Siemens launches strategy overhaul
Number of industrial businesses cut to 3
MUNICH: German trains-to-turbines group Siemens AG launched its biggest strategy overhaul in four years yesterday, aimed at making it more nimble and profitable in the digital industrial age beyond the reign of current chief executive Joe Kaeser.
Siemens reported industrial profit slightly ahead of expectations in the three months to the end of June, helped by another strong performance by its Digital Factory industrial automation unit that compensated for a slump in power and gas.
But the figures were overshadowed by the Munich-based company’s unveiling of its new Vision 2020+ strategy, which will trim its number of industrial businesses to three from five, giving them more autonomy.
“Our aspiration is to create a company that is not only successful today, but well prepared for the decade to come,” said Kaeser, who is due to step down in 2021 from the group that began as a telegraph technology business in the 19th century.
“We will shift from a one-size-fits all set-up to a purpose-driven and marketfocused set-up that can readily create and adapt to disruption and foster consolidation, the 61-year-old told a news conference in Munich.
Kaeser, who has hived off Siemens’ wind power and train businesses into joint ventures and listed its medical technology unit on the stock exchange, said there was no plan to float any of the three new operating companies.
Siemens shares fell 4.8% to the bottom of Germany’s blue-chip DAX as analysts asked whether the measures, designed to lift profitability by two percentage points from the company’s current 11-12% target, were tough enough.
“In contrast to our expectations the Vision 2020+ press release does not include a dedicated restructuring programme to address Siemens’ group overhead (headquarters), just saying it will be considerably leaner including employee transfer to other units,” wrote Baader Bank analysts, keeping their “buy” rating.
Industrial conglomerates like Siemens — whose activities span industrial software to medical scanners — have become increasingly unloved by investors, who favour companies with simpler businesses they can more easily value.
Siemens stock has underperformed that of industrial peers, with its shares losing 0.3% over the last 12 months, compared with an 8.6% gain by the Stoxx Europe 600 Industrial Average.
Rivals including Switzerland’s ABB Group have come under pressure from shareholders to separate weaker businesses, while General Electric Co is spinning off its health-care business and divesting its stake in oil-services firm Baker Hughes.
The Siemens overhaul also triggered management changes, with Lisa Davis, an American who was brought in with the 2015 acquisition of Dresser-Rand Group, taking charge of the new Gas and Power operating company and being offered an extended contract.
Chief technology officer Roland Busch becomes chief operating officer, a signal he could be a rival to board member Michael Senn to eventually replace Kaeser, who has led Siemens since 2013.
Siemens said its industrial profit rose 2% to €2.21 billion ($2.6 billion) in the three months to the end of June, just ahead of an average forecast for €2.18 billion in a Reuters poll of analysts.
Revenue fell 4% to €20.47 billion, missing expectations of €20.73 billion, but orders increased 16% to a better-thanexpected €22.8 billion.
During April-June the Power and Gas business reported a 56% slump in profit, with Siemens citing “ongoing adverse markets” as customers switch from fossil fuels to renewable energy sources, although orders jumped 54%.
During the quarter it sold only five large gas turbines, and Siemens said there could be further declines in the market.
But the downturn was compensated by the continued strong growth in Siemens Digital Factory industrial automation unit, which delivered the fastest profit increase of all Siemens’ industrial businesses.
The division, the jewel in Siemens crown, increased profit by 54% during the quarter, helped by strong growth in revenues China and the United States.