The flagship digital industries business of Germany’s Siemens was hit by a downturn in the manufacturing sector while its power unit also suffered losses which brought down the company’s first quarter earnings and profits of the company well below the expectations of the market.
There was a huge (30 per cent) dip in the industrial operating profit of the company to 1.43 billion euros ($1.58 billion) because of a slow start to the year, as described by Siemen’s Chief Executive Joe Kaeser. That number was lower than the analysts’ expectations of 1.88 billion euros as a consensus value collected by the company.
And even though there was a slight growth in the revenues of the company at 20.32 billion euros, it still missed market estimates of 20.63 billion euros.
The industrial operating margin, excluding severance payments, for the group dropped to 8.3 per cent from 10.5 per cent in the same period a year ago, said the conglomerate that makes trains as well as factory software. After posting 1.33 euros in earnings per share during the first quarter, the company stuck to its previous guidance of full year earnings to remain within the range of 6.30 to 7.00 euros.
While mentioning about the plans of the company to separate the struggling power and gas business of the company and to merge it with its Gamesa wind power operations, Kaeser said that the weak performance across the company’s energy businesses “reinforces our priorities”.
During the first quarter, there was a 63 per cent drop in the operating profit of the Gas and Power business of the company. On the other hand, a 165 million euro loss was posted by Gamesa, primarily because of project delays due to an early winter onset and inclement weather in northern Europe.
The combined business is planned to be listed by the company by the end of September while the rest of the businesses of the company will be focused on factory automation and smart infrastructure.
1.1 billion euros to acquire the 8.1 per cent stake that the Spanish utility Iberdrola has in Siemens Gamesa will be spent by Siemens as a part of the overhaul, the company announced on Tuesday. The company then plans to transfer the shares to the future Siemens Energy.
There was also a drop in the digital industries business of Siemens during the first quarter as the operating profit dropped by almost a third as the clients of the company in the automotive industry and machinery makers face trouble due to a slowing global economy.
IHS Markit said on Monday that there has been a contraction for 13 straight months in the manufacturing sector of Germany that contributes about one fifth of the economy of the country. It forecast that in the coming months, the spread and impact of the coronavirus outbreak in China is likely to hit exports of the manufacturers sector of Germany – which has already been hit by the trade war between the United States and China.
(Adapted from Reuters.com)