Siemens CEO Joe Kaeser at the company’s annual news conference in Munich, Germany, on November 8 2018. Picture: REUTERS/MICHAEL DALDER
Siemens CEO Joe Kaeser at the company’s annual news conference in Munich, Germany, on November 8 2018. Picture: REUTERS/MICHAEL DALDER

Munich — Siemens bucked the trend of boardroom caution when it said on Thursday it expects to shrug off global geopolitical tensions and notch up “moderate” sales growth in 2019.

CEO Joe Kaeser described the German engineering company’s guidance as “courageous”, saying it saw only limited risks and expected to increase sales in the 3%-5% range during its 2019 fiscal year, which began on October 1.

The outlook was for “moderate growth”, he said after the company reported better-than-expected fourth-quarter earnings.

“The capital markets would likely interpret that as growth of between 3% and 5%,” he said.

The train-to-turbine maker’s shares rose 1.1% in early trading, bolstered by a new €3bn share buyback.

“If everybody is concerned, there has to be somebody who brings hope and shows people the way. This is not [being] arrogant ... Our customers like what we do,” Kaeser said.

Many companies have voiced worries about slowing growth as trade tension between the US and China mounts and economies in many countries ebb.

CFO Ralf Thomas told an analysts’ call, however, that Siemens had good visibililty for the first six months of its business year, and had not seen any negative indicators stemming from geopolitical tensions hitting its smaller and shorter-term projects.

Despite the upbeat comments, investment research firm CFRA cut its rating on the shares to “hold” from “strong buy”.

“We think its outlook statement points to a tougher operating environment in financial year 2019, on the back of rising macroeconomic uncertainties and geopolitical tension,” CFRA equity analyst Firdaus Ibrahim said in a note.

Siemens’s confidence contrasts with the troubles at its US rival General Electric, which slashed its dividend in October, saying it faced a deepening federal accounting probe. It has vowed to restructure its power unit.

Shares in Siemens’s Swiss rival ABB hit a nearly two-year low in October after the group reported third-quarter results. ABB turned more cautious on its European outlook, citing concerns about Italy and Britain.

Caterpillar tried to ease mounting concerns about China and global demand in October after it affirmed its 2018 profit estimate, a move that investors feared signalled a cap in earnings growth and sparked a sell-off in its shares.

Kaeser, who is re-organising Siemens to simplify its structure and speed up growth, was particularly buoyed by the strength in Siemens’s short-cycle businesses like its Digital Factory automation unit, the jewel in its crown.

During the three months ended September 30, the division raised revenue by 10% and profit by 28%, helped by sales of its software business which controls industrial processes in factories.

Kaeser said he thought the business could continue to grow even in uncertain times and take market share. But the Power and Gas business remained a sore spot, swinging to a loss of €139m during the quarter as the collapse in demand for large gas-powered turbines persisted and it was hit by charges from cutting jobs.

The business, which competes with General Electric and Mitsubishi Heavy Industries, has also seen falling prices due to over-capacity in the sector.

In September, Siemens said it would cut about 2,900 jobs in Germany to achieve €500m in cost savings to improve the competitiveness of its Power and Gas division and the Process Industries and Drives division.

The overhaul triggered €301m in restructuring charges which weighed on Siemens’s industrial profit, which remained flat at €2.145bn.

Siemens’s results were also hit by a one-off tax charge related to the separation of its mobility unit. The company is seeking approvals from competition authorities to combine the train business with France’s Alstom.

As a result, net profit fell 46% to €681m, better than the €595m expected in a Reuters poll. Siemens proposed raising its dividend. Kaeser said its new share buyback would not prevent future acquisitions.

Reuters

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