Munich: Siemens, Europe’s biggest engineering company, raised its full-year outlook after renewable energy projects and digital services led to better-than-expected first-quarter profit.
Profit margin for the industrial business is expected to be in the range of 11 per cent to 12 per cent this year, compared with a previous outlook of 10.5 per cent to 11.5 per cent, the Munich-based company said in a statement on Tuesday. Siemens also said basic earnings per share would be in the range of 7.20 euros to 7.70 euros, higher than the previous range of 6.80 euros to 7.20 euros.
"With a strong first quarter and a considerably raised outlook for fiscal 2017, we are sending a clear signal,” Chief Executive Officer Joe Kaeser said in the statement.
The improved financial outlook comes as Siemens refocuses its sprawling portfolio by planning to list its health-care unit after acquiring Spanish wind energy company Gamesa Corp Tecnologia. The German maker of scanners, trains and factory equipment has also bought US software companies in a bid to keep pace with competitors like General Electric, which has signaled its ambition to become a top software firm.
Siemens’s improved financial outlook contrasts with the more subdued tone of executives speaking about future orders.
"We’re also seeing a highly volatile and cautious market reflecting current uncertainties in the political environment,” said management board member Lisa Davis at a press conference on Wednesday. "This caution is dampening investor confidence and resulting in projects being largely deferred.”
The company is having to fight for every order amid "intense” price pressure, according to Chief Financial Officer Ralf Thomas.
First-quarter profit from so-called industrial operations rose 26 per cent to 2.51 billion euros ($2.72 billion), the company said. That beat an average of 2.08 billion euros of analysts surveyed by Bloomberg. Net income rose 25 per cent to 1.94 billion euros.
Profit at Siemens’s wind power and renewable energy business more than doubled, with sales rising for offshore installations in Europe. Siemens so-called Digital Factory earnings jumped by 60 per cent partly on an electric car venture. The health-care unit reported flat revenue and a 15 per cent increase in profit against the backdrop of "clear growth” in Asia including China and Australia.
Power plant decline
The train-making mobility division was the worst performer among Siemens’s businesses, with a 15 per cent decline in profit. Power and gas profit rose 31 per cent due to a large order in Egypt even as markets in Europe, the Middle East and the Americas were in "substantial decline,” the company said.
Total revenue for the quarter was 19.1 billion euros, missing the average estimate of analysts surveyed by Bloomberg of 19.6 billion euros.