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Siemens Raises Outlook After Profit Beats Estimates

Siemens Gives More Optimistic Outlook
Peter Loescher, president and chief executive officer of Siemens AG, speaks at a news conference in New Delhi. Photographer: Pankaj Nangia/Bloomberg

July 29 (Bloomberg) -- Siemens AG, Europe’s largest engineering company, raised its full-year profit outlook after quarterly income rose 40 percent, beating analysts’ estimates.

Sector profit, or operating income at Siemens’s energy, health-care and industry divisions, advanced to a record 2.33 billion euros ($3 billion) in the quarter ended June 30, as the company benefited from a rebound in demand and cost savings. That compared with a 2.14 billion-euro estimate from a Bloomberg survey of 10 analysts.

Sector profit this year will “clearly exceed” last year’s 7.47 billion euros, Chief Executive Officer Peter Loescher said in a statement, raising earnings guidance for the second time this year. The company had previously forecast that it would “exceed” last year’s figure.

Siemens is scheduled to end a program that placed as many as 19,000 workers on shorter shifts as factories grappled with lower demand during the financial crisis. Germany’s VDMA machine makers’ association, which had predicted stagnant output this year, switched to a growth forecast of 3 percent on July 20 following a surge in May.

Net income rose 12 percent to 1.41 billion euros, Munich-based Siemens said. Orders rose 22 percent to 20.87 billion euros, compared with the analysts’ estimate of 19.1 billion euros.

The results mark “another first-class quarter” for Siemens, Morgan Stanley analyst Ben Uglow wrote in a note to clients. He rates the shares “equal-weight” and expects them to rise to 82 euros within a year. Analysts’ earnings estimates should be revised upwards, he said.

Scaling Back

Siemens is continuing efforts to scale back some businesses, including cutting 4,200 jobs at its SIS computer-services division, where it lost 81 million euros in the quarter. The company is in the process of carving out the business and said it may sell it at a later stage.

The German maker of trains, turbines and body scanners has advanced 18 percent this year in Frankfurt trading, giving it a market value of 69 billion euros. General Electric Co.’s shares have gained 6.9 percent this year.

Siemens’s order backlog swelled to a record 89 billion euros, helped by the company’s renewable energy unit, which at 2.27 billion euros booked the highest intake among company units in the quarter.

Diagnostics Unit

Siemens’ diagnostics unit was “highly profitable” in the quarter at an operating margin of 17.4 percent, and no decision about a possible goodwill writedown has been made yet, Chief Financial Officer Joe Kaeser said. The unit, built by purchases of Dade Behring Holdings Inc., Diagnostic Products Corp. and Bayer AG’s diagnostics business, had goodwill of 5.51 billion euros as of Sept. 30, 2009, and revenue growth has been slower than originally expected, Kaeser said.

Siemens first raised its outlook for full-year earnings on April 29, spurred by growth in emerging markets and a recovery in short-cycle businesses like light bulbs. Profitability this year will also benefit from lower charges to reorganize some businesses as the economic recovery supports demand, the company said.

The company cut about 16,000 jobs in the 15 months though March and Chief Executive Officer Peter Loescher is in the process of eliminating another 4,900 jobs at the industry-solutions division by 2011.

Both GE and Alstom SA, the world’s third-largest power-equipment maker, have suffered from fewer orders among customers in the power industry. Royal Philips Electronics NV, the world’s biggest lighting company, forecast sales growth will slow in the second half.

To contact the reporter on this story: Richard Weiss in Frankfurt at rweiss5@bloomberg.net.

To contact the editors responsible for this story: Benedikt Kammel at bkammel@bloomberg.net.

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