Siemens Q2 Profit Surges - Update

(RTTNews) - German electrical and electronics engineering powerhouse Siemens AG (SI | Quote | Chart | News | PowerRating), Wednesday, reported a significantly higher second-quarter profit, helped primarily by the absence of the big loss from divestments reported last year. On a continuing basis, earnings grew in double digits, reflecting a sharp growth in Energy and Healthcare sector amid the current economic scenario.

Second-quarter net income amounted to EUR 1.013 billion, up 146% from EUR 412 million in the year-ago quarter. Net income attributable to shareholders of Siemens jumped to EUR 962 million or EUR 1.10 per share from EUR 384 million or EUR 0.42 per share in the second quarter of fiscal 2008.

Results in 2009 include an income from discontinued operations, net of income taxes, of EUR 58 million, compared with a previous year's loss of EUR 153 million. According to the company, discontinued operations consist of Siemens VDO Automotive activities as well as of carrier networks, enterprise networks, and mobile devices activities.

Income from continuing operations for January 1 to March 31, 2009 period rose 69% to EUR 955 million from EUR 565 million in the same quarter a year earlier. Earnings per share on a continuing basis rose to EUR 1.04 from EUR 0.59 in the prior-year period.

The Munich, Germany-based company's income from continuing operations prior to income taxes increased to EUR 1.335 billion from EUR 0.789 billion in the comparable period of last year.

Quarterly revenue from continuing operations rose 5% to EUR 18.955 billion from last year's EUR 18.094 billion, driven by double-digit growth in the Energy and Healthcare sectors, which more than offset a 4% decrease in the Industry sector that stemmed from a drastic slump in short-cycle businesses. On an organic basis, excluding the currency translation impact and portfolio transactions, revenue was up 5%.

New orders for the quarter, however, came 11% below or 10% below on an adjusted basis to EUR 20.864 billion from last year's EUR 23.371 billion, as customers slowed their demand as well as deferred potential new orders. Despite this, the company noted that its book-to-bill ratio again remained above 1.

Siemens' Research and development expenses came higher at EUR 972 million compared to last year, at the same time marketing, selling and general administrative expenses declined to EUR 2.520 billion year-over-year.

In the second quarter, total sectors profit jumped 43% to EUR 1.844 billion from prior-year level of EUR 1.288 billion, led by broad-based profit growth in the Energy Sector. This sector generated a profit of EUR 818 million, compared to the EUR 6 million reported a year ago.

As a percentage of revenue, total sector profit was 10.2%, compared to 7.7% of last year. Also, total Sectors profit last year-included charges of EUR 768 million arising from project reviews in the Fossil Power Generation division and former Transportation Systems Group.

The company further noted that Healthcare also increased its Sector profit despite challenging market conditions, but the Industry sector reduced its profits significantly mainly due to volume-driven margin pressure. Healthcare profit increased to EUR 355 million from EUR 341 million of last year, where Industry profit dipped to EUR 671 million from year-ago EUR 941 million.

On a geographic basis, the company performed strongly in the Americas regions, as well as in the Europe, Commonwealth of Independent States, Africa, Middle East region combine.

Total Sectors revenue rose to EUR 17.993 billion in 2009 from EUR 16.666 billion in 2008. This comprises of a 28% and 4% revenue growth of EUR 6.364 billion and EUR 2.984 billion, respectively, in the Energy as well as the Healthcare sector, but 6% lower revenue of EUR 8.645 billion in the Industry sector.

Sector-wise, the Healthcare sector increased orders chiefly due to the impact of positive currency exchanges, unlike the Industry and Energy sectors that experienced reduced order intake in most of its divisions. The order backlog of the three sectors again increased to EUR 87 billion, and included no material cancellations during the quarter, the company added.

In January, the company had reported a sharp decline in first-quarter profit to 1.23 billion euros from last year's net income of 6.48 billion euros, in the absence of prior year's hefty divestment gain related to the sale of Siemens VDO Automotive. On a continuing operations basis, quarterly earnings per share climbed 25% from last year, mainly on significant growth in Energy sector. Revenue for the quarter rose 7% to 19.63 billion euros from 18.40 billion euros, supported by strong order growth in the past two fiscal years.

For the first six months into fiscal 2009, Siemens posted net income of EUR 2.243 billion or EUR 2.51 per basic share, down from prior-year's EUR 6.887 billion or EUR 7.49 per basic share.

Year-to-date revenue rose 6% to EUR 38.589 billion from EUR 36.494 billion in fiscal 2008. Total sectors profit for the six-month period jumped 31% to EUR 3.876 billion from EUR 2.970 billion a year ago.

Looking ahead, the company expects total sectors profit for fiscal 2009 to exceed prior-year's EUR 6.6 billion profit, based on measures introduced earlier to safeguard profitability. In January, the company's forecast for total Sectors profit for 2009 was EUR 8 billion-EUR 8.5 billion.

The company also sees growth in income from continuing operations to exceed that of total sectors profit. The outlook excludes portfolio effects and impacts from legal and regulatory matters.

Annual revenue growth target is at least twice the rate of actual global GDP growth. However, if the GDP growth were negative, this would mean that a percentage decline in revenue would be targeted at less than half the rate of decline in global GDP.

Among peers, diversified industrial, technology, media and financial services conglomerate General Electric Co. (GE | Quote | Chart | News | PowerRating) reported on April 17, a significant decline in its first-quarter profit at $2.896 billion, hurt mainly by a 23% revenue decline in its financial services business, GE Capital Finance.

Power and automation technology group ABB Ltd. (ABB | Quote | Chart | News | PowerRating), last Thursday, reported a decline in first-quarter profit, citing lower capacity utilization, a change in product mix and price erosion in the short-cycle businesses. Net income decreased 35% to US$652 million on a 9% revenue decline at US$7.21 billion.

SI closed Tuesday's regular trading session on NYSE at US$62.24, down US$1.19, on a volume of 873,400 shares. For the past 52 weeks, shares have been trading in the range of US$43.89 to US$123.81 a share.

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