Siemens Boosted by Innomotics Sale, but Weak Automation Weighs
Earnings Jump, Forecast Maintained
Munich, Germany – Technology conglomerate Siemens kicked off 2023 with a significant earnings boost, largely driven by the sale of its Innomotics subsidiary. However, operational results declined due to ongoing weakness in the automation sector, although early signs of improvement are emerging. The management team maintained its annual forecast amid progress in key markets.
"The €3.1 billion inflow from the Innomotics sale reinforces our solid financial position," said Siemens AG CFO Ralf Thomas. After taxes, net income surged to €3.9 billion in the three months to December, a sharp rise from €2.6 billion in the same period of the previous year.
Industrial Business Struggles
In contrast to the overall earnings performance, the industrial business segment saw an 8% drop in earnings to €2.5 billion in the first quarter compared to the year-ago period. The largest contributors to the segment’s results were the Smart Infrastructure (SI) and Siemens Healthineers businesses. The company highlighted the "high momentum" in industrial artificial intelligence.
Revenue Grows, Automation Lags
Overall revenue rose by 3% on a comparable basis to nearly €18.4 billion, excluding currency and portfolio effects. Siemens outperformed analyst expectations on both earnings and revenue. SI and Healthineers were the primary growth drivers. However, the Digital Industries (DI) division, which encompasses automation and software, experienced a double-digit percentage decline in revenue. Siemens continues to grapple with weak demand and high inventory levels in automation, particularly in Europe and China.
Signs of Improvement in China
Despite the challenges in automation, Siemens reports progress in reducing inventory levels in China. The company expects stockpiles in the Chinese market to normalize by the end of the second quarter.
Forecast Unchanged
CEO Roland Busch expressed cautious optimism about the company’s prospects, noting that "we expect a gradual improvement in our industrial business, particularly in Digtal Industries." The management team reiterated its full-year guidance, including a 6-8% increase in comparable revenue and an adjusted basic earnings per share of €6.60-€7.40.
Analyst Commentary
Analysts have mixed views on Siemens’ performance and outlook. Some praise the strong financial position and the potential for improvement in automation. Others remain concerned about the lingering weakness in the industrial sector and the impact of geopolitical uncertainties.
Conclusion
Siemens’ first-quarter results reflect a tale of two businesses: a strong performance bolstered by Innomotics’ sale and a struggling automation division. However, the company appears to be making progress in addressing inventory challenges in China. While the annual forecast remains intact, the path to recovery in automation will be closely watched by investors and analysts alike.
