Siemens forecasts modest sales growth as speeds up cost cuts

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August 6, 2020

ZURICH Siemens expects a “modest” improvement in orders and revenue in the months ahead, as the German engineering group tackles the coronavirus downturn by speeding up cost savings.

Although the trains to industrial software-maker reported lower sales and orders on Thursday, it raised earnings ahead of forecasts as it cut costs and benefited from an accounting gain.

Chief Executive Joe Kaeser said he was seeing some signs of improvement in markets like China and Germany, although the situation in United States remained uncertain.

Like other industrial companies including France’s Schneider Electric and Switzerland’s ABB, Siemens has been hit by factory and office shutdowns introduced to prevent the spread of the coronavirus.

Siemens’ business supplying the food and beverage sector and data centres were also doing well, Kaeser said, driven by factors like the rise in video conferencing during the pandemic.

“We expect modest sequential growth in both orders and revenues,” Kaeser told reporters, adding that this would be the case particularly in its flagship factory automation unit Digital Industries.

“We do expect a decent quarter in Q4 … But we will certainly not see year over year growth,” he added, referring to the July to September period.

Kaeser, who has led Siemens since 2013, will step down in February and deputy CEO Roland Busch will take charge from Oct. 1, the start of the company’s 2021 business year.

During the May to June period, Siemens increased operating profit at its industrial business by 8% to 1.79 billion euros ($2.13 billion), beating analyst forecasts for 1.17 billion euros in a company-gathered consensus.

The result was helped by a 211 million euro gain in the valuation of Siemens’ stake in American industrial software firm Bentley Systems, offsetting declines elsewhere.

Although lower, sales and orders also beat forecasts and shares in Siemens were up 2.6% at 0956 GMT, making them the best performing industrial stock in Europe.

Jefferies analyst Simon Toennessen called the earnings a “strong beat” and the industrial software business – where sales increased 11% a “star performer”.

Siemens said it was accelerating cost savings to deal with the downturn and would maintain its policy of paying out 40% to 60% of its after-tax profits to shareholders.

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($1 = 0.8422 euros)

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Siemens forecasts modest sales growth as speeds up cost cuts

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