Large orders boost Siemens' earnings
Siemens posts significantly better results in the last quarter compared to a year ago - but one key segment continues to struggle with weak demand.
Siemens benefited from large orders for industrial software in the spring, offsetting the struggling automation business. Siemens CEO Roland Busch said the company as a whole had grown profitably. "The industrial automation business remains challenging," he added. This business has been a concern for Siemens for some time. The Digital Industries division, which includes the automation business, is feeling the global hesitation of customers in making investments, and inventories are full. Accordingly, orders for automation technology decreased.
The division received 20% more orders overall, thanks to the thriving business with software licenses. Now, the division generates 20% of its revenue from software - profits in this area surged by over 80% in the past year.
Group-wide, revenue increased by 5% to €18.9 billion in the last quarter, Siemens announced. Industrial business profit rose by 11% to €3 billion. Analysts surveyed by the company had predicted earnings of €18.9 billion and an industrial business profit of €2.8 billion.
Orders from China increase
The Digital Industries segment is usually the star performer in the Siemens group, but currently, the automation business there is suffering from weak demand and poor capacity utilization. Along with full inventories, business is also tougher for customers. However, orders from the important market of China have increased.
This current weakness does not seem to harm the head of Digital Industries, Cedrik Neike. The day before the results were announced, Siemens revealed that his contract had been extended until 2030. Neike is seen as a potential long-term successor to the current CEO Busch. The other major segment, Smart Infrastructure (SI), performed well across the board, with particularly strong business in the US. The smaller railway division, Mobility, also performed solidly.
Projection confirmed, but slightly more cautious
Given the current situation, Siemens has confirmed its projection for the rest of its fiscal year, which ends in September. However, the division between the strong-performing Smart Infrastructure segment and the struggling Digital Industries is also evident here: while the margin for DI is expected to be at the lower end of the previously indicated range, it is expected to be at the upper end for SI.
Orders were 15% below the previous year's level, but higher than analysts had predicted. This was mainly due to a significant decrease in orders in the Mobility division: in 2023, the area received an order worth €2.5 billion for a turnkey railway system from Egypt and a second order for S-Bahn trains worth €2.1 billion from Germany.
The increase in orders from China is a positive development for the Digital Industries segment, despite the segment's current struggles with weak demand and full inventories. The division's revenue has benefited from a 20% increase in software orders, resulting in 20% of its revenue now coming from software sales, with profits in this area surging by over 80% in the past year.
