27 Jan 2009
Jan. 27 (Bloomberg) -- Siemens AG, Europe's largest engineering company, reported first-quarter profit that beat analyst estimates and said 2009 sales will at least equal last year's total.Earnings at the industry, energy and health-care divisions, referred to as sector profit, gained 20 percent to 2 billion euros ($2.6 billion), Munich-based Siemens said today. Analysts had predicted 1.83 billion euros. Orders dropped 8 percent to 22.2 billion euros, in line with estimates.
Siemens will avoid a slump in sales this year, even as the global economy contracts, Chief Financial Officer Joe Kaeser said today at a press conference. The company is sticking to its 2009 profit goals, boosted by orders from government economic stimulus packages for infrastructure, savings from purchasing improvements and its planned 16,750 job cuts.
"On the earnings front, the numbers look really good," said Frank Rothauge, an analyst at Sal Oppenheim Jr & Cie. who advises investors to hold the shares. "When you look at orders, the industry division was weak, though energy made up for that."
Siemens, which makes trains and hearing aids, gained as much as 5.7 percent to 46 euros in Frankfurt trading and was at 45.07 euros as of 9:10 a.m. local time. Siemens has lost 38 percent in six months, cutting its market value to 40.9 billion euros. General Electric Co., the No. 1 maker of power-plant turbines, locomotives and medical-imaging equipment, has slid 55 percent. The U.S. company last week posted a decline in quarterly earnings and sales.
Efficiency Expert
Siemens Chief Executive Officer Peter Loescher is counting on new board member Barbara Kux to deliver savings from more efficient purchasing of components and materials. The company's full-year profit goal has become "more ambitious," he said today. Siemens already announced plans to save 1.2 billion euros by 2010 as it targets margins equal to GE and France's Alstom SA.
Quarterly sales at the German manufacturer increased 7 percent to 19.6 billion euros, topping predictions.
Cost cuts may not be enough as the global financial crisis hurts demand for automation equipment and electric motors. The industry division, which makes light bulbs and control panels for factories, missed analyst estimates for profit in the first quarter and Siemens said weaker demand was noticeable throughout its businesses.
A strong order backlog will help the company meet its 2009 target for sector profit of 8 billion euros to 8.5 billion euros, the CEO said.
Better Prepared
"We are staying on course in an environment that has become even more challenging," Loescher told reporters at a press conference in Munich today. "We are feeling the impact as well. However, we are better prepared than others."
With cash to spend, Siemens views the global financial crisis as an opportunity to expand its main divisions through bolt-on acquisitions, Loescher said at a briefing last month. GE is struggling to convince investors that the company can maintain its annual dividend and triple-A credit rating after it posted a 43 percent decline in fourth-quarter profit on Jan. 23. The stock fell 11 percent.
"This confirms our scenario, which called for tough times in the industry segment being countered by the energy and healthcare sector," Michael Busse, an analyst at Landesbank Baden-Wuerttemberg who rates the stock "hold," said in a note to clients today.
Net income at Siemens dropped 81 percent to 1.2 billion euros in the quarter following a year-earlier gain of 5.4 billion euros from the sale of its VDO automotive unit to Continental AG.
