the effect particularly on its healthcare and industrial software units.

Siemens shares were indicated 1% higher ahead of the 0700 GMT Frankfurt market open. "Siemens ... results surprised positively," said analyst Guenther Hollfelder of Baader Bank, which rates Siemens "hold".

JOB CUTS

Kaeser has responded to poor demand, especially in power generation, which has been hurt by Germany's switch to renewable energy and falling oil prices, by cutting more than 12,000 jobs, about 4% of its workforce.

It booked a severance charge of 274 million euros ($300 million) in the quarter. Excluding the charge, of which Siemens attributed 173 million to its industrial businesses, the industrial margin would have been 10.4%.

Overall, quarterly results beat expectations with orders down 5%, sales down 3% and net profit down 2% on a comparable basis. Currency effects lifted reported orders by 8% and sales by 9%.

Industrial business profit rose 1% to 1.82 billion euros, beating the company's own consensus for 1.7 billion euros.

ABB and Dutch group Philips both reported difficult markets last quarter. ABB's net profit fell 8% due to a drop in demand for its oil and gas products, slower-than-expected US business, soft demand from China and a strong dollar.

Philips reported higher quarterly medical equipment sales and improved margins in its consumer and lighting businesses this week but also cautioned that growth was slowing in China and emerging markets.

At Siemens' power and gas unit, which has just closed the $7.6 billion acquisition of US oilfield equipment maker Dresser-Rand, orders fell 22%, revenue fell 15% and profit fell 47%.

Siemens' transportation unit Mobility had a weak quarter due to the timing of large rail projects but it won a 1.6 billion euro Russian train maintenance order in the period.

($1 = 0.9112 euros)