Q4 revenue by region

Siemens on track after solid performance

Siemens turns to emerging markets to offset slow growth elsewhere.

The results of a company the size and scope of Siemens are always a good test as to market conditions, but with the Eurozone currently balancing on the edge of another financial meltdown this year’s figures are particularly interesting. The fact that the performance of the German-headquartered global giant failed to provide a remedy for the financial gloom drew the ire of many financial commentators, but stripping away the expectations they highlight a solid performance.

In its fiscal fourth quarter, which ended on 30 September, overall sales grew nearly 5 per cent to €20.35bn, but emerging markets rose 8 per cent to contribute €7.235bn to that total. Revenue in the Europe, Middle East and Africa region, by contrast, rose only 3 per cent.

With more than a third of the company’s revenue derived from emerging markets it is cushioned against the stalled growth in the global economy, allowing it to ride out the Eurozone crisis.

“The macroeconomic environment continues to be highly volatile and difficult to assess,” said Siemens CEO Peter Loscher. “The forecasts of experts have become more cautious. However, even the most recent forecasts call for global GDP growth of 3 per cent – in other words, growth roughly at last year’s level.”

It is clear that the global economy is moving at two speeds. The growth forecast for industrial countries is at 1.4 per cent for 2012. For emerging countries it is four times as high, 5.6 per cent, and even higher for the BRIC countries at 6.8 per cent. Loscher acknowledged that the company is already seeing signs of a slowdown among customers.

“Yet it is clear that we are also benefiting from the dynamic growth in emerging countries. There are many places in the world – from Istanbul to Asia and Latin America – where the daily news is not dominated by crisis summits and emergency measures but by growing self-confidence, by successes, and by rising expectations. And all these places are home to Siemens customers and to Siemens. Our growth rates there are above average. Against this backdrop, Siemens will continue to grow faster than the global economy.”

For a company that makes a diversified portfolio of products from trains to renewable energy plants you would expect a varied level of performance and that is certainly true.

Over the year the industry and energy sectors delivered an especially strong performance; both grew new orders at a double-digit rate. The industry sector increased earnings by 36 per cent to €3.6bn, buoyed by the huge order from Deutsche Bahn for ICx trains – the biggest in the history of the company. However, the industry automation and drive technologies divisions also contributed significantly to the success of the sector.

The energy sector increased new order volume too – by 15 per cent to about €34.8bn for the year, despite uncertainty in the nuclear sector post-Fukushima and disappointing performance in renewable energy.

“[With] renewable energy, our expectations have not yet been met in the area of solar thermal power because regulatory conditions have deteriorated and projects delayed,” Loscher said. “However, the progress being made in the first Desertec projects shows this market does have a future. This year, our wind business won its first order for an offshore wind park in China, which is a milestone in our entry into the world’s largest wind energy market.”

The healthcare sector picture is mixed. “The strength of the imaging business, which has been able to maintain its leading market position, contrasts sharply with the operational challenges at the diagnostics business. In the pioneering area of particle therapy, the time is not yet ripe for the broad commercial deployment of this highly innovative technology.”

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