Siemens Q4 Profit up But Order Intake Drops

Posted 09 November 2006 @ 09:35 am EET     Print     Reprint     E-Mail     Comments

MUNICH (Reuters) - Industrial conglomerate Siemens posted a 35-percent rise in fourth-quarter operating profit on Thursday, better than market expectations, despite poor results at its telecoms and IT services units.

Operating profit for the July-September quarter was 1.251 billion euros ($1.60 billion) compared with an average of 1.202 billion euros forecast by a Reuters poll of 21 analysts.

Severance charges at telecoms unit Com were 195 million euros. IT services unit SBS narrowed its loss.

New orders fell 4 percent to 22.616 billion euros in the quarter despite a resurgent economy in Europe, where Siemens makes about half its sales. That was below average market expectations of new orders at 24.204 billion euros.

Despite lower orders, the turbines-to-hearing-aids group reiterated a forecast that it expects to grow sales at double the rate of global domestic product growth in its next fiscal year to end-September 2007, and forecast all the groups of the conglomerate would reach their profit margin target.

Siemens said it would raise its dividend to 1.45 euros from 1.35 euros, and reiterated it was focusing on bringing all its divisions into line with profitability targets by April 2007.

Sales rose 8 percent to 23.92 billion euros in the quarter, beating expectations for an average 22.93 billion euros, while income from continuing operations rose 29 percent to 640 million euros.

Siemens said demand was driven by its Automation and Control businesses as well as its Power Generation and Distribution units.

Siemens, one of the world's biggest industrial conglomerates, did not give details about the planned sale of the Enterprise Networks, the corporate telecoms division of its Com unit, but said the unit had widened its loss and sales had declined.

The disposal of the unit, if successful, will be the last major stage in Siemens's gradual exit from the telecoms sector, in which the group has its roots but which has weighed on its valuation in recent years amid increasingly fierce competition.

Siemens shares which trade at just under 14 times expected 2006/07 earnings, according to Reuters data traded at 72.25 euros on Instinet at 0740 GMT, slightly up from a close of 71.82 euros on Wednesday.

Rival conglomerates Dutch group Philips and General Electric

of the United States trade at higher forward multiples of 19 and 15 respectively, reflecting uncertainty about Siemens's ability successfully to transform its portfolio and become more profitable.

Since taking the helm at Siemens in January 2005, Chief Executive Klaus Kleinfeld has set about reshaping the 159-year-old company, eschewing short-term targets but promising to deliver on profitability goals next year after the revamp.

The fast-growing healthcare technology unit, Med on which Siemens has spent more than $7 billion on acquisitions in the last year was once again the group's most profitable, turning in an operating margin of 13.7 percent in the quarter.

Turbines unit Power Generation's margin declined to 5 percent, partly due to charges associated with a delay to a Finnish nuclear project, while transport unit TS recovered slightly to deliver a margin of 1.4 percent.