Siemens lifts profit forecast, adapts to low-growth world

(Reuters) – German industrial group Siemens (NYSE:SI) raised its full-year earnings forecast for the 2nd time this year after large energy projects helped to take its 3rd-quarter results above expectations and sent its shares to a 12-month high.

Siemens reported growth in orders and sales that outpaced those of its main rivals despite global political uncertainty that is dampening customers’ appetite to invest in areas from oil and gas to industrial plants and transport projects.

A switch in focus to helping customers save money through smarter automation and maintenance of existing equipment was allowing Siemens to profit in a low-growth global environment, said Chief Executive Joe Kaeser.

“The whole world is not so much about capex and expansion — it’s about efficiency,” he told analysts on a conference call on Thursday.

Kaeser credited strong execution, cost discipline and improvements in underperforming businesses for quarterly increases of 9% in orders, 7% in sales and 20% in industrial profit.

That compares with a decline in sales and orders at Swiss engineering group ABB, a 16% drop in new orders at U.S. rival General Electric and a sales forecast cut by U.S. industrial automation provider Rockwell.

Siemens expects annual earnings per share of 6.50 to 6.70 euros, up from a previous forecast of 6.00 to 6.40 euros.

“We are leaders in growth at present but there is still a great deal to do,” Kaeser told reporters on a conference call.

Since taking over as CEO three years ago, Kaeser has sold a number of Siemens’ remaining consumer businesses, stripped out layers of management and made large acquisitions in industrial software and energy, including Spanish wind farm builder Gamesa in a deal agreed last month.

NEW WORLD ORDER

Siemens’ profit from its industrial units rose by a fifth to 2.19 billion euros ($2.44 billion) in the quarter to the end of June, easily beating the average forecast of 2.06 billion euros in a Reuters poll.

The industrial profit margin rose to 10.8% of sales from 9.5% a year earlier, close to the upper end of Siemens’ 10-11% target range.

“The Q3 report was better than expected,” DZ Bank analyst Alexander Hauenstein, who rates Siemens “buy”, wrote in a note.

“The transformation of the conglomerate continues.”

By 0845 GMT, Siemens shares were up 4.2% to 100.85 euros, topping Germany’s blue-chip DAX, which was up 0.7%.

Siemens raised its cost-savings estimate for the year to the end of September to 950 million to 1 billion euros from 850 to 950 million previously as it continued to cut support and administrative spending in its individual businesses.

It gave no targets beyond September but Kaeser said the group would need to continue to respond rapidly to a world beset by risks illustrated by recent mass attacks in Nice and Munich, an attempted coup in Turkey and Britain’s vote to leave the European Union.

“Disorder is the new world order,” he said.

Siemens’ jump in orders was helped by large turbine deals in the Americas, a 1.4 billion-pound ($1.9 billion) UK offshore wind farm contract and a large transformer order from China.

Order intake rose 12% in China, 11% in the United States and 2% in Europe on a comparable basis.

Weak points were plant-engineering division Process Industries and Drives, which suffered from low demand in commodity-related industries, and healthcare unit Healthineers, where investments in innovation curbed the profit margin.

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