Siemens AG
Press Presse Prensa
For the business and financial press
Lisbon, April 27, 2005
Siemens in the second quarter (January 1 to March 31) of fiscal 2005
-- Net income was 781 million, resulting in earnings per share of 0.88.
-- Reported net income of 1.210 billion in the prior-year period included
significant effects, primarily a gain on the sale of shares in Infineon
Technologies AG. Excluding these effects, the prior-year result was 807
million.
-- Group profit from Operations was 1.098 billion, up from 1.076 billion in
the second quarter a year ago.
-- Orders rose 5% year-over-year, to 20.674 billion, and sales increased 4%,
to 18.563 billion.
-- Net cash from operating and investing activities was a negative 193
million. A year earlier, net cash from operating and investing activities
was a positive 3.565 billion, including net proceeds of 1.794 billion from
the sale of Infineon shares.
As we expected, most of our Groups delivered good performance in the second
quarter, especially considering the modest economic growth in European markets.
This goes most of all for our top earnings performers. Taken together, these
Groups showed solid progress which should continue through the rest of the
fiscal year. The acquisitions weve announced will expand the competitive
position of these businesses and further strengthen the growth opportunities for
our entire company, said Siemens CEO Klaus Kleinfeld. In addition, the three
smaller Groups in the Automation and Control business area clearly improved
their earnings compared to the prior year and continue to move toward their
margin targets.
Against this generally positive background we intensified the restructuring
measures in our Information and Communications Groups, as part of the previously
announced strategic reorientation of their businesses, Kleinfeld continued.
These measures will continue and lead to further charges, which from todays
standpoint we cant specify as to amount or timing. The goal, however, is clear:
to position our Information and Communications activities for the future, while
keeping in mind the interests of our customers, suppliers, and employees.
For the second quarter of fiscal 2005, ended March 31, 2005, Siemens reported
net income of 781 million and basic and diluted earnings per share of 0.88 and
0.84, respectively. In the second quarter a year earlier, net income was 1.210
billion and basic and diluted earnings per share were 1.36 and 1.30,
respectively. Prior-year results included a 590 million pretax gain on the sale
of shares in Infineon plus a related 246 million reversal of deferred tax
liability, partly offset by a 433 million goodwill impairment. Excluding the
net result of these effects, 403 million, net income in the prior-year period
was close to the level in the current period.
Group profit from Operations in the second quarter rose 2% year-over-year, to
1.098 billion. Top earnings performers included Automation and Drives (A&D),
Power Generation (PG), Medical Solutions (Med), Siemens VDO Automotive (SV),
Osram and Power Transmission and Distribution (PTD). Transportation Systems (TS)
was in the black. Communications (Com) posted a loss, primarily due to its
Mobile Devices business, while the negative result at Siemens Business Services
(SBS) included significant charges arising from strategic reorientation
measures.
Financing and Real Estate activities contributed 124 million in income before
income taxes in the second quarter, up from 111 million a year earlier.
Corporate Treasury activities contributed 77 million compared to 128 million
in the prior-year period.
Second-quarter sales were up 4% year-over-year, to 18.563 billion, and orders
increased 5%, to 20.674 billion. Excluding currency translation effects and the
net effect of acquisitions and dispositions, sales and orders increased 1%
compared to the second quarter a year earlier. International sales rose 8%,
compared to a 7% decline in Germany. Within international sales, growth in the
Americas and Asia-Pacific regions outpaced growth in Europe. International
orders were up 5% year-over-year, compared to 3% growth in Germany. Within
international orders, the primary growth driver was Asia-Pacific with an 16%
rise.
Operations used 490 million in net cash from operating and investing activities
in the second quarter, including a build-up of net working capital and higher
capital expenditures. In the second quarter a year earlier, net cash provided of
2.719 billion included net proceeds of 1.794 billion from the sale of Infineon
shares. Financing and Real Estate and Corporate Treasury activities provided net
cash of 297 million in the second quarter, compared to net cash provided of
846 million in the same period a year earlier. For Siemens as a whole,
operating and investing activities used net cash of 193 million, compared to
3.565 billion in net cash provided in the prior-year period.
Operations in the second quarter of fiscal 2005
Information and Communications
Communications (Com)*
Second quarter
% Change
( in millions) 2005 2004 Actual Comparable**
Group profit (19) 146
Group profit margin (0.5)% 3.5%
Sales 4,000 4,196 (5)% (6)%
New orders 4,084 4,402 (7)% (7)%
* Com includes the activities of Siemens former Information and Communication Networks
(ICN) and Information and Communication Mobile (ICM) Groups, which were combined into a
single Group at the beginning of the fiscal year. Prior-year results have been recast into
the new structure for purposes of comparison.
** Excluding currency translation effects of (1)% on orders, and portfolio effects of 1% on
sales and orders.
Com posted a loss of 19 million in the second quarter, due primarily to the
Mobile Devices business which had a loss of 138 million (prior year: positive
13 million). Second-quarter sales were 4.000 billion and orders were 4.084
billion, compared to 4.196 billion and 4.402 billion, respectively, a year
earlier. Revenue growth in the Mobile Networks and Fixed Networks businesses was
more than offset by lower demand at Mobile Devices, where handset volume of 9.3
million units (prior year: 12.8 million) generated sales of 842 million (prior
year: 1.243 billion).
Siemens Business Services (SBS)
Second quarter
% Change
( in millions) 2005 2004 Actual Comparable*
Group profit (129) 26
Group profit margin (10.0)% 2.3%
Sales 1,284 1,121 15% 6%
New orders 1,549 1,334 16% (7)%
* Excluding portfolio effects of 9% and 23% on sales and orders, respectively.
A loss of 129 million at SBS in the second quarter included 63 million in
charges for capacity adjustments and disposal of its Sinitec business, arising
from implementation of ongoing restructuring measures. Long-term outsourcing
contracts, partly involving acquisitions, pushed sales up 15%, to 1.284
billion, and orders up 16%, to 1.549 billion.
Automation and Control
Automation and Drives (A&D)
Second quarter
% Change
( in millions) 2005 2004 Actual Comparable*
Group profit 277 235 18%
Group profit margin 12.3% 11.2%
Sales 2,258 2,102 7% 8%
New orders 2,352 2,180 8% 9%
* Excluding currency translation effects.
A&D again led all Groups with 277 million in second-quarter Group profit.
Further increases in productivity and capacity utilization improved A&Ds
earnings margin more than a full point year-over-year, to 12.3%. Sales rose 7%
to 2.258 billion, including double-digit growth in the Americas and
Asia-Pacific regions. Order growth for the quarter was broad-based, rising 8%
from the prior-year level to 2.352 billion.
Industrial Solutions and Services (I&S)
Second quarter
% Change
( in millions) 2005 2004 Actual Comparable*
Group profit 41 26 58%
Group profit margin 3.5% 2.6%
Sales 1,169 983 19% 6%
New orders 1,291 1,085 19% 7%
* Excluding currency translation effects of (2)% on sales and orders, and portfolio effects
of 15% and 14% on sales and orders, respectively.
Second-quarter sales and orders at I&S rose 19% year-over-year, to 1.169
billion and 1.291 billion, respectively, reflecting the Groups USFilter
acquisition between the periods under review. Second-quarter Group profit of 41
million also benefited from the acquisition.
Logistics and Assembly Systems (L&A)
Second quarter
% Change
( in millions) 2005 2004 Actual Comparable*
Group profit 7 (30)
Group profit margin 1.3% (6.0)%
Sales 536 503 7% 13%
New orders 866 761 14% 18%
* Excluding currency translation effects of (3)% and (2)% on sales and orders,
respectively, and portfolio effects of (3)% and (2)% on sales and orders, respectively.
L&A recorded Group profit of 7 million in the second quarter on broad-based
earnings improvement. For comparison, the loss in the prior-year period was
burdened by charges related to excess capacity and project cost overruns.
Second-quarter sales rose 7%, to 536 million, while orders climbed 14%, to 866
million, including large contracts in Europe and Asia-Pacific.
Siemens Building Technologies (SBT)
Second quarter
% Change
( in millions) 2005 2004 Actual Comparable*
Group profit 22 16 38%
Group profit margin 2.1% 1.6%
Sales 1,030 996 3% 1%
New orders 1,128 1,030 10% 7%
* Excluding currency translation effects of (2)% on sales and orders, and portfolio effects
of 4% and 5% on sales and orders, respectively.
Second-quarter Group profit at SBT rose to 22 million from 16 million a year
earlier, reflecting improvement in the Groups cost position. Sales of 1.030
billion were up 3% from the prior-year level, while orders rose 10% to 1.128
billion on strong demand in the Security Systems division.
Power
Power Generation (PG)
Second quarter
% Change
( in millions) 2005 2004 Actual Comparable*
Group profit 257 274 (6)%
Group profit margin 12.7% 16.0%
Sales 2,024 1,713 18% 14%
New orders 2,515 2,414 4% 4%
* Excluding currency translation effects of (2)% on sales and orders, and portfolio effects
of 6% and 2% on sales and orders, respectively.
PG generated Group profit of 257 million in the second quarter, including a
positive contribution from equity investment income. Group profit in the
prior-year period benefited from the release of accruals associated with project
completion. Second-quarter sales of 2.024 billion included services growth and
the acquisition of the Groups Wind Power business between the periods under
review. Two major contracts in Spain, for components and service, fueled the
increase in second-quarter orders, which reached 2.515 billion.
Power Transmission and Distribution (PTD)
Second quarter
% Change
( in millions) 2005 2004 Actual Comparable*
Group profit 61 63 (3)%
Group profit margin 6.9% 7.9%
Sales 890 793 12% 6%
New orders 1,229 907 36% 31%
* Excluding currency translation effects of (2)% on sales and orders, and portfolio effects
of 8% and 7% on sales and orders, respectively.
Second-quarter orders climbed 36%, to 1.229 billion, on a broad-based increase
in new business including large orders in China and the Middle East. Sales of
890 million, up 12% year-over-year, benefited from the Groups acquisition of
Trench Electric Holding between the periods under review. Second-quarter Group
profit at PTD was 61 million compared to 63 million a year earlier.
Transportation
Transportation Systems (TS)
Second quarter
% Change
( in millions) 2005 2004 Actual Comparable*
Group profit 4 (289)
Group profit margin 0.4% (28.4)%
Sales 940 1,017 (8)% (8)%
New orders 1,011 1,121 (10)% (10)%
* No currency translation effects and portfolio effects.
TS posted second-quarter Group profit of 4 million compared to a loss of 289
million in the prior-year period, when technical issues in the Groups rolling
stock business required TS to take substantial charges. Sales of 940 million
came in below prior-year levels. Orders were 1.011 billion, as growth in
Asia-Pacific only partially offset lower orders in Europe.
Siemens VDO Automotive (SV)
Second quarter
% Change
( in millions) 2005 2004 Actual Comparable*
Group profit 160 128 25%
Group profit margin 6.8% 5.9%
Sales 2,348 2,162 9% 0%
New orders 2,343 2,160 8% (1)%
* Excluding currency translation effects of (1)% on sales and orders, and portfolio effects
of 10% on sales and orders.
SVs second-quarter sales and orders were 2.348 billion and 2.343 billion,
respectively. As demand softened on an industry-wide basis, volume growth
year-over-year was driven by acquisitions between the periods under review,
including 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 160
million from 128 million in the same period a year earlier.
Medical
Medical Solutions (Med)
Second quarter
% Change
( in millions) 2005 2004 Actual Comparable*
Group profit 218 228 (4)%
Group profit margin 12.3% 13.3%
Sales 1,774 1,708 4% 7%
New orders 1,923 1,736 11% 15%
* Excluding currency translation effects of (3)% and (4)% on sales and orders,
respectively.
In the second quarter, Med contributed 218 million in Group profit in the
highly competitive market for medical solutions. On the strength of its core
diagnostic imaging businesses, Med increased second-quarter sales to 1.774
billion, up 4% year-over year, and took in orders of 1.923 billion, 11% higher
than in the second quarter a year earlier. Excluding currency translation
effects, growth in sales and orders was even stronger.
Lighting
Osram
Second quarter
% Change
( in millions) 2005 2004 Actual Comparable*
Group profit 117 116 1%
Group profit margin 11.1% 10.7%
Sales 1,057 1,088 (3)% 0%
New orders 1,057 1,088 (3)% 0%
* Excluding currency translation effects of (3)% on sales and orders.
Osram increased Group profit to 117 million on the strength of higher-margin
new products and tight cost control. These factors enabled the Group to improve
its earnings margin despite softening demand that held Osrams sales at 1.057
billion, level with the prior year excluding negative currency translation
effects.
Other Operations
Other Operations consist of centrally held equity investments and other
operating businesses not related to a Group. These activities contributed 82
million in Group profit in the second quarter, compared to 137 million in the
same period a year earlier. The decline was driven by lower equity earnings from
joint ventures, particularly at BSH Bosch und Siemens Hausger�te GmbH.
Corporate items, pensions and eliminations
Corporate items, pensions and eliminations were a negative 290 million in the
second quarter, compared to a negative 108 million in the same period a year
earlier. The difference is due primarily to effects in the second quarter a year
earlier, when a centrally taken goodwill impairment of 433 million related to
L&A was more than offset by a pre-tax gain of 590 million on the sale of
Infineon shares. Higher expenses for corporate items in the current period were
partially offset by a decrease in centrally carried pension expense
year-over-year.
Financing and Real Estate
Siemens Financial Services (SFS)
Second quarter
( in millions) 2005 2004 % Change
Income before income taxes 90 66 36%
March 31, Sept. 30,
2005 2004
Total assets 9,123 9,055 1%
Income before income taxes at SFS was 90 million, up from 66 million in the
second quarter a year earlier, due primarily to a special dividend related to an
investment held by the Equity division. Assets rose slightly compared to the end
of fiscal 2004 despite negative currency translation effects.
Siemens Real Estate (SRE)
Second quarter
( in millions) 2005 2004 % Change
Income before income taxes 34 45 (24)%
Sales 404 399 1%
March 31, Sept. 30,
2005 2004
Total assets 3,448 3,455 0%
Income before income taxes at SRE was 34 million compared to 45 million in the
second quarter a year earlier, due to lower income from rental activities and
property disposals in the weak domestic commercial real estate market.
Eliminations, reclassifications and Corporate Treasury
Income before income taxes from Eliminations, reclassifications and Corporate
Treasury activities was 77 million in the second quarter of fiscal 2005,
compared to 128 million in the same period a year earlier. The difference was
primarily due to lower income from derivatives not qualifying for hedge
accounting.
Income statement highlights in the second quarter
Siemens reported second-quarter net income of 781 million. Net income of 1.210
billion in the same quarter a year earlier benefited from a pre-tax gain of 590
million on the sale of Infineon shares plus a related 246 million tax benefit,
partially offset by a 433 million goodwill impairment.
Gross profit margin was 28.9% in the second-quarter, up from 28.6% a year
earlier. A majority of the Groups in Operations achieved a gross profit
improvement year-over-year, overcoming a decline in gross profit in the I&C
Groups. Research and development expenses were 7.2% of sales compared to 7.0% in
the second quarter a year ago, while marketing, selling and general
administrative expenses as a percent of sales moved lower, to 17.9% of sales
from 18.1% in the prior-year period.
Other operating income (expense), net was a negative 23 million in the second
quarter, compared to negative 423 million a year earlier. The prior-year period
included the goodwill impairment mentioned above. Income from investments in
other companies was 212 million, compared to 777 million in the same period a
year earlier, which included the Infineon share sale gain.
Income and earnings per share in the first six months
Net income for the first six months of fiscal 2005 was 1.782 billion. A year
earlier, first-half net income of 1.936 billion included the net benefit of the
share sale and goodwill effects mentioned above. Group profit from Operations
for the first six months was 2.531 billion, up 4% compared to 2.437 billion in
the prior year. Basic earnings per share were 2.00 and diluted earnings per
share were 1.91 for the current period, compared to 2.17 and 2.08,
respectively, in the first half a year earlier.
Sales and order trends for the first six months
Sales in the first six months of fiscal 2005 were 36.730 billion, a 2% increase
from 36.123 billion in the prior-year period. Orders increased 5%, from 40.206
billion to 42.211 billion, primarily on growing demand in the Americas and
Asia-Pacific. Excluding the net effects of acquisitions and dispositions and
currency translation effects, orders were up 3% and sales remained stable
year-over-year.
International sales rose 4%, to 28.653 billion, and orders increased 6%, to
33.628 billion. In contrast, sales in Germany declined 6% year-over-year, to
8.077 billion, while acquisitions between the periods under review kept orders
in Germany level with the prior year, at 8.583 billion. In Europe outside
Germany, sales declined 2%, to 12.336 billion, and orders slid 3%, to 14.064
billion. The weakness in European markets was more than offset by growth in the
Americas and Asian-Pacific regions. Within the Americas, sales in the U.S. in
the first half increased 10%, to 6.806 billion, and orders climbed 12%, to
7.357 billion, as organic growth and acquisitions combined to more than offset
negative currency translation effects. Sales in Asia-Pacific increased 3%, to
4.436 billion, while orders climbed 22%, to 5.902 billion. Within
Asia-Pacific, first-half sales in China were down 3%, at 1.276 billion. Orders
in China surged to 2.120 billion, up 39% year-over-year, including major orders
at TS, L&A, PG and PTD.
Liquidity for the first six months
Within Operations, operating and investing activities used net cash of 2.788
billion in the first half of fiscal 2005. Net cash provided in the same period a
year earlier, 1.226 billion, included 1.794 billion in net proceeds from the
sale of Infineon shares. The change year-over-year is also attributable to
increases in net working capital in existing businesses and higher cash used for
acquisitions. Both periods included supplemental cash contributions to Siemens
pension plans, totaling 1.496 billion in the first half of fiscal 2005 and
1.255 billion in the first half a year earlier.
The two other components of Siemens, consisting of Financing and Real Estate and
Corporate Treasury activities, provided net cash from operating and investing
activities of 290 million in the first six months of fiscal 2005. The
difference relative to net cash provided of 1.148 billion in the prior-year
period is primarily due to a build-up of assets at SFS and lower proceeds from
intracompany hedging activities at Corporate Treasury. In aggregate, net cash
used in operating and investing activities for Siemens in the first six months
was 2.498 billion compared to net cash provided of 2.374 billion a year
earlier.
Funding status of pension plans
The funding status of Siemens' principal pension plans on March 31, 2005
improved significantly compared to the end of the prior fiscal year, with an
underfunding of approximately 1.1 billion compared to an underfunding of
approximately 3.1 billion at September 30, 2004. The improvement in funding
status is mainly due to both supplemental and regular contributions plus a
higher than expected actual return on plan assets during the first six months.
The return on plan assets during the last six months amounted to 936 million.
This represents a 10.1% return on an annualized basis, compared to an expected
annualized return of 6.7%.
Economic Value Added
Economic Value Added (EVA) in the first half of fiscal 2005 was positive but
below the level a year earlier. Excluding Infineon and the goodwill impairment
mentioned above, EVA improved compared to the prior year.
Starting today at 10 a.m. CET, we will provide a live video webcast of the
semiannual press conference with CEO Dr. Klaus Kleinfeld and CFO Heinz-Joachim
Neub�rger. You can access the webcast at www.siemens.com/pressconference. You
will also be able to download the speeches and the presentation. Starting at
3:00 p.m. CET, Siemens CEO Dr. Klaus Kleinfeld and 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 such 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 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, 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 SECs 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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