Siemens Reports Growth in Sales and Earnings for 2023

According to the latest news, Siemens’ sales and earnings rose in the final quarter of 2023. Despite changeable market conditions and economic challenges, the company has remained resilient and managed to adapt. The German multinational conglomerate has also confirmed a positive outlook for the fiscal year 2024.

The company’s sales increased by 2% and hit €18.4 billion (around 19.8 billion dollars). The increase totals 6% when adjusted for currency and portfolio effects.

Financial Performance

Siemens’ industrial profit rose 3% to €2.72 billion for the final quarter of 2023, beating expectations. Revenue rose by 2% to €18.41 billion, net income increased €2.39 billion, while earnings per share (EPS) (before purchase price allocation accounting) was €3.19. Disappointingly, orders declined year-on-year, coming in at €22.3 billion. Siemens’ Digital Industries unit reported a decline in new orders, chiefly in Asia and Australia. This was offset by the excellent performance of the Mobility and Smart Infrastructure units. Partnerships with Microsoft and AWS to push artificial intelligence have also boosted the firm’s credibility and ability to manage its portfolio and its flexibility to respond to the changing landscape have helped it perform well overall. 

Fiscal 2024 outlook

Things are looking up for Siemens and this reflects the company’s continued dedication to excellence and competitiveness in the global marketplace. Siemens confirmed its outlook for the fiscal year of 2024, and is anticipating similar revenue growth in the range of 4% to 8%. The company also expects an increase in its earnings per share for the fiscal year 2024. In a statement, discussing Siemens’ revenue growth, Chief Executive Roland Busch said: “Siemens again delivered a strong quarter, maintaining a trajectory of profitable growth.”

China’s performance to affect sales

Siemens has warned earlier in November that sales growth could slow down, despite its record profits, due to China’s performance in 2024. The Munich-based industrial group said profit margins in its industrial business reached 15.4%, with sales growth hitting 11% in the past fiscal year ending in September.

The fact that sales in 2024 are expected to grow between 4% and 8% demonstrates moderately weak expectations for Siemen’s industrial automation business, which has performed very well in China. The reason may be attributed to various problems that China is experiencing at the moment. As Busch said, “The property market was overheated, private consumption is not picking up after the pandemic as we had hoped. The global economy is weak, which is a problem for a country that exports a lot. The ageing population also plays a role.”  However, demand in the automation business will increase again and especially in China, but this will happen in the second half of 2024. The flat growth expectations from Siemens are based on this assumptill raise its dividend to €4.70 a share. Its share price rose almost 15% in 2023.

Transformation into a tech company

In the last two years, Siemens has succeeded in changing into a tech company dedicated to developing industrial digital tools and several high-margin businesses.

Despite selling its 50% stake in its home appliances joint venture to Bosch, Siemens retains stakes in many of its previous companies, including a 25% stake in Siemens Energy.

Siemens Energy remains separate and not under the control of Siemens. After it reported a full-year net loss of €4.6 billion, it had agreed to a €15 billion government rescue plan. As part of the rescue plan, Siemens will buy an 18% stake in an Indian joint venture for €2.1 billion from its former energy unit. Berlin will provide the company with €7.5 billion in credit guarantees. Banks will lend €12 billion to help support Siemens Energy’s order book. The package will offer liquidity to help Siemens Energy defend its credit rating and solve issues at its wind unit. 

Siemens Energy’s Profits Surge after Sale of Indian affiliate

The German renewables firm reported €1.58 billion ($1.7 billion) net profit, after it sold its 18% stake in India’s Siemens Limited for €2.1 billion.

Siemens Energy posted a 23.9% year-on-year increase in orders to €15.4 billion, with its order backlog reaching a whooping €118 billion. Siemens Energy’s orders increased 23.9% year-on-year to €15.4 billion. Revenue rose 12.6% year-on-year to €7.6 billion, with its grid technologies division performing especially well. Profit before special items came in at €208 million beating the previous year’s loss of €282 million. Free cash flow was negative €283 million due to Siemens Gamesa’s high cash outflow.

Siemens Energy experienced a very difficult year in 2023, after issues with Siemens Gamesa which led to a €4.6 billion loss for the fiscal year. The wind turbine division is undergoing an investigation into quality issues.

Siemens Energy Chief Financial Officer Maria Ferraro told CNBC on Wednesday (7 February 2024) that Siemen’s momentum across its businesses and the increase in orders demonstrate the solid path that the company is on and is especially encouraging.

She explained that “We continue to work through our Siemens Gamesa quality issues and we saw that this quarter was a stable quarter, so as expected, and step by step we’re going to be looking at all of those quality issues and rectifying those.” Orders in the grid technologies division increased 32.9% to €8.24 billion.

She added: “We have just shy of 42 billion in backlog in our Siemens Gamesa business — this is also a record order backlog. Half of that approximately is in our offshore business, and as we said we are ramping up across our facilities to really ensure that we facilitate executing those orders. I think it’s no doubt that each and every country is looking at how do they progress their energy and their green agenda, and certainly our grid technologies business is excellently poised to really benefit from those programs, and you’re seeing that in quarter one and hopefully continuing throughout the rest of our fiscal year.”

Investors call for Siemens to simplify operations

According to Reuters (7 February 2024), two of Siemens’s (SIEGn.DE) largest investors have called for the German group to simplify its operations by reducing investments in Siemens Energy and Siemens Healthineers.

German fund manager Union Investment and Deka Investment, an asset manager for Germany’s unlisted banks, have argued that Siemens’s complexity has hurt its share price.

Despite its strong operational performance in 2023, Siemens’s total shareholder return was lower than many of its competitors. By reducing its stakes in Siemens Energy and Siemens Healthineers, Siemens will be able to streamline its operations. Union Investment said Siemens’s profit margins were affected by its Mobility business.

Portfolio manager Vera Diehl explained: “I know all the long history of Siemens and the company’s attachment to its various divisions, but it’s time to let its children go.”

Siemens said it would continue to reduce its Energy stake but wanted to remain the majority shareholder in Healthineers. By sharing its technology, keeping joint services and managing purchase and supply chains with other parts of its businesses, Siemens said will be able to keep costs down.

Exención de responsabilidad:
Esta información no debe considerarse asesoramiento o recomendación sobre inversiones, sino una comunicación de marketing. IronFX no se hace responsable de datos o información de terceros en esta comunicación, ya sea por referencia o enlace.