Siemens AG is reaping the benefits of a deep shift to efficiency-boosting software that helps reduce the carbon footprint of its industrial customers and drives automation among a global shortage of skilled workers.
The German industrial behemoth raised its outlook for a second time in fiscal 2023 after revenue and orders jumped with the company’s main businesses pairing industrial products with digital solutions driving the result. The company is sitting on a record order backlog of €105 billion ($114 billion) due to strong demand, while protracted supply-chain shortages are finally easing.
“In regards to climate change, we have to drive up efficiency and get our energy consumption down,” Chief Executive Officer Roland Busch said Wednesday in an interview with Bloomberg Television. “We believe we are sitting on a supercycle with a portfolio serving mega trends like climate change, urbanization or aging societies with less and less labor.”
Adressable Market
Siemens sees an addressable market of around €175 billion over the next five years for its three major units, Busch said in a call with reporters, with 60% of this potential growth in the U.S, the European Union, China and India. The company’s Digital Industries, Smart Infrastructure and Mobility divisions make products like factory automation devices and software, as well as solutions to track carbon emissions of commercial buildings and electric trains and rail infrastructure.
The manufacturer is profiting form a major strategic reset of its business, shedding heavy-duty equipment in favor of software-driven product lines with higher profitability levels. It has sold many of its smaller divisions, alongside spinoffs of businesses like gas turbine maker Siemens Energy AG and health-care equipment manufacturer Siemens Healthineers AG.
The German company now sees comparable revenue growth of 9% to 11% for the year, up from between 7% to 10%, Siemens said Wednesday, also driving a rise in expected earnings per share. After a surge in demand during the fiscal second quarter, Siemens said orders are set to normalize during the second half.
“We are sitting on a record high order backlog, which gives us very good visibility on fiscal 2023 and into 2024,” said in the interview. “We see a normalization of order intake, which is good as want to go back to better delivery times.”
For the second half of the fiscal year, Siemens expects revenue from its order bank alone of €30 billion. The shares were up 2.5% at 10:40 a.m. in Frankfurt trading, the most since March, pushing gains this year to 18%.
“A strong set of numbers by Siemens, with the results and upbeat outlook in line with those of its peers,” RBC analyst Mark Fielding said in a note. This “should encourage consensus to drift upwards.”
Mixed Picture
At Siemens’s main divisions, digital industries and smart infrastructure, the picture was more mixed. While profit surged, orders at the unit making factory products and related digital services fell 10%. The company still raised its profit margin outlook for digital industries to as much as 23.5%, up from as much as 22%.
At smart infrastructure, with strong demand for data center products, orders rose 9%, and Siemens also boosted expectations for revenue and returns.
During the fiscal second quarter, comparable revenue rose 15% to €19.4 billion, beating analyst estimates of €18.7 billion. Net income rose to €3.48 billion, above analyst estimates of €3.1 billion. Siemens’ bottom line profited from an €1.59 billion accounting gain related to the partial impairment reversal on its stake in Siemens Energy.
--With assistance from Oliver Crook.
Author: Wilfried Eckl-Dorna
