Germanys electronics giant Siemens AG said yesterday that sales and orders in the business year to the end of September would grow at a faster pace than previously expected but profits would remain steady.
Net earnings in the final three months of 1996, the first quarter of Siemens business year to September 30, 1997, fell five per cent to 478 million marks ($283.8 million), despite strong growth in orders and sales during the same period.
Speaking to shareholders in Berlin, Siemens AG chairman Heinrich von Pierer said the fall in profits in the first quarter was a temporary dent. While profit would remain stable this year, sales and orders were robust.
We expect sales and orders to exceed the somewhat muted original forecast for the year. The present favourable currency situation and the low interest level are largely responsible for this unforeseen growth, he said.
In the past three years we continually improved our results. We will reach last years high 2.5 billion marks level again this year. And next year, we anticipate another increase, he added.
The slippage in profit was not reflected in the companys sales and orders for the first quarter, which rose sharply on the back of favourable foreign exchange markets and low German interest rates.
Incoming orders surged 22 per cent to 27 billion marks and sales were up six per cent to 20.9 billion marks. Of the total, domestic orders rose eight to 9.5 billion marks and foreign orders soared 31 per cent to 17.5 billion marks.
The highest growth was achieved in the Asia-Pacific region, where orders surged 130 per cent, and the Americas, where orders grew 37 per cent. In coming years the foreign share of group sales would rise to around 70 per cent from 60 per cent now.
In the 1995-96 business year, group net profit before extraordinary items was 2.5 billion marks and sales were 94.2 billion marks.
Pierer dismissed speculation that Siemens might break up the group into smaller units and list these on stock exchanges.
Splitting up our company would not create additional value, but rather would destroy value, he said, adding that those who call for such a move fail to recognise the value Siemens achieves from synergies between its divisions.
Siemens aims to improve its position in world markets and its profitability by spinning off dead-end businesses, acquiring others with better prospects, and expanding in new fields.
Pierer said the company was evaluating and adapting its business portfolio but that its core business would remain electrical engineering and electronics, where the global market was growing at an annual rate of seven per cent.
Each of the companys 250 business fields needed to develop and sustain profitability and competitive strength and be able to achieve a leading position on the global market, he said.
In the foreseeable future we plan to divest a sales volume of roughly three billion marks, he said, citing cardiac pacemakers, industrial lasers and high-performance printers.
These changes would continue to have an impact on the companys German workforce.
Unfortunately we are not yet finished with our job reductions in Germany, Pierer told Germanys ZDF television. He described the Bonn governments planned income tax reform as a step in the right direction towards improving conditions for domestic investment, but made no pledges to curb the companys plans to continue to cut domestic jobs.
He said that was not growing on the German market but rather in international markets, but added that the pace domestic job cuts was already slowing.
