Siemens Weathers Storm With Factories Staying Open in Pandemic

(Bloomberg) -- Siemens AG sent its share price higher with a reduced sales forecast that investors viewed as better than feared amid the industrial malaise caused by the coronavirus pandemic.

The European giant was able to keep factories running during a time when many manufacturing plants were forced to close doors, even as government-imposed measures to fight the virus affected many customers. Profit still fell at all divisions and the Munich-based company predicted a moderate decline in full-year sales and was unable to make a call on earnings.

“The challenges posed by the coronavirus crisis are clearly noticeable, but our financial stability puts us in a good position to handle them,” Chief Financial Officer Ralf Thomas told reporters in a call. The company said the downturn has reached its nadir, even if it’s impossible to predict the timing of a recovery.

The shares gained 5.2% to 88.68 euros as of 11:28 a.m. in Frankfurt, reducing a decline for the year to 24%.

The pandemic has sent European economies into a tailspin, with the euro-region forecast to contract 7.7% this year, forcing unemployment and public debt higher. Industrial production dropped 9.2% in March in Germany, presaging grimmer figures for April when millions of people were mostly confined to their homes.

Siemens has so far avoided large-scale factory shutdowns due to long-term contracts making trains and turbines, but the company is a supplier to many industries that have been directly affected. The group’s digital-industries division, seen as a bellwether for German industrial demand, is a major supplier to carmakers such as Volkswagen AG, which have seen operations suspended as dealerships closed across Europe.

‘Better Than Feared’

Profit from the unit fell 21% to 585 million euros ($634 million), but this “was better than feared, and also ahead of competitors,” Morgan Stanley analyst Ben Uglow said in a note. He later hailed an “encouraging call,” with management.

While quarterly revenue held up in part due to the performance of Siemens’ health division, other industrial companies haven’t fared so well. General Electric Co. announced Monday it would cut 13,000 jobs from its jet-engine division, adding to reductions the company had announced in March. ABB Ltd. warned the pandemic could crush a fragile recovery in China, its second-largest market.

Siemens sits at the intersection of Germany’s industrial heartland, supplying factory automation equipment to companies ranging from family-owned businesses to the world’s largest automakers. The company is seeking about 3 billion euros from a new credit line to help the company through the virus crisis.

The collapse in the price of crude has hurt Siemens’ gas and power business, which supplies drives, compressors and other transmission equipment to the sector. The division will be spun off into a new company called Siemens Energy that will also include the firm’s stake in wind-power unit Siemens Gamesa Renewable Energy SA.

The spinoff is scheduled to take place by September, and Siemens stuck to that timing Friday. The company will pause a 3 billion-euro share buyback due to end in November 2021 while it completes the process.

Siemens also plans to separate its Flender unit, which makes drives used in wind turbines and other large generators. The company will fold another wind energy business into Flender and spin off the combined entity next year.

©2020 Bloomberg L.P.