TIDMSIE
Siemens AG
EARNINGS RELEASE Q2 2012 January 1 to March 31, 2012(Munich,
Germany, April 25, 2012)
BROAD-BASED REVENUE GROWTH CONTINUES NSN restructuring and
Transmission charges burden income
Peter Löscher, President and Chief Executive Officer of Siemens
AG
"As expected, the second quarter was not easy. While we achieved
clear growth in revenue, orders came in below the prior year due to
lower volume from large orders. For fiscal 2012, we are on course
to achieve our goals for revenue and orders. Profit for the quarter
was below our expectation due to charges at power transmission
projects in Germany. We are addressing the problems
systematically."
FINANCIAL HIGHLIGHTS:
-- Revenue for the second quarter rose 9% year-over-year, to EUR19.297
billion, including increases in all Sectors and reporting
regions as
well as 11% growth in emerging markets.
-- Orders came in at EUR17.880 billion, 13% below the prior-year period
which included a significantly higher volume from large
orders,
particularly in emerging markets. The book-to-bill ratio for
the
quarter was 0.93, and the order backlog was EUR100 billion.
-- Total Sectors profit was EUR1.929 billion, a strong increase from the
first quarter of fiscal 2012 but well below the prior-year
period
which benefited from a EUR1.520 billion gain from the divestment
of
Siemens' stake in Areva NP (Areva). Total Sectors profit in
the
current period included charges of EUR278 million in the
power
transmission business.
-- Income from continuing operations was EUR1.053 billion, held back by an
equity investment loss of EUR640 million resulting from
restructuring at
Nokia Siemens Networks B.V. (NSN). In contrast, the prior-year
period
benefited from the Areva gain mentioned above.
-- Free cash flow from continuing operations was up year-over-year, at
EUR446 million, on higher cash flows in the Sectors.
ORDERS AND REVENUE
Strong backlog drives continued revenue growth
Revenue grew 9% in the second quarter, including increases in
all Sectors and in all three regions supported by Siemens' strong
order backlog. Orders came in 13% lower, due primarily to
significantly lower volume from large orders compared to the
prior-year period. On an organic basis, excluding currency
translation and portfolio effects, revenue rose 7% and orders
declined 16%. The backlog (defined as the sum of the order backlogs
of the Sectors) was EUR100 billion at the end of the quarter.
Revenue rises in all Sectors and regions
All Sectors delivered revenue growth in the second quarter.
Energy led with double-digit growth, supported by its strong order
backlog. Industry and Healthcare generated clear increases on
broad-based growth across their businesses, and Infrastructure
& Cities contributed a solid increase.
On a geographic basis, revenue rose in all three reporting
regions led by the Americas. The region comprising Europe, the
Commonwealth of Independent States, Africa and the Middle East
(Europe/CAME) and Asia, Australia both posted solid increases.
Emerging markets on a global basis grew faster than revenue
overall, at 11% year-over-year, and accounted for EUR6.168 billion,
or 32%, of total revenue for the quarter.
Lower volume from large orders in Energy
At the Sector level, the decline in orders was due primarily to
Energy, which had a significantly lower volume from large orders in
Germany. Infrastructure & Cities also recorded lower orders,
while orders rose in Healthcare and Industry.
On a geographic basis, lower order intake was most evident in
Germany and emerging markets. Notable examples included a sharp
drop in India and a less severe decline in China. Globally, orders
in emerging markets accounted for EUR5.483 billion, or 31%, of
total orders for the quarter.
INCOME AND PROFIT
Sector profit burdened by charges
Total Sectors profit declined to EUR1.929 billion, from EUR3.695
billion a year earlier. The main factor was Energy, which took
project charges of EUR278 million in its power transmission
business related primarily to grid connections to offshore
wind-farms in Germany. In contrast, the prior-year period benefited
from a EUR1.520 billion pretax gain on the sale of Energy's stake
in Areva. As a result, second-quarter profit at Energy came in at
EUR573 million compared to EUR2.369 billion a year earlier.
Industry led all Sectors with profit of EUR662 million, up from
EUR630 million a year earlier. Infrastructure & Cities also
increased its profit year-over-year, to EUR270 million.
Healthcare's contribution to Total Sectors profit was lower
year-over-year, at EUR424 million, including a strong earnings
performance in the imaging and therapy systems business. The
decline was due mainly to charges related to Healthcare's Agenda
2013 initiative.
NSN restructuring impacts income
Income from continuing operations was EUR1.053 billion, down
from EUR3.174 billion a year earlier, and corresponding basic EPS
declined to EUR1.16 compared to EUR3.58 a year earlier. The
difference was due mainly to lower Total Sectors profit. Equity
Investments recorded a loss of EUR594 million due primarily to a
substantially larger equity investment loss from Siemens' share in
NSN. This was only partly offset by positive results in Corporate
items.
Lower loss from discontinued operations
Net income was EUR1.015 billion compared to EUR2.836 billion a
year earlier. Corresponding basic EPS declined to EUR1.12 compared
to EUR3.20 a year earlier. The primary factor in the change is
lower income from continuing operations as described above.
Discontinued operations posted a loss of EUR38 million due mainly
to the previously announced settlement related to Greece which
burdened income by EUR142 million pretax. For comparison, the loss
of EUR338 million within discontinued operations in the prior-year
period included a loss of EUR345 million related to Siemens IT
Solutions and Services (SIS). In the current period results from
discontinued operations related to SIS was a positive EUR43
million. Income from discontinued operations attributable to OSRAM
declined to EUR28 million compared to EUR87 million a year earlier,
due primarily to previously announced measures to reduce its
capacities for traditional lighting products and to lower operating
results. These factors more than offset positive effects from
cessation of depreciation. OSRAM reported an 8% revenue increase
compared to the second quarter a year earlier, and a 2% growth on
an organic basis.
CASH, RETURN ON CAPITAL EMPLOYED (ROCE), PENSION FUNDED
STATUS
Higher free cash flow at Sector level
Free cash flow from continuing operations rose to EUR446 million
from EUR354 million in the second quarter a year earlier. The
increase was due mainly to higher cash inflows at the Sector level
driven by an increase in Infrastructure & Cities. For
comparison, the prior-year period included higher cash outflows in
connection with personnel-related expenses comprising the
previously disclosed special remuneration for non-management
employees.
Free cash flow from discontinued operations was a negative EUR8
million, up from a negative EUR416 million in the prior-year
quarter. The change year-over-year was due primarily to two
factors. Cash outflows related to SIS were lower compared to the
prior-year period, which included higher payments in connection
with the establishing of SIS as a separate legal group. In
addition, the current period included cash inflows relating to
OSRAM, compared to cash outflows in the prior-year period.
Pension plan underfunding increases
The estimated underfunding of Siemens' pension plans (continuing
operations) as of March 31, 2012 amounted to approximately EUR6.5
billion, compared to an underfunding of approximately EUR5.7
billion at the end of the first quarter. A positive actual return
on plan assets and employer contributions partly offset a
significant increase in Siemens' defined benefit obligation (DBO).
The DBO rose due to a decrease in the discount rate assumption as
of March 31, 2012 and accrued service and interest costs. As of
September 30, 2011, pension plan underfunding amounted to EUR6.2
billion.
ENERGY SECTOR
Strong revenue growth, additional burdens on profit
Energy Sector profit was EUR573 million in the second quarter,
including another strong earnings performance from Fossil Power
Generation. Sector profit was held back by project charges totaling
EUR278 million in the transmission business. In addition, Energy
increased its expenses for R&D, marketing and selling
associated with business expansion. For comparison, profit of
EUR2.369 billion in the prior-year period benefited from the
EUR1.520 billion Areva gain mentioned earlier.
Second-quarter revenue was up 13% year-over-year, as the Sector
continued to convert its large order backlog into current business.
Revenue rose in all three reporting regions, including a
substantial increase in Asia, Australia. Orders came in 32% lower
compared to the prior-year period, when the Sector recorded a much
larger volume from major orders. This comparison effect was
particularly notable in Europe/CAME, where the prior-year period
included a particularly large contract for a combined-cycle power
plant in Saudi Arabia and orders for three offshore wind-farms in
Germany. Due to significantly lower volume from large orders in the
current quarter, the book-to-bill ratio was 0.84 and the Sector's
order backlog was EUR56 billion at the end of the quarter. While
Energy expects its market environment to remain highly competitive,
the Sector expects a book-to-bill ratio above one for the full
fiscal year.
Profit again on a high level supported by strong backlog
Fossil Power Generation delivered EUR501 million in profit,
including increased R&D, marketing and selling expenses
associated with growth. The service business maintained its strong
contribution to profit development. For comparison, profit in the
same period a year earlier benefited from the EUR1.520 billion
Areva gain mentioned above and a more favorable project mix in the
component business, only partly offset by charges of EUR87 million
related to the Olkiluoto project in Finland. Revenue for the second
quarter rose 13% year-over-year on conversion from a strong order
backlog, especially in the solutions business. On a geographic
basis, strong double-digit percentage increases in Asia, Australia
and the Americas more than offset a modest decline in Europe/CAME.
Orders declined 20% compared to the prior-year period, when a
higher volume from large orders included the contract in Saudi
Arabia mentioned above. This comparison effect led to a substantial
decline in orders year-over-year for Europe/CAME, more than
offsetting increases in other regions.
Continued revenue growth, strong profit contribution
The Renewable Energy business, which includes Siemens' Wind
Power and Solar & Hydro Divisions, took its profit up sharply
compared to the prior-year period, to EUR112 million.
Volume-driven earnings growth more than offset higher expenses
for R&D, marketing and selling associated with expansion. The
wind business also drove revenue and order development for
Renewable Energy. Revenue rose sharply, due to conversion of large
orders from prior periods into current business. The current
quarter included a lower volume from large orders, while the
prior-year period included the three large wind-farm orders
mentioned above in Europe/CAME. As a result, second-quarter orders
overall were down sharply year-over-year. Challenging market
conditions in renewable energy, including pricing pressure, are
expected to continue in coming quarters.
Increased profit contribution
Second-quarter profit at Oil & Gas was up year-over-year, at
EUR131 million, despite higher marketing and selling expenses
associated with growth. Revenue rose 14% due primarily to increases
in Asia, Australia. Orders declined 15%, with lower orders in Asia,
Australia and the Americas offsetting growth in Europe/CAME.
Project charges and pricing pressure lead to loss
Power Transmission experienced continuing challenges in the
second quarter and reported a loss of EUR169 million. The Division
took additional charges of EUR278 million related primarily to grid
connections to offshore wind-farms in Germany, resulting from
revised estimates of required resources and personnel as well as
delays associated with the projects' complex marine and regulatory
environment. The revenue mix for the quarter was clearly less
favorable year-over-year, due in part to low-margin orders booked
during prior periods with significant pricing pressure. These
factors were only partly offset by the release of a provision of
EUR64 million related to a successful project completion. For
comparison, second-quarter profit a year ago included charges of
EUR41 million associated with optimizing the Division's global
manufacturing footprint. Revenue for the current quarter was down
5% and orders came in 24% lower compared to the prior-year period,
which included a higher volume from large orders. Power
Transmission expects continuing challenges in coming quarters
including the grid-connection projects mentioned above and
structural issues in certain businesses.
HEALTHCARE SECTOR
Broad-based growth, strong operational performance
Healthcare delivered EUR424 million in profit in the second
quarter, led by a strong earnings performance in the imaging and
therapy systems business. Profit came in lower compared to the same
quarter a year earlier, primarily due to EUR38 million in charges
the Sector took related to its Agenda 2013 initiative aimed at
improving its competitive position and expanding its capacity for
innovation. Healthcare expects additional charges related to Agenda
2013 in coming quarters.
Diagnostics took EUR20 million of the Agenda 2013 charges,
related primarily to improving its cost position. As a result, its
profit came in at EUR67 million compared to EUR86 million in the
second quarter a year earlier. Purchase price allocation (PPA)
effects related to past acquisitions at Diagnostics were EUR43
million in the second quarter. A year earlier, Diagnostics recorded
EUR42 million in PPA effects.
Healthcare revenue rose 8% compared to the prior-year period, on
broad-based growth across its businesses. Orders were up 4%, with
most businesses contributing increases.Reported growth benefited
from currency translation effects amounting to 3 percentage points
for both revenue and orders. On a regional basis, Asia, Australia
showed double-digit increases for both revenue and orders,
highlighted by substantial growth in China. The Americas region
showed clear growth for revenue and a slight decline in orders.
Both revenue and orders were stable in Europe/CAME. The
book-to-bill ratio was 0.97, and Healthcare's order backlog was
EUR7 billion at the end of the quarter.
The Diagnostics business contributed to revenue and order growth
in the second quarter. Revenue rose to EUR976 million and orders
increased to EUR979 million, from EUR924 million and EUR918
million, respectively, in the prior-year period. Diagnostics showed
the same development as the Sector with regard to currency
translations effects. On a geographic basis, Asia, Australia drove
revenue and order growth including double-digit increases in
China.
INDUSTRY SECTOR
Strong short-cycle businesses deliver revenue and profit
growth
In a robust business environment, Industry took its
second-quarter profit up 5%, to EUR662 million. Strong performances
in the Sector's short-cycle businesses more than offset higher
expenses for R&D, marketing and selling for innovation and
growth initiatives. The contribution from the Sector's renewable
energy offerings was held back by ongoing market challenges.
Industry revenue climbed 9%, including increases across the
Sector's businesses. On a regional basis, Industry generated
substantial revenue growth in the Americas and clear growth in
Europe/CAME. Orders were up slightly year-over-year, with solid
growth in Europe/CAME more than offsetting a decline in Asia,
Australia. The Sector's book-to-bill ratio was 1.01 and its order
backlog was EUR12 billion at the end of the quarter.
Double-digit revenue and profit growth
Industry Automation took its second-quarter profit up to EUR335
million, even after higher expenses year-over-year for R&D,
marketing and selling associated with growth. Strong, broad-based
demand resulted in double-digit revenue growth and 8% order growth,
including increases in all three reporting regions. PPA effects
related to the fiscal 2007 acquisition of UGS Corp. were EUR36
million in the current period and EUR35 million in thesame quarter
a year earlier.
Revenue climbs, takes profit up
Second-quarter profit at Drive Technologies rose slightly
year-over-year, to EUR279 million. The Division increased its
R&D, marketing and selling expenses associated with innovation
and growth. The contribution from the Division's renewable energy
offerings was held back by ongoing market challenges, particularly
in the wind business. Revenue rose 9% for the quarter, with
contributions from across the Division's businesses.Orders were
level compared to the prior-year period. On a regional basis,
revenue and orders increased in Europe/CAME and the Americas but
declined in Asia, Australia.
INFRASTRUCTURE & CITIES SECTOR
Revenue growth drives higher profit
The Infrastructure & Cities Sector increased second-quarter
profit by 10% year-over-year, driven by the Power Grid Solutions
& Products business. Revenue rose 6% for the quarter, on strong
growth at Power Grid Solutions & Products and Building
Technologies. On a regional basis, revenue increases in the
Americas and Europe/CAME more than offset a decline in
Asia/Australia. Orders came in 6% below the prior-year period,
which included a higher volume from large orders in the
Transportation & Logistics business. This comparison effect was
notable in regional results, with Asia/Australia posting
substantially lower orders year-over-year. The Sector's
book-to-bill ratio was 0.92 and its order backlog at the end of the
quarter was EUR24 billion.
Profit declines on lower revenue
The Transportation & Logistics business, which includes
Siemens' Rail Systems Division and its Mobility and Logistics
Division, posted profit for the second quarter of EUR75 million.
The decline compared to the prior-year period was due in part to
slightly lower revenue. In addition, earnings began to include the
effect of lower margins associated with large, long-term contracts
from prior periods, which are now being converted to current
business. As noted above, the current period included a lower
volume from large orders, and as a result orders overall came in
substantially below the prior-year level, particularly in Asia,
Australia.
Double-digit growth takes profit higher
The Power Grid Solutions & Products business includes
Siemens' Low and Medium Voltage Division and its Smart Grid
Division. Profit for the second quarter rose to EUR101 million, in
part due to higher revenue. In addition, improved earnings in low
and medium voltage activities more than offset higher expenses for
smart grid growth initiatives. Second-quarter orders rose 10%
year-over-year. On a regional basis, both revenue and orders grew
in all three reporting regions compared to the same period a year
earlier.
Higher revenue and orders, stable profit
Second-quarter profit increased slightly to EUR77 million at
Building Technologies, held back by higher expenses partially
associated with growth initiatives. Revenue rose 9% and orders
increased 7% compared to the prior-year period, driven in part by
demand for the Division's energy efficiency solutions. On a
geographic basis, both revenue and orders grew in all three
reporting regions compared to the same period a year earlier.
EQUITY INVESTMENTS AND FINANCIAL SERVICES
NSN charges impact Equity Investments
Equity Investments recorded a loss of EUR594 million in the
second quarter, compared to a profit of EUR23 million a year
earlier. That prior period benefited from a gain of EUR91 million
from the sale of Siemens' 49% stake in Krauss-Maffei Wegmann GmbH
& Co. KG. The loss in the current period was due mainly to the
equity investment result related to Siemens' share in NSN, which
was a negative EUR640 million compared to a negative EUR107 million
in the prior-year period. NSN previously announced a global
restructuring program aimed at maintaining its long-term
competitiveness and improving profitability. NSN reported to
Siemens that it booked restructuring charges and associated items
totaling EUR772 million in the current quarter, compared to charges
of EUR28 million in the same period a year earlier. Due to the
nature of the restructuring program as well as prevailing
uncertainty in macroeconomic conditions, the amount and timing of
improvements in profitability is uncertain. Therefore, results from
Equity Investments are expected to be volatile in coming
quarters.
Profit burdens hold back results at Financial Services
Financial Services(SFS) continued to successfully execute its
growth strategy, which has led to a substantial build-up in assets
since the beginning of the fiscal year. The associated increase in
operating expenses held back profit development in the second
quarter. The current period also included burdens on profit related
to certain activities in the U.S. As a result, profit (defined as
income before income taxes) came in at EUR74 million compared to
EUR114 million in the prior-year period. Total assets increased
clearly from EUR14.602 billion at the end of the prior fiscal year
to EUR16.031 billion at the end of the second quarter, including
positive currency translation effects.
CORPORATE ITEMS, CORPORATE ACTIVITIES AND ELIMINATIONS
Positive effects in Corporate items
Corporate items and pensions totaled a positive EUR105 million
in the second quarter compared to a negative EUR62 million in the
same period a year earlier. The difference was due primarily to
Corporate items, which were a positive EUR106 million compared to a
negative EUR81 million in the second quarter of fiscal 2011. The
improvement is due mainly to positive effects totaling EUR95
million related to legal and regulatory matters, compared to net
expenses related to legal andregulatory matters in the prior-year
period. The current quarter includes expenses of EUR23 million
related to previously announced reimbursements to Atos S.A. Both
periods under review included positive effects related to a major
asset retirement obligation, amounting to EUR28 million in
thecurrent period and EUR20 million in the prior-year period.
Improved results from Corporate Treasury activities
Income before income taxes from Eliminations, Corporate Treasury
and other reconciling items was a negative EUR22 million in the
second quarter compared to a negative EUR43 million in the same
period a year earlier. The primary factor in the improvement was
higher income from Corporate Treasury activities due mainly to
changes in the fair market value of interest rate derivatives not
qualifying for hedge accounting used for interest rate management.
For comparison, the prior-year period included positive effects
related to the divestment of financial assets.
OUTLOOK
For fiscal 2012 we confirm our expectations of moderate organic
revenue growth compared to fiscal 2011, and orders again exceeding
revenues for a book-to-bill above 1. We continue to anticipate
strong earnings performances in most of our businesses, including
our industrial short-cycle businesses. Challenges, mostly in our
power transmission business, impact the level of income from
continuing operations we originally expected to achieve in fiscal
2012, EUR6.0 billion, by an estimated EUR0.6 to EUR0.8 billion.
This outlook excludes significant portfolio effects and impacts
related to legal and regulatory matters in the second half of the
fiscal year.
NOTES AND FORWARD-LOOKING STATEMENTS
All figures are preliminary and unaudited. This Earnings Release
should be read in conjunction with information Siemens published
today regarding legal proceedings. FinancialPublications are
available for download at:
www.siemens.com/ir -> Publications & Events.
This document includes supplemental financial measures that are
or may be non-GAAP financial measures. New orders and order
backlog; adjusted or organic growth rates of revenue and new
orders; book-to-bill ratio; Total Sectors profit; return on equity
(after tax), or ROE (after tax); return on capital employed
(adjusted), or ROCE (adjusted); Free cash flow, or FCF; cash
conversion rate, or CCR; adjusted EBITDA; adjusted EBIT; adjusted
EBITDA margins, earnings effects from purchase price allocation, or
PPA effects; net debt and adjusted industrial net debt are or may
be such non-GAAP financial measures. These supplemental financial
measures should not be viewed in isolation as alternatives to
measures of Siemens' financial condition, results of operations or
cash flows as presented in accordance with IFRS in its Consolidated
Financial Statements.
Other companies that report or describe similarly titled
financial measures may calculate them differently. Definitions of
these supplemental financial measures, a discussion of the most
directly comparable IFRS financial measures, information regarding
the usefulness of Siemens' supplemental financial measures, the
limitations associated with these measures and reconciliations to
the most comparable IFRS financial measures are available on
Siemens' Investor Relations website at www.siemens.com/nonGAAP. For
additional information, see supplemental financial measures and the
related discussion in Siemens' most recent annual report on Form
20-F, which can be found on our Investor Relations website or via
the EDGAR system on the website of the United States Securities and
Exchange Commission.
Today beginning at 9:00 a.m. CEST, the telephone conference at
which CEO Peter Löscher and CFO Joe Kaeser discuss the quarterly
figures will be broadcast live on the Internet at
www.siemens.com/conferencecall.
The accompanying slide presentation can also be viewed here, and
a recording of the conference will subsequently be made available
as well.
Starting at 4:00 p.m. CEST, Peter Löscher and Joe Kaeser will
hold a telephone conference in English for analysts and investors,
which can be followed live at
www.siemens.com/analystconference.
This document contains statements related to our future business
and financial performance and future events or developments
involving Siemens that may constitute forward-looking statements.
These statements may be identified by words such as "expects,"
"looks forward to," "anticipates," "intends," "plans," "believes,"
"seeks," "estimates," "will," "project" or words of similar
meaning. We may also make forward-looking statements in other
reports, in presentations, in material delivered to stockholders
and in press releases. In addition, our representatives may from
time to time make oral forward-looking statements. Such statements
are based on the current expectations and certain assumptions of
Siemens' management, and are, therefore, subject to certain risks
and uncertainties. A variety of factors, many of which are beyond
Siemens' control, affect Siemens' 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 or
anticipated on the basis of historical trends. These factors
include in particular, but are not limited to, the matters
described in Item 3: Risk factors of our most recent annual report
on Form 20-F filed with the SEC, in the chapter "Risks" of our most
recent annual report prepared in accordance with the German
Commercial Code, and in the chapter "Report on risks and
opportunities" of our most recent interim report.
Further information about risks and uncertainties affecting
Siemens is included throughout our most recent annual, and interim
reports as well as our most recent earnings release, which are
available on the Siemens website, www.siemens.com, and throughout
our most recent annual report on Form 20-F and in our other 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, performance
or achievements of Siemens may vary materially from those described
in the relevant forward-looking statement as being expected,
anticipated, intended, planned, believed, sought, estimated or
projected. Siemens neither intends, nor assumes any obligation, to
update or revise these forward-looking statements in light of
developments which differ from those anticipated.
Due to rounding, numbers presented throughout this and other
documents may not add up precisely to the totals provided and
percentages may not precisely reflect the absolute figures.
For tables omitted, please go to
http://www.siemens.com/press/pool/de/events/2012/corporate/2012-Q2/2012-Q2-earnings-release-e.pdf
For the full report, please go to
http://www.siemens.com/investor/pool/en/investor_relations/financial_publications/speeches_and_presentations/q22012/q2_interim_report.pdf
Media Relations:Alexander BeckerPhone: +49 89 636-36558E-mail:
becker.alexander@siemens.com
Oliver SantenPhone: +49 89 636-36669E-mail:
oliver.santen@siemens.comSiemens AG,80333 Munich, Germany
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