RNS Number:0765Y
Siemens AG
28 April 2004
Press Presse Prensa
For the business and financial press
Munich, April 28, 2004
Siemens in the second quarter (January 1 to March 31) of fiscal 2004
* Net income was Euro1.210 billion, up strongly from Euro568 million in the
second fiscal quarter a year ago.
* Net income was influenced by a pre-tax gain of Euro590 million on the sale
of shares of Infineon Technologies AG, a goodwill impairment of Euro433 million
related to Siemens Dematic (SD), and a reversal of Euro246 million in deferred tax
liabilities arising as a consequence of the Infineon share sale. Excluding these
effects, net income was Euro807 million, up 42% year-over-year.
* Group Profit from Operations was Euro1.076 billion, level with the
prior-year period despite a loss of Euro289 million at Transportation Systems (TS)
due to significant charges in its rolling stock business.
* Orders of Euro19.716 billion were up 3% and sales of Euro17.794 billion were
down 2% compared to the second quarter a year earlier. Excluding currency
translation effects and the net effect of acquisitions and dispositions, orders
increased 5% and sales rose 2%.
* Net cash from operating and investing activities rose to Euro3.565
billion, including Euro1.794 billion in net proceeds from the sale of Infineon
shares.
"I am pleased with our overall performance for the second quarter," said Siemens
CEO Heinrich v. Pierer. "We progressed well in the Groups and largely hit our
earnings targets. The same goes for sales and orders, in a still challenging
macroeconomic environment. This shows we have moved further along the right path
toward achieving our operational goals.
The main exception is TS, where problems arose in the rolling stock business,
principally involving Combino railcars. This forced us to take significant
charges, and I cannot rule out further earnings impacts. We have established a
special team to address this situation, drawing on the technical expertise of
the company as a whole. Despite these difficulties we remain committed to our
full-year targets. However, the charges make them more challenging to achieve."
For the second quarter ended March 31, 2004, Siemens reported net income of
Euro1.210 billion and basic earnings per share of Euro1.36, compared to Euro568 million
and Euro0.64 in the second quarter a year earlier. The primary driver of net income
was Euro1.076 billion in Group Profit from Operations. A number of additional
factors influenced net income in the current period. A pre-tax gain of Euro590
million on the sale of Infineon shares was partly offset by a goodwill
impairment of Euro433 million related to Siemens' 2001 acquisition of businesses
from Atecs Mannesmann, which were merged into Siemens Dematic. Net income also
included a reversal of Euro246 million in deferred tax liabilities.
In Operations, a majority of Siemens' Groups achieved both double-digit profit
growth and higher earnings margins compared to the prior-year period. The
leading earnings contributors for the quarter included Power Generation (PG),
Automation and Drives (A&D), Medical Solutions (Med), Siemens VDO Automotive
(SV), and Osram. Due primarily to the charges at TS in its rolling stock
business, second-quarter Group Profit from Operations was up only slightly
year-over-year.
Second-quarter orders of Euro19.716 billion were up 3% from Euro19.084 billion in the
second quarter a year earlier. Sales of Euro17.794 billion were down 2% from
Euro18.230 billion in the prior-year quarter. Excluding currency translation
effects and the net effect of acquisitions and dispositions (i.e., on a
comparable basis), orders increased 5% and sales rose 2% year-over-year.
Net cash from operating and investing activities in the second quarter was
Euro3.565 billion, including net proceeds of Euro1.794 billion from the sale of
Infineon shares. Excluding this effect, net cash was still up sharply compared
to Euro1.398 billion in the second quarter a year ago.
Operations in the second quarter of fiscal 2004
Information and Communications
Information and Communication Networks (ICN)
Second quarter ended March 31,
% Change
(Euro in millions) 2004 2003 Actual Comparable*
Group profit 37 (147)
Group profit margin 2.3% (8.8)%
Sales 1,618 1,679 (4)% (1)%
New orders 1,773 1,689 5% 7%
* Excluding currency translation effects of (3)% on sales and currency translation effects of
(3)% and portfolio effects of 1% on orders.
ICN posted another sharply improved quarter year-over-year, reflecting the
positive impact of previous restructuring efforts. The earnings turn-around was
most evident in ICN's Carrier Networks and Services business, which recorded a
Euro5 million profit on sales of Euro753 million compared to a loss of Euro180 million on
sales of Euro797 million in the second quarter a year earlier. The Enterprise
Networks division earned Euro46 million on sales of Euro867 million compared to Euro49
million on sales of Euro887 million in the prior-year quarter. For ICN overall,
second-quarter sales were nearly level with the prior year on a comparable
basis. Orders rose year-over-year, particularly at the Carrier Networks
division.
Information and Communication Mobile (ICM)
Second quarter ended March 31,
% Change
(Euro in millions) 2004 2003 Actual Comparable*
Group profit 109 55 98%
Group profit margin 4.1% 2.4%
Sales 2,661 2,329 14% 17%
New orders 2,713 2,300 18% 20%
* Excluding currency translation effects.
ICM nearly doubled its second-quarter Group profit year-over-year, to Euro109
million, combining double-digit sales growth with higher earnings margins. The
Mobile Networks division led the way with Euro76 million in profits on sales of
Euro1.163 billion, compared to Euro44 million on sales of Euro1.067 billion a year
earlier. The Mobile Phones division increased sales 26%, to Euro1.243 billion, and
profits rose to Euro13 million from Euro2 million, despite a lower average selling
price per unit compared to the prior-year quarter. Handset volume rose to 12.8
million units from 8.0 million in the same period a year earlier. Average
selling price remained stable compared to the first quarter of this fiscal year
(the seasonally strong Christmas quarter), when handset volume was 15.2 million
units. For ICM as a whole, second-quarter sales rose 14% to Euro2.661 billion, and
second-quarter orders climbed 18% to Euro2.713 billion.
Siemens Business Services (SBS)
Second quarter ended March 31,
% Change
(Euro in millions) 2004 2003 Actual Comparable*
Group profit 26 25 4%
Group profit margin 2.3% 1.9%
Sales 1,121 1,338 (16)% (15)%
New orders 1,334 1,291 3% 5%
* Excluding currency translation effects.
Group profit of Euro26 million at SBS rose 4% compared to the second quarter a year
earlier, as the Group countered volume-driven pressure on earnings with
cost-reduction measures. Sales declined year-over-year, to Euro1.121 billion, while
orders rose to Euro1.334 billion on the strength of large new contracts in Europe.
Automation & Control
Automation and Drives (A&D)
Second quarter ended March 31,
% Change
(Euro in millions) 2004 2003 Actual Comparable*
Group profit 235 184 28%
Group profit margin 11.2% 9.0%
Sales 2,102 2,034 3% 5%
New orders 2,180 2,155 1% 3%
* Excluding currency translation effects of (3)% and portfolio effects of 1%.
A&D continued to increase its operating leverage, achieving a 28% increase in
Group profit, to Euro235 million, on a 3% rise in sales. As in recent quarters,
higher productivity and a streamlined cost structure enabled A&D to increase
earnings in a difficult market environment. The Industrial Automation Systems
and Motion Control Systems divisions were leading contributors to Group profit,
and improving profitability in the U.S. also contributed to A&D's earnings
growth. Sales rose to Euro2.102 billion and orders were also up year-over-year, at
Euro2.180 billion.
Industrial Solutions and Services (I&S)
Second quarter ended March 31,
% Change
(Euro in millions) 2004 2003 Actual Comparable*
Group profit 26 4
Group profit margin 2.6% 0.4%
Sales 983 990 (1)% 2%
New orders 1,085 1,018 7% 10%
* Excluding currency translation effects.
I&S posted Euro26 million in Group profit, as the Group benefited from higher
productivity resulting from previous restructuring efforts. Sales were level
with the second quarter a year earlier, while orders rose 10% year-over-year on
a comparable basis, benefiting from major new orders in China. I&S continues to
streamline its business portfolio.
Siemens Dematic (SD)
Second quarter ended March 31,
% Change
(Euro in millions) 2004 2003 Actual Comparable*
Group profit (30) 12
Group profit margin (6.0)% 1.8%
Sales 503 658 (24)% (20)%
New orders 761 614 24% 35%
* Excluding currency translation effects of (5)% and (12)% on sales and orders, respectively,
and portfolio effects of 1% on sales and orders.
Group profit at SD was a negative Euro30 million, despite higher earnings on
stronger sales at the Electronics Assembly division. Overall results for SD were
driven by a combination of factors including excess capacity and project cost
overruns. Following an extensive internal review of the outlook for the SD's
airport logistics activities and distribution and industry activities,
management concluded that goodwill related to SD was impaired. Because these
businesses were acquired at the corporate level as part of Siemens' Atecs
Mannesman transaction, the resulting goodwill impairment was taken centrally.
Sales of Euro503 million for SD were substantially lower than in the same period a
year earlier, while a major new contract with the U.S. Postal Service increased
orders by 35% year-over-year on a comparable basis.
Siemens Building Technologies (SBT)
Second quarter ended March 31,
% Change
(Euro in millions) 2004 2003 Actual Comparable*
Group profit 16 2
Group profit margin 1.6% 0.2%
Sales 996 1,228 (19)% (8)%
New orders 1,030 1,238 (17)% (5)%
* Excluding currency translation effects of (4)% and (5)% on sales and orders, respectively,
and portfolio effects of (7)% on sales and orders.
SBT posted higher Group profit on lower sales year-over-year, reflecting the
streamlining of its business portfolio between the periods under review. Sales
and orders, at Euro996 million and Euro1.030 billion, respectively, were lower in
comparison to the prior year primarily due to first-quarter divestiture of SBT's
facility management activities, coupled with currency translation effects and a
weak construction market in Europe.
Power
Power Generation (PG)
Second quarter ended March 31,
% Change
(Euro in millions) 2004 2003 Actual Comparable*
Group profit 274 262 5%
Group profit margin 16.0% 15.5%
Sales 1,713 1,691 1% (7)%
New orders 2,414 2,213 9% (8)%
* Excluding currency translation effects of (5)% on sales and orders and portfolio effects of
13% and 22% on sales and orders, respectively.
PG was the top earnings performer among Siemens Groups, posting Group profit of
Euro274 million. Earnings rose 5% even though the prior-year period benefited from
substantial cancellation gains. PG's service business continued to increase its
earnings contribution year-over-year. The industrial turbine business acquired
from Alstom between the periods under review also contributed to PG's positive
earnings development. Higher sales for PG overall, Euro1.713 billion, reflect the
new volume from Alstom partly offset by negative currency translation effects.
The same factors influenced orders of Euro2.414 billion.
Power Transmission and Distribution (PTD)
Second quarter ended March 31,
% Change
(Euro in millions) 2004 2003 Actual Comparable*
Group profit 63 50 26%
Group profit margin 7.9% 5.9%
Sales 793 846 (6)% (3)%
New orders 907 811 12% 18%
* Excluding currency translation effects.
PTD increased Group profit to Euro63 million, up 26% year-over-year, and improved
its earnings margin by two full points compared to the prior-year quarter. The
High Voltage division was a key earnings contributor. Sales were Euro793 million
compared to Euro846 million in the prior-year quarter, while double-digit order
growth year-over-year included new contracts in the Middle East, Africa, and
Asia-Pacific.
Transportation
Transportation Systems (TS)
Second quarter ended March 31,
% Change
(Euro in millions) 2004 2003 Actual Comparable*
Group profit (289) 64
Group profit margin (28.4)% 5.8%
Sales 1,017 1,101 (8)% (6)%
New orders 1,121 1,424 (21)% (20)%
* Excluding currency translation effects.
TS reported a loss of Euro289 million, primarily due to Euro364 million in charges.
Within this total, the Mass Transit division accounted for Euro296 million of the
charges, primarily in its light rail business (Combino), while the Trains
division accounted for the remaining Euro68 million. Sales of Euro1.017 billion were
below the prior-year level due in part to delays in project completion. The
decline in orders year-over-year reflects a number of factors, including
multiple large orders in the prior-year period, a market slow-down, and a focus
at TS on resolving technical issues in its rolling stock business.
Siemens VDO Automotive (SV)
Second quarter ended March 31,
% Change
(Euro in millions) 2004 2003 Actual Comparable*
Group profit 128 119 8%
Group profit margin 5.9% 5.4%
Sales 2,162 2,185 (1)% 8%
New orders 2,160 2,185 (1)% 8%
* Excluding currency translation effects of (3)% and portfolio effects of (6)%.
SV recorded second-quarter Group profit of Euro128 million, up 8% year-over-year,
on the strength of higher profitability at the Interior and Infotainment
division. Second-quarter sales and orders of Euro2.162 billion and Euro2.160 billion,
respectively, were nearly level year-over-year. Excluding currency translation
effects and primarily the divestiture of SV's cockpit module business between
the periods under review, second-quarter sales and orders rose 8%
year-over-year. After the close of the second quarter, Siemens completed its
acquisition of certain U.S. automotive electronics manufacturing activities of
DaimlerChrysler AG located in Huntsville, Alabama, and will consolidate them
into Siemens worldwide as of April 1, 2004.
Medical
Medical Solutions (Med)
Second quarter ended March 31,
% Change
(Euro in millions) 2004 2003 Actual Comparable*
Group profit 228 255 (11)%
Group profit margin 13.3% 13.9%
Sales 1,708 1,830 (7)% 5%
New orders 1,736 1,845 (6)% 6%
* Excluding currency translation effects of (7)% and portfolio effects of (5)%.
Med was once again a leading earnings contributor, with Euro228 million in Group
profit for the second quarter. Med's core diagnostics imaging businesses held
their own in a competitive market, maintaining their earnings levels and driving
the Group's sales and orders higher year-over-year on a comparable basis.
Second-quarter sales of Euro1.708 billion and orders of Euro1.736 billion reflect
currency translation effects, as well as the sale of Med's Life Support Systems
business and the transfer of a portion of its electromedical systems business
into a joint venture between the periods under review.
Lighting
Osram
Second quarter ended March 31,
% Change
(Euro in millions) 2004 2003 Actual Comparable*
Group profit 116 101 15%
Group profit margin 10.7% 9.5%
Sales 1,088 1,063 2% 10%
New orders 1,088 1,063 2% 10%
* Excluding currency translation effects.
Osram achieved a 15% increase in second-quarter Group profit, to Euro116 million,
on the strength of higher profitability combined with higher sales at the
Automotive Lighting and Opto Semiconductors divisions. At Euro1.088 billion, sales
and orders were up 10% year-over-year excluding currency translation effects.
Top-line growth was well balanced geographically on a currency-adjusted basis,
highlighted by strengthening demand in Eastern Europe and Asia-Pacific.
Other operations
Other operations consist of centrally held equity investments and other
operating businesses not related to a Group. These activities resulted in Euro137
million in Group profit in the second quarter, up from Euro87 million in the same
period a year earlier. The improvement was driven by higher equity earnings in
the current quarter, mostly from Bosch und Siemens Hausgerate GmbH.
Corporate Items, Pensions and Eliminations
Corporate items, pensions and eliminations were a negative Euro108 million in the
second quarter, compared to a negative Euro386 million in the same period a year
earlier. In the prior-year period, Corporate items included a negative Euro127
million representing Siemens' equity share of Infineon's net loss for the
quarter. Corporate items no longer include an equity share of Infineon's
results. The current period includes the pre-tax gain of Euro590 million on the
sale of Infineon shares, partly offset by the Euro433 million goodwill impairment
related to the airport logistics and distribution and industry activities of SD
which were acquired at the corporate level as part of Siemens' Atecs Mannesmann
transaction. Centrally carried pension expense was Euro183 million in the second
quarter compared to Euro187 million in the same period a year ago.
Financing and Real Estate
Siemens Financial Services (SFS)
Second quarter ended March 31,
% Change
(Euro in millions) 2004 2003 Actual Comparable*
Income before income taxes 66 58 14%
Sales 145 139 4% 8%
* Excluding currency translation effects.
Income before income taxes at SFS was Euro66 million compared to Euro58 million in the
second quarter a year earlier.
Siemens Real Estate (SRE)
Second quarter ended March 31,
% Change
(Euro in millions) 2004 2003 Actual Comparable*
Income before income taxes 45 55 (18)%
Sales 399 395 1% 2%
* Excluding currency translation effects.
Income before income taxes at SRE was Euro45 million in the second quarter compared
to Euro55 million in the same period a year earlier, due primarily to a weaker
market for sales of commercial real estate. The same conditions resulted in
lower income before income tax on a consecutive-quarter basis. SRE has put a
property development project in Frankfurt, Germany on hold pending an updated
analysis of prevailing market conditions.
Eliminations, reclassifications and Corporate Treasury
Income before income taxes from Eliminations, reclassifications and Corporate
Treasury was Euro128 million, compared to Euro28 million in the same period a year
ago. The difference is primarily the result of positive mark-to-market effects
at Corporate Treasury from interest rate derivative contracts not qualifying for
hedge accounting, and higher interest income.
Income statement highlights for Operations in the second quarter
In Operations, net sales were Euro17.618 billion compared to Euro18.113 billion a year
earlier. Second-quarter gross profit margin improved to 28.3% of sales, from
27.8% a year ago, driven by higher margins at a majority of Siemens' Groups.
Research and development expense was 7.1% of sales, even with the level in the
prior-year quarter. Marketing, selling, and general administration expense was
17.9% of sales, up from 17.4% in the same period a year earlier. Other operating
income (expense), net was a negative Euro426 million, compared to a positive Euro69
million in the prior-year period. The current period includes the Euro433 million
goodwill impairment mentioned above, while the prior-year period benefited from
cancellation gains at PG. Income from investments in other companies, net was
Euro762 million compared to Euro3 million in the second quarter a year earlier. The
current period included the pre-tax gain of Euro590 million from the sale of
Infineon shares and higher equity earnings at Bosch und Siemens Hausgerate
GmbH. The prior-year period included a negative Euro127 million from Siemens'
equity share of Infineon's quarterly net loss.
Income and earnings per share in the first six months
Net income for the first six months of fiscal 2004 increased to Euro1.936 billion,
up from Euro1.089 billion a year earlier. The current period includes the pre-tax
gain of Euro590 million on the sale of Infineon shares, partly offset by the Euro433
million goodwill impairment related to the airport logistics and distribution
and industry activities of SD acquired from Atecs Mannesmann. Net income also
benefited from the reversal of Euro246 million in deferred tax liabilities.
Operations also made a significant contribution to the growth in net income, as
Group Profit from Operations rose 12% to Euro2.437 billion from Euro2.170 billion in
the prior-year period. Basic earnings per share for the first six months of this
year were Euro2.17 and diluted earnings per share were Euro2.08. Earnings per share in
the same period a year ago were Euro1.22, without dilution.
Sales and order trends for the first six months
Sales in Germany for the first half of fiscal 2004 were Euro8.555 billion, up 3%
compared to the first half a year earlier, while orders in Germany decreased 1%
year-over-year, to Euro8.605 billion. International sales decreased 4%
year-over-year, to Euro27.568 billion, and international orders increased 4%, to
Euro31.601 billion. On a comparable basis, international sales for the first half
rose 2% and international orders climbed 8%.
Within international results, sales for the first half of fiscal 2004 in the
U.S. of Euro6.182 billion were 22% lower compared to the same period a year
earlier, due primarily to the end of the gas turbine boom in the U.S. Orders of
Euro6.597 billion were 13% lower year-over-year. Excluding currency translation
effects, U.S. sales were 9% lower and U.S. orders were up 2% year-over-year.
Sales in Asia-Pacific for the first six months remained stable year-over-year,
at Euro4.307 billion, and orders decreased 2%, to Euro4.819 billion. Excluding
currency translation effects, sales in the Asia-Pacific region rose 7% and
orders rose 5%. Sales in China were Euro1.311 billion, 3% below the prior-year
level, while orders reached Euro1.524 billion, up 16%. Excluding currency
translation effects, sales rose 6% and orders climbed 27%.
Liquidity for the first six months
For Siemens worldwide, net cash from operating and investing activities for the
first six months of fiscal 2004 was Euro2.374 billion, including Euro1.794 billion in
net proceeds from the sale of Infineon shares. For comparison, net cash was Euro261
million in the same period a year earlier. Both periods under review included
supplemental pension contributions, totalling Euro1.255 billion in the first half
of fiscal 2004 and Euro442 million in the same period of fiscal 2003.
Funding status of pension plans
The funding status of Siemens' principal pension plans on March 31, 2004
improved significantly compared to the end of the prior fiscal year, with an
underfunding of approximately Euro3.1 billion compared to an underfunding of
approximately Euro5.0 billion at September 30, 2003. The return on plan assets
during the first six months amounted to Euro1.012 billion. This represents a 12.0%
return on an annualized basis, well above the expected annualized return of
6.7%. The projected benefit obligation of Siemens' pension plans increased by
approximately Euro300 million during the first six months, due to the net of
pension service and interest costs less benefits paid.
Economic Value Added
Economic Value Added (EVA) for Siemens worldwide improved significantly in the
first half compared to the positive EVA in the first half of the prior year. The
improvement in EVA was driven by higher earnings, and excludes the goodwill
impairment related to the former Atecs businesses and fiscal 2004 effects
related to Infineon.
Note: Siemens CEO Heinrich v. Pierer and CFO Heinz-Joachim Neuburger will hold
an English-language telephone conference with analysts on April 28, 2004 at 14:
00 CET. You can follow this conference live on the Internet by going to
www.siemens.com/analystcall. A recording of the telephone conference will be
available later at the same location.
This press release report contains forward-looking statements based on beliefs
of Siemens' management. The words "anticipate," "believe," "estimate,"
"forecast," "expect," "intend," "plan," "should" and "project" are used to
identify forward-looking statements. Such statements reflect the company's
current views with respect to future events and are subject to risks and
uncertainties. Many factors could cause the actual results to be materially
different, including, among others, changes in general economic and business
conditions, changes in currency exchange rates and interest rates, introduction
of competing products, lack of acceptance of new products or services and
changes in business strategy. Actual results may vary materially from those
projected here. Siemens does not intend or assume any obligation to update these
forward-looking statements.
This information is provided by RNS
The company news service from the London Stock Exchange
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