Siemens AG
Siemens in the first quarter 2005 (October 1, 2004 to December 31, 2004)
-- Net income rose 38% compared to the first quarter a year earlier, reaching
1.001 billion or 1.12 per share.
-- Group profit from Operations rose to 1.433 billion from 1.361 billion in
the prior-year period.
-- Orders of 21.537 billion were up 5% year-over-year, and sales of 18.167
billion were nearly level with the first quarter a year earlier.
-- Net cash from operating and investing activities was a negative 2.305
billion, including 1.5 billion in supplemental cash pension contributions.
Net cash also includes increases in net working capital and acquisitions
aimed at future growth.
"I am very satisfied with the first quarter of fiscal 2005. The earnings growth
in Operations is in line with our expectations," said Siemens CEO Heinrich v.
Pierer. "Revenue growth is typically slow in our first fiscal quarter. Depending
on exchange rate developments, we expect higher turnover growth than in the past
year."
"For fiscal 2005, we expect that the Groups known for their strong margins will
continue on their successful paths. Similarly, Industrial Solutions and
Services, Logistics and Assembly Systems, and Siemens Building Technologies are
moving toward their respective margin targets. Furthermore, we anticipate that
Transportation Systems will return to profitability for the full year. Earnings
for the Information and Communications Groups are expected to be influenced by
non-operating effects arising from, among other things, strategic reorientation
of business activities. Nevertheless we are directing all our efforts toward
increasing comparable net income* for the full fiscal year."
*) Comparable net income in fiscal 2004: 3.002 billion (net income of 3.405
billion excluding a pretax gain of 590 million on sale of Infineon shares plus
related 246 million reversal of deferred tax liability, less a goodwill
impairment of 433 million).
For the first quarter of fiscal 2005, ended December 31, 2004, Siemens reported
net income of 1.001 billion, up 38% compared to the same quarter of fiscal
2004. Basic and diluted earnings per share rose to 1.12 and 1.08,
respectively, from 0.82 and 0.78 per share a year earlier. Group profit from
Operations rose 5%, to 1.433 billion, including a gain from the sale of a
portion of shares held in Juniper Networks, Inc. Strong earnings came from
Automation and Drives (A&D), Medical Solutions (Med), Power Generation (PG),
Siemens VDO Automotive (SV) and Osram. In the Information and Communications
business area, Communications (Com) more than offset losses in its mobile phone
business with the Juniper gain, and Siemens Business Services (SBS) reported a
loss in a weak operating environment. Results for these two Groups confirm the
need for additional measures that will enable them to achieve their margin
targets.
Finance and Real Estate activities contributed 137 million in income before
income taxes, and Corporate Treasury activities yielded 104 million primarily
from derivatives not qualifying for hedge accounting. While income taxes for the
quarter were higher than a year earlier, the effective tax rate was lower.
First-quarter orders rose 5% for Siemens worldwide, to 21.537 billion.
International orders were up 7% year-over-year, compared to a 3% decline in
orders in Germany. Within international orders, a decline in Europe was more
than offset by growth in other regions, including a major locomotive order in
China and a large power plant order in Bahrain. Sales for Siemens worldwide were
18.167 billion for the quarter, down 1% year-over-year. International sales
were level with the prior year, compared to a 5% decline in Germany. Within
international sales, lower revenues in Europe were more than offset by rising
sales in other regions. For Siemens worldwide, the net effect of acquisitions
and dispositions added four percentage points to order growth and three
percentage points to sales growth, whereas currency translation effects cut two
percentage points from growth in both orders and sales.
In the first quarter, Operations used 2.298 billion in net cash in operating
and investing activities compared to 1.493 billion in net cash used in the same
period a year earlier. The change is due primarily to increases in net working
capital and cash used in acquisitions aimed at future growth. Supplemental
pension plan contributions were also higher in the current period, totaling
1.496 billion compared to 1.255 billion a year earlier. Financing and Real
Estate and Corporate Treasury activities used net cash of 7 million compared to
net cash provided of 302 million a year earlier. In aggregate, operating and
investing activities for Siemens worldwide used net cash of 2.305 billion in
the first quarter, compared to net cash used of 1.191 billion in the prior-year
period.
Operations in the first quarter of fiscal 2005
Information and Communications
Communications (Com)
First quarter
-----------------------------------------------
% Change
( in millions) 2005 2004 Actual Comparable*
-------------------------------------------------------------------------
Group profit 240 174 38%
Group profit margin 5.7% 3.8%
-------------------------------------------------------------------------
Sales 4,243 4,567 (7)% (6)%
New orders 4,670 4,779 (2)% (2)%
-------------------------------------------------------------------------
* Excluding currency translation effects of (2)% and (1)% on sales and
orders, respectively, and portfolio effects of 1% on sales and orders.
At the beginning of the first quarter of fiscal 2005, Siemens combined its
Information and Communication Networks (ICN) and Information and Communication
Mobile (ICM) Groups into a single Group, called Communications (Com). Prior-year
results have been recast into the new structure for purposes of comparison. In
the first quarter, Com had sales of 4.243 billion and orders of 4.670 billion
compared to 4.567 billion and 4.779 billion, respectively, a year earlier.
Group profit of 240 million at Com was due primarily to a gain of 208 million
from sales of a portion of its shares in Juniper Networks, Inc. The Mobile
Devices business (formerly Mobile Phones) saw sales drop to 1.170 billion from
1.486 billion year-over-year, and lost 143 million compared to a profit of 64
million a year earlier. Unit volume in the Christmas quarter was 13.5 million
handsets, down from 15.2 million in the prior-year period, and average selling
price also declined year-over-year, from 98 to 86.
Siemens Business Services (SBS)
First quarter
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% Change
( in millions) 2005 2004 Actual Comparable*
-------------------------------------------------------------------------
Group profit (25) 44
Group profit margin (2.0)% 3.6%
-------------------------------------------------------------------------
Sales 1,256 1,210 4% (2)%
New orders 1,850 1,399 32% 15%
-------------------------------------------------------------------------
* Excluding currency translation effects of (1)% on sales and orders
and portfolio effects of 7% and 18% on sales and orders, respectively.
SBS took in sharply higher orders of 1.850 billion in the first quarter,
primarily due to long-term outsourcing contracts partly involving acquisitions.
Sales of 1.256 billion for the quarter included a new outsourcing contract with
the BBC in the U.K. The change in Group profit year-over-year was due primarily
to an unfavorable revenue mix, and severance charges.
Automation & Control
Automation and Drives (A&D)
First quarter
-----------------------------------------------
% Change
( in millions) 2005 2004 Actual Comparable*
-------------------------------------------------------------------------
Group profit 262 221 19%
Group profit margin 12.1% 10.8%
-------------------------------------------------------------------------
Sales 2,157 2,050 5% 7%
New orders 2,433 2,200 11% 12%
-------------------------------------------------------------------------
* Excluding currency translation effects of (3)% and (2)% on sales and
orders, respectively, and portfolio effects of 1% on sales and orders.
A&D led all Groups with 262 million in first-quarter Group profit. Sales
increased 5% to 2.157 billion. Sales growth was broad-based among A&D's
divisions and also balanced between the Group's domestic and international
markets. First-quarter orders rose 11% to 2.433 billion, as A&D continued to
augment its established business in Europe and the U.S. with fast growth in the
Asia-Pacific region.
Industrial Solutions and Services (I&S)
First quarter
-----------------------------------------------
% Change
( in millions) 2005 2004 Actual Comparable*
-------------------------------------------------------------------------
Group profit 20 15 33%
Group profit margin 1.7% 1.5%
-------------------------------------------------------------------------
Sales 1,183 997 19% 5%
New orders 1,466 1,129 30% 17%
-------------------------------------------------------------------------
* Excluding currency translation effects of (3)% on sales and orders
and portfolio effects of 17% and 16% on sales and orders, respectively.
I&S posted first-quarter Group profit of 20 million, up from 15 million a year
earlier. Earnings in the current period benefited from the Group's entry into
the water systems market via its USFilter acquisition in the fourth quarter of
fiscal 2004. The acquisition also enabled I&S to show substantial increases in
first-quarter sales and orders, which rose to 1.183 billion and 1.466 billion,
respectively.
Logistics and Assembly Systems (L&A)
First quarter
-----------------------------------------------
% Change
( in millions) 2005 2004 Actual Comparable*
-------------------------------------------------------------------------
Group profit 38 (37)
Group profit margin 6.6% (6.8)%
-------------------------------------------------------------------------
Sales 579 542 7% 12%
New orders 592 861 (31)% (28)%
-------------------------------------------------------------------------
* Excluding currency translation effects of (4)% and (2)% on sales and
orders, respectively, and portfolio effects of (1)% on sales and orders.
L&A's first-quarter orders were 592 million, below the level of the prior-year
period, which included a large order in the Middle East. First-quarter sales
rose 7%, to 579 million. Group profit of 38 million included significant
positive effects from foreign exchange derivatives not qualifying for hedge
accounting. The Group anticipates offsetting effects in coming quarters. For
comparison, the prior-year quarter included 33 million in contract charges.
Siemens Building Technologies (SBT)
First quarter
-----------------------------------------------
% Change
( in millions) 2005 2004 Actual Comparable*
-------------------------------------------------------------------------
Group profit 49 39 26%
Group profit margin 4.9% 3.8%
-------------------------------------------------------------------------
Sales 1,010 1,040 (3)% 0%
New orders 1,088 1,105 (2)% 1%
-------------------------------------------------------------------------
* Excluding currency translation effects.
SBT posted Group profit of 49 million, up from 39 million in the first quarter
a year earlier, due to a gain on the sale of an investment and improvements in
the Group's cost position. Sales and orders of 1.010 billion and 1.088
billion, respectively, were stable year-over-year on a comparable basis.
Power
Power Generation (PG)
First quarter
-----------------------------------------------
% Change
( in millions) 2005 2004 Actual Comparable*
-------------------------------------------------------------------------
Group profit 214 245 (13)%
Group profit margin 13.6% 12.9%
-------------------------------------------------------------------------
Sales 1,578 1,902 (17)% (17)%
New orders 2,485 2,676 (7)% (9)%
-------------------------------------------------------------------------
* Excluding currency translation effects of (2)% on sales and orders
and portfolio effects of 2% and 4% on sales and orders, respectively.
Orders at PG were 2.485 billion, including a major order in Bahrain and the
first large order for PG's new Wind Power division following its acquisition of
Bonus Energy A/S. A year earlier, first-quarter orders included an exceptionally
large order in Finland. Sales of 1.578 billion in the first quarter came in
lower than prior-year sales of 1.902 billion. PG's Group profit of 214 million
included 29 million in cancellation gains and a significant earnings
contribution from its services business. For comparison, Group profit a year
earlier was 245 million.
Power Transmission and Distribution (PTD)
First quarter
-----------------------------------------------
% Change
( in millions) 2005 2004 Actual Comparable*
-------------------------------------------------------------------------
Group profit 52 51 2%
Group profit margin 6.2% 6.2%
-------------------------------------------------------------------------
Sales 834 820 2% (3)%
New orders 1,093 1,020 7% 5%
-------------------------------------------------------------------------
* Excluding currency translation effects of (3)% and (4)% on sales and
orders, respectively, and portfolio effects of 8% and 6% on sales and
orders, respectively.
PTD posted Group profit of 52 million in the first quarter, including a
positive contribution from the Group's acquisition of Trench Electric Holding
between the periods under review. This acquisition also positively influenced
sales and orders, which rose to 834 million and 1.093 billion, respectively.
Transportation
Transportation Systems (TS)
First quarter
-----------------------------------------------
% Change
( in millions) 2005 2004 Actual Comparable*
-------------------------------------------------------------------------
Group profit 20 32 (38)%
Group profit margin 2.0% 3.1%
-------------------------------------------------------------------------
Sales 1,014 1,049 (3)% 0%
New orders 1,230 1,020 21% 26%
-------------------------------------------------------------------------
* Excluding currency translation effects of (1)% on sales and orders
and portfolio effects of (2)% and (4)% on sales and orders,
respectively.
TS posted Group profit of 20 million in the first quarter compared to 32
million in the same period a year earlier. Both periods included charges in the
Group's rolling stock business, at a significantly lower level than in
intervening quarters. Sales of 1.014 billion came in lower than in the first
quarter a year earlier, due primarily to sharply reduced investment in rail
projects in Germany. TS responded by winning significant new orders
internationally, including major contracts in China, the U.K., and Vietnam. As a
result, first-quarter orders rose 21% year-over-year, to 1.230 billion.
Siemens VDO Automotive (SV)
First quarter
-----------------------------------------------
% Change
( in millions) 2005 2004 Actual Comparable*
-------------------------------------------------------------------------
Group profit 144 100 44%
Group profit margin 6.3% 4.9%
-------------------------------------------------------------------------
Sales 2,285 2,039 12% 3%
New orders 2,294 2,039 13% 4%
-------------------------------------------------------------------------
* Excluding currency translation effects of (2)% on sales and orders
and portfolio effects of 11% on sales and orders.
SV's first-quarter sales and orders reached 2.285 billion and 2.294 billion,
respectively. Growth was driven by acquisitions, primarily an automotive
electronics unit in the U.S. With a larger revenue base and more favorable
revenue mix, SV was able to increase Group profit to 144 million from 100
million in the same period a year earlier.
Medical
Medical Solutions (Med)
First quarter
-----------------------------------------------
% Change
( in millions) 2005 2004 Actual Comparable*
-------------------------------------------------------------------------
Group profit 215 327 (34)%
Group profit margin 13.0% 19.8%
-------------------------------------------------------------------------
Sales 1,656 1,648 0% 5%
New orders 2,030 1,891 7% 12%
-------------------------------------------------------------------------
* Excluding currency translation effects.
Med delivered Group profit of 215 million, up slightly year-over-year excluding
portfolio transactions that added 116 million to first-quarter Group profit a
year earlier. Sales were level year-over-year while orders rose 7%, to 2.030
billion, on strength in Med's imaging systems business. Both business volume and
earnings were adversely affected by currency effects.
Lighting
Osram
First quarter
----------------------------------------------
% Change
( in millions) 2005 2004 Actual Comparable*
------------------------------------------------------------------------
Group profit 120 109 10%
Group profit margin 11.1% 10.2%
------------------------------------------------------------------------
Sales 1,083 1,073 1% 5%
New orders 1,083 1,073 1% 5%
------------------------------------------------------------------------
* Excluding currency translation
effects.
Osram increased first-quarter Group profit 10%, to 120 million, as higher
capacity utilization helped raise the Group's earnings margin nearly a full
percentage point year-over-year. Osram continued to expand internationally,
particularly in Asia-Pacific, increasing first-quarter revenues to 1.083
billion.
Other Operations
Other Operations consist of centrally held equity investments and other
operating businesses that are not related to a Group. Equity earnings from joint
ventures, particularly BSH Bosch und Siemens Hausger�te GmbH, were the primary
contributor to first-quarter earnings from Other Operations, which increased to
84 million from 41 million in the same period a year earlier.
Corporate items, pensions and eliminations
Corporate items, pensions and eliminations improved to a negative 271 million
in the first quarter from a negative 357 million in the same period a year
earlier. Corporate items totaled a negative 146 million compared to a negative
174 million in the prior-year period. Centrally carried pension expense also
was lower year-over-year. This was due primarily to supplemental pension
funding, which increased pension plan assets and expected returns, and also to
lower amortization of unrecognized net losses in the current quarter compared to
the prior-year period.
Financing and Real Estate
Siemens Financial Services (SFS)
First quarter
--------------------------------------
( in millions) 2005 2004 % Change
-----------------------------------------------------------------------
Income before income taxes 99 57 74%
-----------------------------------------------------------------------
Dec. 31, Sept. 30,
2004 2004
-----------------------------------------------------------------------
Total assets 9,109 9,055 1%
-----------------------------------------------------------------------
Income before income taxes at SFS was 99 million compared to 57 million in the
first quarter a year earlier, including higher earnings in the Group's Equipment
and Sales Financing division and a gain on the sale of an investment. In
contrast, SFS took higher provisions against receivables in the first quarter a
year earlier. Assets rose slightly compared to the end of fiscal 2004, despite
negative currency translation effects.
Siemens Real Estate (SRE)
First quarter
--------------------------------------
( in millions) 2005 2004 % Change
-----------------------------------------------------------------------
Income before income taxes 38 54 (30)%
-----------------------------------------------------------------------
Sales 384 385 0%
-----------------------------------------------------------------------
Dec. 31, Sept. 30,
2004 2004
-----------------------------------------------------------------------
Total assets 3,504 3,455 1%
-----------------------------------------------------------------------
Income before income taxes at SRE was 38 million compared to 54 million in the
first quarter a year earlier, due in part to lower occupancy rates.
Eliminations, reclassifications and Corporate Treasury
Income before income taxes from Eliminations, reclassifications and Corporate
Treasury was 104 million compared to a negative 2 million in the same period a
year earlier. The difference was due primarily to significantly higher positive
effects from derivatives not qualifying for hedge accounting, related mainly to
management of interest rate risk in both euros and U.S. dollars.
Income statement highlights for Siemens worldwide in the first quarter 2005
Siemens reported net income for the first quarter of 1.001 billion, up 38% from
726 million in the first quarter a year earlier. All three components of
Siemens worldwide increased their contribution to net income, which also
benefited from a lower effective tax rate compared to the prior-year period.
For Siemens worldwide, first-quarter gross profit margin increased to 30.8% from
29.8% a year earlier. A majority of the Groups in Operations improved their
gross profit year-over-year, led by A&D, L&A, and I&S. These gains more than
offset a volume-driven decline in gross profit at Com. Research and development
expenses were nearly unchanged at 6.8% of sales. Marketing, selling and general
administrative expenses rose to 19.4% of sales, compared to 18.3% in the
prior-year period, mainly due to higher expenses at I&S, Com, and SBS.
Other operating income was a net 17 million in the first quarter, compared to
99 million a year earlier. The prior-year period included gains from
dispositions, particularly at Med. Income from investments in other companies
was a net 144 million, up from 105 million in the same period a year earlier.
Income (expense) from financial assets and marketable securities was a net gain
of 299 million compared to a net expense of 38 million in the prior-year
period, due primarily to a gain of 208 million at Com from the sale of a
portion of its shares in Juniper Networks, Inc.
Sales and order trends for the first quarter 2005
Sales for Siemens worldwide in the first quarter of fiscal 2005 were 18.167
billion, nearly level with 18.329 billion in the same period a year earlier.
Orders for Siemens worldwide increased 5% to 21.537 billion compared to 20.490
billion in the prior year, primarily on the strength of international business.
On a comparable basis, excluding the net effect of acquisitions and dispositions
and currency translation effects, orders were up 3% and sales declined 2%
year-over-year.
In Germany, sales of 4.171 billion and orders of 4.492 billion came in 5% and
3% lower, respectively, than the prior-year period. International sales remained
stable, at 13.996 billion, while international orders increased 7%, to 17.045
billion. China was a key source of international growth. Sales in China were up
3% year-over-year, to 645 million, and orders surged 56%, to 1.109 billion,
including a major order for new locomotive engines. This in turn kept
first-quarter sales for the broader Asia-Pacific region nearly level with the
prior year, at 2.014 billion, while sending first-quarter Asia-Pacific orders
up 30% year-over-year, to 2.893 billion. The U.S. was another strong driver of
international growth. Despite significant negative currency translation effects,
U.S. sales in the first quarter rose 11% to 3.402 billion, while orders climbed
23% year-over-year, to 3.729 billion. In Europe outside Germany, sales and
orders were 6.246 billion and 6.845 billion, respectively, lower than in the
prior year.
Liquidity for the first quarter 2005
Within Operations, operating and investing activities used net cash of 2.298
billion, compared to net cash used of 1.493 billion in the prior year. The
change is primarily due to international growth, involving both higher net
working capital in existing businesses and higher cash used for acquisitions,
including Bonus Energy A/S. Both periods include supplemental cash contributions
to Siemens pension plans, totaling 1.496 billion in the current quarter and
1.255 billion in the prior-year period.
The two other components of Siemens worldwide, which include Financing and Real
Estate and Corporate Treasury activities, used net cash in operating and
investing activities of 7 million in the first quarter of fiscal 2005. These
components provided net cash of 302 million in the prior-year period, primarily
from positive effects related to intra-company financing. In aggregate, net cash
used in operating and investing activities for Siemens worldwide in the first
quarter was 2.305 billion compared to net cash used of 1.191 billion a year
earlier.
Funding status of pension plans
The funding status of Siemens' principal pension plans on December 31, 2004
improved significantly compared to the end of the prior fiscal year, with an
underfunding of approximately 1.0 billion compared to an underfunding of
approximately 3.1 billion at September 30, 2004. The improvement in funding
status is due to supplemental and regular contributions and a
higher-than-expected actual return on plan assets in the first quarter. The
return on plan assets during the last three months amounted to 779 million.
This represents a 17.8% return on an annualized basis, compared to an expected
annualized return of 6.7%.
Economic Value Added
Beginning in fiscal 2005, Siemens adjusted its calculation of Economic Value
Added (EVA), in particular the weighted average cost of capital (WACC) for our
Operations Groups, to better correspond to the current operating environment. On
a consistent calculation basis, EVA for Siemens worldwide was significantly
improved in the first quarter primarily due to substantially higher earnings.
Subsequent event
During the first quarter, Siemens made a tender offer to acquire a majority
interest in VA Technologie AG of Austria ("VA Tech"). Following the close of the
first quarter, Siemens revised the terms of its offer and made it conditional on
acquiring at least 90% of VA Tech shares.
Starting today at 10 a.m. CET, we will provide a live video webcast on the
internet of Chairman of the Supervisory Board Dr. Karl-Hermann Baumann's, CEO
Dr. Heinrich v. Pierer's and CFO Heinz-Joachim Neub�rger's speeches to the
Annual Shareholders' Meeting at the Olympic Hall in Munich, Germany. You can
access the webcast at www.siemens.com/press/agm. A video of the speeches will be
available after the live webcast. Starting at 8:30 a.m. CET, Siemens CFO
Heinz-Joachim Neub�rger will hold a conference with analysts and investors. You
can follow the conference live on the internet by going to
www.siemens.com/analystconference.
This document contains forward-looking statements and information - that is,
statements related to future, not past, events. These statements may be
identified by words as "expects," "anticipates," "intends," "plans," "believes,"
"seeks," "estimates," "will" or words of similar meaning. Such statements are
based on our current expectations and certain assumptions, and are, therefore,
subject to certain risks and uncertainties. A variety of factors, many of which
are beyond Siemens' control, affect its operations, performance, business
strategy and results and could cause the actual results, performance or
achievements of Siemens worldwide to be materially different from any future
results, performance or achievements that may be expressed or implied by such
forward-looking statements. For us, particular uncertainties arise, among
others, from changes in general economic and business conditions, changes in
currency exchange rates and interest rates, introduction of competing products
or technologies by other companies, lack of acceptance of new products or
services by customers targeted by Siemens worldwide, changes in business
strategy and various other factors. More detailed information about certain of
these factors is contained in Siemens' filings with the SEC, which are available
on the Siemens website, www.siemens.com and on the SEC's website, www.sec.gov.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from
those described in the relevant forward-looking statement as anticipated,
believed, estimated, expected, intended, planned or projected. Siemens does not
intend or assume any obligation to update or revise these forward-looking
statements in light of developments which differ from those anticipated.
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