- Geopolitical instability is unhelpful for following year: CEO
- CEO Joe Kaeser speaks in an interview in Buenos Aires
Siemens AG Chief Executive Officer Joe Kaeser said Europe’s biggest engineering company may beat its earnings forecast for the fiscal year ending this month while the longer-term outlook is clouded by political concerns.
“This year we’re going to be fine with our guidance -- maybe even some upside to it in a well-working environment,” Kaeser said Wednesday in an interview in Buenos Aires, where he attended a government forum.
“Next year is a new game,” the CEO said. “What I am most concerned about next year is the increasing geopolitical instability, which in a capital goods environment is not exactly helpful.”
Siemens has raised its financial target twice this year, most recently saying last month that it expects earnings per share of between 6.50 euros and 6.70 euros. Analysts are expecting the top end of that range, according to the average of estimates compiled by Bloomberg. Kaeser’s optimism since the start of 2016 was at first greeted with surprise because of a slowdown in China and continued lower energy prices. His almost 2 1/2-year tenure has been marked by large acquisitions to boost the energy division, which has pulled in big orders for power projects.
The shares rose 3 percent to 105.55 by the close in Frankfurt, the biggest jump since Aug. 4. The stock has gained 17 percent this year, compared with a 2.9 percent fall on the DAX Index.
The CEO said Wednesday that he is “very satisfied” with his team and that the Munich-based company has been outperforming competitors.
Siemens’s guidance for the current financial year also includes “moderate” revenue growth, net of currency effects, and orders accelerating with a book-to-bill ratio “clearly” above 1. The company reported higher-than-expected third-quarter profit on Aug. 4 with a jump in large orders for power-generating equipment. Siemens is scheduled to report full-year earnings on Nov. 10.
Among the geopolitical uncertainties that could lead customers to hold back on investment, Kaeser cited instability in the Middle East, the U.K.’s plan to exit the European Union and the forthcoming elections in the U.S.
“I’m not so much concerned about our ability to perform and not so much concerned about our competitive strength,” he said in the interview. “But the geopolitical environment is not exactly encouraging our customers to go the next level. So that is a sticky point for 2017.”
The U.S. election campaign “polarizes society and of course the industry,” he said. “There are a lot of questions on how much of what some candidates are saying is actually coming.”