Siemens Lifts Guidance as China-Led Recovery Gains Momentum

Siemens AG raised its revenue and profit guidance for the year, the latest sign that Europe’s biggest engineering company is benefiting from a strengthening global recovery being led by China.

Siemens now sees net income rising to 5.7 billion euros ($6.9 billion) to 6.2 billion euros, from a previous range of of 5 billion euros to 5.5 billion euros for the fiscal year that ends in September. It also predicted revenue growth between 9% and 11%, up from the mid- to high-single-digit expansion projected previously.

“There is strong momentum,” Chief Executive Officer Roland Busch said in an interview with Bloomberg TV.

The guidance increase -- the company’s second this year -- provides a boost to Busch as he presents his first set of quarterly results after taking over from Joe Kaeser. Kaeser spent years overhauling the sprawling industrial conglomerate, hiving off major assets to better focus on core areas including industrial applications and the so-called digital factory.

Siemens Lifts Guidance as China-Led Recovery Gains Momentum

In the fiscal second quarter, net income surged to 2.39 billion euros from 697 million euros a year earlier. The figures got a 900 million-euro boost from closing the sale of the Flender mechanical-drive subsidiary to private equity firm Carlyle Group Inc. Revenue gained 9% on a comparable basis to 14.67 billion euros, underpinned by gains at all its main businesses.

“It’s a strong set of numbers,” said Ingo Schachel, an analyst at Commerzbank AG. “Overall a very consistent earnings beat across all segments.”

Siemens gained as much as 2.1% in early Frankfurt trading. The company’s stock has risen about 21% since the start of the year, among the half-dozen best performers on Germany’s benchmark stock index in the period.

Raw Materials

The economic fallout from the coronavirus pandemic and decisions by customers to hold back on investment limited demand for Siemens-built products and weighed on profits last year. Now the U.S. and China, the world’s biggest economies, are driving the recovery, helped by huge stimulus programs.

Discussing possible risks to the recovery, Busch said Siemens was feeling the pinch from rising material costs amid gathering signs of inflation, but the company has so far been able to pass on higher costs to customers. Siemens is less exposed to the chip shortage bedeviling other major German exporters like Volkswagen AG, he said.

What Bloomberg Intelligence Says

Siemens’ raised fiscal 2021 guidance implies stronger sequential 2H organic sales growth, though a less-favorable sales mix and higher costs suggest the company could struggle to exceed 1H’s quarterly adjusted Ebita of 2.2 billion euros.

-- Johnson Imode, BI industrials analyst

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In the reporting period, orders at the mobility unit took an 8% hit, though Siemens said it expects a “massive acceleration” in the second half. The business has struggled as commuters avoid public transport, battering mass-transit budgets and reducing the need for replacements and repairs.

Sales and orders at the other businesses grew in the period, and Siemens said it expects the book-to-bill ratio to remain above 1 for the full year.

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