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Siemens hikes profit forecast but warns of global risks

Thursday, August 4, 2016 - 18:36
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German industrial giant Siemens lifted its annual earnings forecast Thursday after booming demand for renewables fattened order books in the second quarter, but warned of increasing geopolitical risks.

[BERLIN] German industrial giant Siemens lifted its annual earnings forecast Thursday after booming demand for renewables fattened order books in the second quarter, but warned of increasing geopolitical risks.

For the financial year ending September, the group said it expected profits per share between 6.50 and 6.70 euros (S$9.72 - S$10.02), compared with the 6.0 to 6.40 it had previously predicted - the second upward revision since March.

Chief executive Joe Kaeser said in a statement that Siemens "delivered excellent performance, especially with regard to growth, in an increasingly difficult market environment".

But he warned in a telephone conference on Thursday that market conditions could still worsen.

"Disorder seems to have become the new world order," said Kaeser, pointing to Britain's vote to leave the EU, terrorism, and tense EU-Turkey relations.

"These things create uncertainty, uncertainty creates reticence, that creates a difficult investment climate and lower spending," he went on.

Such risks could hurt parts of Siemens' business in the upcoming 2016-17 financial year, which begins in October.

"Turkey is an important market" for the group, Kaeser acknowledged on Thursday.

"We can no longer gauge how things are going to develop there." However in April through June quarter its order book swelled to 21 billion euros, a 6.0 per cent increase over the same period in 2015, boosted by both demand for renewables as well as power and gas.

At 2.7 billion euros, its renewables orders were almost four times larger this quarter - which also saw it announce the merger of its wind turbine business with Spain's Gamesa in June - than the same period last year.

During the three months, the group won contracts to build offshore wind farms in Britain and Germany for a total of almost 2 billion euros.

Meanwhile, large orders for the power and gas unit from the United States and Bolivia brought in 1.2 billion euros of new business - contributing to 26 per cent order growth for the division to 4.5 billion euros.

The group, which builds products ranging from trains to gas and wind turbines to medical equipment, said it had made a net profit of 1.37 billion euros in its third quarter.

That was little changed from last year's figure, which had been artificially high after it sold some business units.

Siemens reported a jump in underlying, or operating, profit as measured by EBITDA, of 41 per cent to 2.67 billion euros on revenues of 19.8 billion euros - up five per cent compared with last year.

Analysts at DZ bank welcomed a "better than expected" third quarter for Siemens, saying that the group's restructuring and the Gamesa merger were beginning to pay off.

The group said that it expected "moderate revenue growth" for the whole of the 2015-16 financial year after adjusting for currency effects.

The upbeat earnings results sent Siemens shares to the top of the Frankfurt DAX index of leading German companies on Thursday morning, gaining more than 4.0 per cent by just before 1000 GMT.

AFP