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Siemens cautions about 2020 after beating quarterly forecasts

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11/07/2019 | 06:18am EST
FILE PHOTO: Logo of German industrial group Siemens is seen in Zurich

Munich, GERMANY (Reuters) - Siemens sounded a cautious note about the global economy over the next 12 months after booming industrial software sales helped the German engineering company beat forecasts during its fourth quarter.

The trains to turbines maker said on Thursday it expected the macroeconomic environment to remain "subdued" next year, citing geopolitical and economic risks, as well as elections in big markets like the United States.

The problems would particularly hit demand for its short-cycle products, used by the automotive and machinery industries, where the company expects a "moderate decline" in the market.

Still, Siemens forecast a recovery during the second half of next year and said it expected to outperform the market.

"The weakening of the global economy accelerated considerably fiscal 2019," CEO Joe Kaeser told reporters, adding Siemens nonetheless achieved its fiscal guidance.

"While many other industrial companies had to revise their outlooks, and some conglomerates had to struggle even more to survive, we kept our word."

Global readings of manufacturing business surveys in October showed the aggregate ticked up for the third month to show an expansion in factory activity, easing some concerns about the world economy.

But Siemens' rivals such as ABB and General Electric, as well as steelmaker ArcelorMittal, have recently sounded downbeat.

Siemens stock rose 2.8% in early trade after it reported a 20% increase in industrial operating profit in the three months to the end of September. The 2.64 billion euros (£2.27 billion) outcome beat analyst expectations for 2.33 billion euros.

Orders rose 4% to 24.71 billion euros, and revenue by 8% to 24.52 billion euros - both beating forecasts.

The Munich-based company's full-year operating profit margin - excluding severance charges - was 11.5%, within its target range of 11-12%.

During the quarter, the company benefitted from demand at its smart infrastructure business, which makes products to automate buildings, and Siemens Healthineers, the medical equipment maker where Siemens retains an 85% stake.

But Siemens's flagship Digital Industries business saw tepid revenue growth as a 21% rise in sales of industrial software as offset by weaker demand for factory automation and motion controllers.

During its 2020 financial year, Siemens expects total revenue growth of 3-5%.

CEO Kaeser said customer confidence was being hit by political and economic uncertainties, such as the U.S.-China trade war and Britain's messy exit from the European Union.

"Machine-building production in the most important export nations - Germany, Japan, China and the U.S. is a widely followed parameter for the global economy. The best case scenario for 2020 assumes a certain degree of stabilisation," he said.

By John Revill

Stocks mentioned in the article
ChangeLast1st jan.
ABB LTD 0.73% 22.12 Delayed Quote.14.74%
ARCELORMITTAL 1.43% 15.554 Delayed Quote.-14.26%
SIEMENS AG -1.53% 116.14 Delayed Quote.19.26%
SIEMENS HEALTHINEERS -0.33% 43.78 Delayed Quote.19.80%
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