Siemens misses forecasts and refuses outlook
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Siemens, the German industrial and technology conglomerate, on Thursday reported weaker-than-expected full-year results, refused to give an outlook on the coming year and failed to answer questions about the strategic direction of its two problem divisions.
But the shares rose by 0.5 per cent to €62.33 as investors focused on strong underlying profitability, after stripping out an unexpected €800m charge for the sale of its mobile handsets arm and disappointing results from its ailing SBS IT services unit and its Com telecommunications equipment division.
Some analysts and investors had hoped to learn more about how Klaus Kleinfeld, chief executive, intended to turn round Com and the lossmaking SBS. But Mr Kleinfeld refused to elaborate on measures announced in September, under which 2,400 jobs will be cut at SBS as part of attempts to save €1.5bn by 2007 and steps will be taken at Com.
Siemens has been criticised by some investors for failing to get high enough margins out of its 11 businesses, whose products range from lightbulbs to power plants. Mr Kleinfeld yesterday stood by his ambitious profit targets for April 2007, which five of the 11 divisions currently fail to meet.
Heinz-Joachim Neuberger, chief financial officer, said various positive and negative effects meant no outlook was possible for this year. “We are focused on our targets for 2007,” he added. SBS, which has a target margin of 5-6 per cent, had one of minus 12.8 per cent last year while Com, which is meant to achieve 8-11 per cent by 2007, earned 3.5 per cent.
Ben Uglow, an analyst at Morgan Stanley, said stripping out those two divisions, the underlying results were nearly 20 per cent ahead of expectations, driven by strong performances by the medical and power generation units, where orders surged.
“Across the board on an underlying basis this was probably the best quarter from Siemens for about a year. But the big shock was SBS and they haven’t laid out a road map for it,” he said.
SBS made a loss of €427m in the fourth quarter alone and one of €690m for the entire year.
Lower interest rates caused its pension liabilities to rise, leading to a €1.5bn cash injection that, added to the €3.1bn in cash spent on acquisitions, meant the net cash position for the year was a negative €1.5bn.
Fourth-quarter net profit fell 88 per cent to €77m. Full-year net income fell from €3.4bn to €2.2bn, against expectations of €3.1bn, on sales up 7 per cent at €75bn and orders up 11 per cent at €84bn. The dividend is increased 8 per cent to €1.35.
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