Long In Awe of GE, Siemens Emerges From U.S. Rival's Shadow

Date : 11/08/2018 @ 10:20AM
Source : Dow Jones News
Stock : General Electric Company (GE)
Quote : 7.84  0.0 (0.00%) @ 9:26AM

Long In Awe of GE, Siemens Emerges From U.S. Rival's Shadow

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By Ruth Bender 

BERLIN -- Siemens AG on Thursday said it would raise its dividend after solid full-year results in the latest example of how the German engineering giant, after years of living in the shadow of rival General Electric Co., is beginning to outshine its U.S. nemesis.

Siemens, whose management for years used the much larger GE as their benchmark, has faced many of the same challenges that have affected the U.S. group -- investor pressure to streamline its structure, slowing demand in its power business -- yet its latest figures show it has generally been faster and more successful at addressing them.

While GE last month slashed its quarterly dividend to a token penny a share to preserve the little cash it currently generates for restructuring the company, Siemens said Thursday it would raise its fiscal-year dividend by 10 euro cents to EUR3.8 a share and announced a share-buyback program.

Shares of Siemens were up nearly 2% in afternoon trading.

Like other conglomerates, the German group has come under pressure to streamline its businesses and extract more value from its vast array of activities under pressure from investors who have fallen out of love with the once mighty manufacturers of everything.

But while GE has been grappling with tumbling results and management crises, Siemens has been reaping the first rewards of longstanding restructuring efforts in recent years to back further transformations.

"We have reached a lot with Vision 2020," Siemens Chief Executive Joe Kaeser told reporters at its annual results press conference, referring to the group's plan toward better profitability and reminding of time when Siemens was in a much weaker spot. "We have a clear plan that we are implementing consistently and carefully."

Mr. Kaeser has led an effort to refocus the sprawling conglomerate since he took over as CEO in 2013, shedding underperforming businesses to focus on a narrower selection of more profitable units, cutting thousands of jobs and slashing costs across the board.

In August, Siemens said it would combine its current five industrial businesses to three -- essentially power turbines and gas, manufacturing software and automation, and infrastructure. Under the new structure, to take effect at the end of March 2019, Siemens units will get more autonomy to make decisions but also carry more responsibility for meeting financial targets.

Mr. Kaeser also listed the medical technology unit Siemens Healthineers AG, moved Siemens' wind-power business into a joint venture with a Spanish rival to form Siemens Gamesa Renewable Energy SA and is planning to merge its trains activities with France's Alstom SA.

The CEO, whose term runs until 2021, said the decision to float Healthineers had been vindicated by a 36% share-price gain since the new stock started trading.

"This shows that pure plays in today's world have a totally different significance," Mr. Kaeser said. "Medical technology has very impressively used the freedom we gave them."

While GE's shares have lost over 50% since the beginning of the year, Siemens shares have dropped some 11%.

Analysts say Siemens has been taking steps in the right direction to draw more value out of a company that is still doing business in a number of areas with little overlap.

But some have criticized the August restructuring announcement as low on details, for instance about how much it would save by reducing head-office functions. Others argue Siemens could go further, for example by merging or selling its troubled power business, which has been hit by a sharp fall in demand for large gas turbines.

Jefferies analyst Peter Reilly said Siemens future "remains more obscure than we would like" after the company Thursday failed to provide more details on its current internal reorganization.

The short-term cost associated with any large-scale restructuring was apparent in Siemens's latest quarterly results. Fourth-quarter net profit nearly halved to EUR681 million ($780.2 million) from EUR1.25 billion a year earlier because of charges related to job cuts at the power and gas business. Revenue edged up to EUR22.61 billion from EUR22.22 billion, driven by all businesses except the power unit.

For the full fiscal year, which for Siemens ends Sept. 30, the company posted flat net profit of EUR6.12 billion.

In addition to raising its dividend, Siemens said it would launch a EUR3 billion share-buyback program that will run until November 2021.

Write to Ruth Bender at Ruth.Bender@wsj.com

 

(END) Dow Jones Newswires

November 08, 2018 10:05 ET (15:05 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.

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