Siemens AG, Europe’s largest engineering company, said profit this year will rise at least 75 percent, more than it previously anticipated, as customers buy more industrial equipment and a unit overhaul starts to pay off.
Net income from continued operations will rise to at least 7.5 billion euros ($11.1 billion) in the year ending Sept. 30, from 4.3 billion euros a year earlier, Siemens said today. The Munich-based company previously predicted an increase of as much as 35 percent. Sales growth will be a “mid-single digit” percentage, from an earlier forecast of “moderate growth.”
“The outlook is still pretty conservative, it leaves room for improvement,” said James Stettler, an equity analyst at UniCredit in London. After stripping out non-recurring items, Siemens’s profit guidance is for an increase of about 10 percent, he said. He recommends clients to buy the shares and sees them rising to 100 euros within a year.
Chief Executive Officer Peter Loescher is accelerating a reorganization as he sells the computer-services division, the source of years of losses, and prepares the Osram GmbH lighting subsidiary for an initial public offering later this year. Loescher said he’s “proactively” scouring the globe for acquisition targets, after largely refraining from purchases in the last three years.
Siemens dropped as much as 2.37 euros, or 2.4 percent, to 95.02 euros in Frankfurt, trimming this year’s gain to 3.9 percent. General Electric Co. has risen 13 percent this year, while Royal Philips Electronics NV, the largest manufacturer of lighting equipment, has fallen 10 percent since the start of 2011.
In the second quarter ended March 31, income from continuing operations more than doubled to 3.17 billion euros, Siemens said today. Siemens booked a 1.52 billion-euro gain in the quarter from the sale of a stake in a venture with Areva SA, the French maker of nuclear plants. Sales rose to 17.72 billion euros, from an adjusted 16.52 billion euros.
“We’ve achieved outstanding, broad-based orders growth,” Loescher said in a statement.
Siemens said a month ago that growth in the second half will ease and predicted “continued challenges” at some renewable-energy businesses. The operating margin at the subsidiary fell by half in the quarter, Siemens said.
Possible acquisitions should be “bolt-on” in nature and could amount to 1 billion euros to 3 billion euros, Chief Financial Officer Joe Kaeser said on a call for analysts.
Order intake in the quarter grew 28 percent to 20.65 billion euros as of March 31. Plant and machinery orders in Germany, Europe’s largest economy, increased 32 percent in the three months to March, the country’s VDMA machine makers’ association said May 3. ABB Ltd. on April 27 said first-quarter profit rose 41 percent on demand for automation equipment.
Order growth at 77 percent was highest in Germany, and rose 58 percent in India and 15 percent in China. Orders from emerging markets amounted to 7.48 billion euros, an increase of 52 percent.
Siemens labeled businesses with almost 9 billion euros in fiscal 2010 sales as discontinued operations following the plan to sell the computer division and list the lighting subsidiary. Those operations posted a loss of 338 million euros in the quarter, stemming largely from the IT unit.
Osram contributed profit of 87 million euros, after 91 million last year. New orders and sales at Osram rose about ten percent in the quarter, Kaeser said.
Loescher said the preparation for the IPO is going according to plan, and that the share sale is still slated for the latter part of the year. A listing of Osram would be among the largest IPOs in Germany in a decade. Siemens aims to sell a majority stake in Osram, and selection of banks for the process will be completed shortly.
The sale of the stake to Areva helped profit at the fossil power division rise more than sixfold to 2.05 billion euros. The profit margin in fossil power increased to 20.8 percent excluding the gain from the sale. Profit at the renewable energy division fell 53 percent to 48 million euros as the company expands its wind energy operations.
At the industry businesses, profit grew 60 percent at industry automation, while earnings declined in the building technologies and mobility divisions. Earnings in health care fell 4 percent in the quarter, Siemens said.
Siemens booked a gain of 91 million euros for the sale of its stake in armored-vehicle maker Krauss-Maffei Wegmann GmbH in December.
While Siemens routinely receives indications of interest from investors for its Nokia Siemens Networks joint venture, the focus for the time being is on improving performance, Kaeser said. The Enterprise Communications joint venture has been “nicely revamped,” the CFO said, declining to comment if the company considers listing the unit.
Bloomberg on April 29 reported that the company is weighing an initial public offerings of their business that sells phone equipment and services to companies.