Germany's Siemens, a manufacturer of technology to automate and digitalise businesses and households by supplying hydraulic, electrical and electronic equipment and household appliances, today reported revenue growth of 27% (year-on-year) and 1% growth between quarters.
This exceeded analysts' expectations of €17.47 billion, reaching €17.87 billion in Q3 (the financial year starts earlier than the calendar year). This growth was mainly attributed to an increase in orders from the areas of business automation and intelligent infrastructure.
"Demand in the European capital goods sector is holding up," commented Barclays last week, following the publication of results from other companies in the sector, such as ABB and Schneider Electric. This was also confirmed by CEO Roland Busch, who said that demand remained strong in the quarter despite an environment affected by sanctions on Russia, high inflation and the ongoing effects of a pandemic. However, it is worth noting that these companies typically operate on long-term contracts and the decline in demand can be noticed after a long delay.
Siemens has a strongly diversified business, not only in terms of products but also in respect of the countries of origin of its customers. However, this may not protect it from the looming recession, which seems to be a problem not only for Europe or the US but for the whole world.
Alarming are, for example, the data of the German manufacturing PMI (Purchasing Managers' Index), which measures the assessment of the economic situation by managers. This index is currently at almost its lowest level in two years. The results in other countries in Europe and America also look similar. Asian economies also appear to be weakening.
Siemens also incurred a net loss of €1.66 billion charge for the write-down of the value of its stake in Siemens Energy, which operated in Russia. In addition, the company estimates that it has incurred additional losses of €0.6 billion due to the actions of the Russian Federation.
Despite high energy prices, Siemens is struggling to make savings from its 35% stake in the turbine and wind energy company. It has had a difficult two years since the spin-off in 2020, with operational problems and losses in the Siemens Gamesa wind turbine division.
Siemens' net profit per share surprised investors with a low result of -€2.06, beating expectations of -€0.32. Among the main reasons cited were losses related to operations in Russia and rising energy prices. This was the first loss since the fourth quarter of 2010. Siemens thus lowered its annual earnings per share estimate from €8.70-9.10 to €5.33-5.72.
Despite the loss of business in Russia and other problems, the stock price did not plummet as could be expected. Likely, this news was already included in the share price. Instead, investors seemed more surprised by the revenue, which was better than expected. As a result, Siemens shares are gaining almost 1.5% cent at 14:00 GMT+3 on the Conotoxia MT5 platform.
Rafał Tworkowski, Junior Market Analyst, Conotoxia Ltd. (Conotoxia investment service)
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