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Siemens lifts earnings outlook, helped by euro, cuts
[MUNICH] Siemens, Europe's biggest industrial group, raised its full-year earnings-per-share forecast on Monday after beating market expectations for first-quarter industrial profit, revenue and orders.
Siemens' healthcare, transportation and energy-management units drove a gain in industrial profit to 10.4 per cent of sales from 10.2 per cent a year earlier, helped greatly by the weak euro and ongoing cost cuts.
The Munich-based group said it now expected EPS of 6.00 to 6.40 euros, up from its previous forecast of 5.90 to 6.20 euros for the year ending next September. "We delivered a strong quarter and are well underway in executing our Vision 2020. Therefore, we will raise our earnings outlook for 2016, even though the macroeconomic and geopolitical developments remain a concern for our markets," Chief Executive Joe Kaeser said in a statement.
Siemens shares rose 2.3 per cent in after-hours trading in Frankfurt.
Like its US rival General Electric, Siemens turned to self-help measures such as job cuts, disposals and an increased focus on high technology as slowing economic growth in China and low oil prices dim the outlook for industrial goods.
Share buybacks and dividends have supported the stock.
Under Kaeser's leadership, Siemens has disposed of its remaining consumer businesses and beefed up its oil equipment offering with the most expensive acquisition in its history, leaving it highly exposed to the energy sector.
Siemens' Power and Gas unit, which accounts for a fifth of group sales, saw its profit drop to 9.5 per cent in the quarter from 11.3 per cent a year earlier. The weak oil price also hurt profits at the Process Industries and Drives unit.
The Munich-based company said profit development was held back by effects related to the acquisition of oilfield equipment maker Dresser-Rand, among other things, and overcapacities that resulted in increased price pressure.
GE said on Friday it would double its 2016 budget for restructuring spending to fight the effects of low oil prices and slow global growth that pummelled its earnings last year, particularly at its oil and gas operations.
Its fourth-quarter industrial margin was 18.3 per cent, however - almost twice that of Siemens - excluding effects of its acquisition of French Alstom's energy businesses.
Digital Factory, Siemens' factory-automation unit, remained its most profitable business, with a profit margin of 16.9 per cent, down from 18.8 per cent a year earlier, partly due to slowing demand from China.
Siemens is fast adding software expertise to this business, and confirmed on Monday it was buying US engineering software firm CD-adapco for US$970 million.
For the whole Siemens group, industrial profit jumped 10 per cent to 1.99 billion euros in the first quarter, easily beating the Reuters poll average of 1.87 billion.
Sales rose 1 per cent on a comparable basis to 18.9 billion euros and orders jumped 19 per cent to 22.8 billion, thanks to a huge Egyptian power-plant order, an offshore wind contract in Britain and a large number of rail projects.
Siemens confirmed it expects moderate revenue growth excluding currency effects, orders clearly above sales and an industrial profit margin of 10-11 per cent this year.