Siemens' Healthineers in cost-cutting drive before IPO

[FRANKFURT] Healthineers, Siemens's medical imaging and diagnostics division, will launch a cost-cutting drive to address modest earnings growth this year as it prepares for a separate listing expected to value it at around 40 billion euros (S$64.76 billion).

"Structural cost savings initiatives are targeting 240 million euros of cost savings per year with a first full impact visible in 2020, and the company aims to achieve continuous productivity improvements going forward," Siemens Healthineers said in a statement on Tuesday before an event for analysts and investors.

The maker of medical gear such as X-ray and MRI machines expects an adjusted operating profit margin of 17-18 per cent for 2018 and comparable revenue growth of 3-4 per cent.

That compares with 18.1 per cent in the fiscal year to September, while comparable revenue growth was 3 per cent.

Siemens plans to list its healthcare unit in March, two people close to the matter told Reuters last week. The German industrial conglomerate reiterated on Tuesday the listing was planned for the first half of 2018.

Over the medium term the business expects organic revenue growth to speed up to 4-6 per cent, led by products such as automated lab diagnostic gear or software to help physicians interpret medical images.

Analysts have said they would be looking for clues on how Siemens plans to turn around the underperforming In-Vitro diagnostics business, which provides lab machinery to analyse blood, tissue or urine samples.

The group said that business's profit margin would improve to 16-19 per cent over the medium term, up from 14 per cent last year.

Michael Sen, Siemens board member in charge of Healthineers, said the unit would act independently but it would remain part of the parent group in the long term.

"We will actively accompany that development as a long-term shareholder."

REUTERS