Siemens exceeds expectations despite China weakness

German trains-to-turbines group Siemens beat expectations for its third-quarter results and stuck to its full-year outlook on Thursday despite weakness in China.

Frankfurt: German trains-to-turbines group Siemens beat expectations for its third-quarter results and stuck to its full-year outlook on Thursday despite weakness in China.

The Munich-based group reported solid results in six of its eight divisions, with industrial software and healthcare in particular lifting profits to counter declines in gas turbines and transportation for the quarter to end-June. 

Siemens said it continued to target a full-year profit margin of 10 to 11 percent from its industrial businesses after lifting it to 9.5 percent in the last quarter, from 9.0 percent in the second quarter, still far behind its key rivals.

"We expect to maintain our momentum with a strong closing quarter for fiscal 2015," Chief Executive Joe Kaeser said, noting, however, a softening market environment on the back of weaker Chinese markets.

Finance chief-turned-CEO Kaeser, who has run Siemens for almost two years, introduced the industrial margin measure as a way to benchmark the company against competitors.

General Electric for instance improved its industrial profit margin to 16.2 percent last quarter, while Swiss power and automation group ABB`s core operational margin was 11.7 percent.

Siemens` sales in China fell 8 percent in the quarter and Chinese new orders slid 2 percent. The group noted the effect particularly on its healthcare and industrial software units.

Siemens shares were indicated 1 percent higher ahead of the 0700 GMT Frankfurt market open. "Siemens ... results surprised positively," said analyst Guenther Hollfelder of Baader Bank, which rates Siemens "hold".

JOB CUTS

Kaeser has responded to poor demand, especially in power generation, which has been hurt by Germany`s switch to renewable energy and falling oil prices, by cutting more than 12,000 jobs, about 4 percent of its workforce.

It booked a severance charge of 274 million euros ($300 million) in the quarter. Excluding the charge, of which Siemens attributed 173 million to its industrial businesses, the industrial margin would have been 10.4 percent.

Overall, quarterly results beat expectations with orders down 5 percent, sales down 3 percent and net profit down 2 percent on a comparable basis. Currency effects lifted reported orders by 8 percent and sales by 9 percent.

Industrial business profit rose 1 percent to 1.82 billion euros, beating the company`s own consensus for 1.7 billion euros.

ABB and Dutch group Philips both reported difficult markets last quarter. ABB`s net profit fell 8 percent due to a drop in demand for its oil and gas products, slower-than-expected U.S. business, soft demand from China and a strong dollar.

Philips reported higher quarterly medical equipment sales and improved margins in its consumer and lighting businesses this week but also cautioned that growth was slowing in China and emerging markets.

At Siemens` power and gas unit, which has just closed the $7.6 billion acquisition of U.S. oilfield equipment maker Dresser-Rand, orders fell 22 percent, revenue fell 15 percent and profit fell 47 percent.

Siemens` transportation unit Mobility had a weak quarter due to the timing of large rail projects but it won a 1.6 billion euro Russian train maintenance order in the period.

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