Chief executive�Joe Kaeser has announced his restructuring plan for Siemens

Siemens unveils restructuring strategy

Siemens has unveiled a long-awaited restructuring including a £785m deal for part of Rolls-Royce’s energy business.

The German engineering giant is hoping the plan can help it catch up with more profitable rivals, as it posted weaker-than-expected earnings for its fiscal second quarter, hit by charges in its energy business, ahead of chief executive Joe Kaeser's presentation at the firm's historic "Siemensstadt" site in Berlin.

Kaeser has been working on the new strategy since taking power last summer following a boardroom coup that pushed out his predecessor Peter Loescher after a series of profit warnings.

The overhaul, dubbed "Vision 2020", is aimed at strengthening Siemens' focus on electrification, automation and digitalisation – processes to help industrial companies produce more efficiently – as taken together they are expected to generate productivity gains of €1bn (£820m) per year, with full effect from the end of fiscal 2016.

The firm announced a series of deals, including the purchase of energy assets from Rolls-Royce in the field of aero-derivative gas turbines, compressor systems and related services for oil and gas and power generation customers and the transfer of a majority stake in its Austrian metals business to Japan's Mitsubishi Heavy Industries for undisclosed terms.

The company is also streamlining its divisional structure, publicly listing its hearing aids business and separating out management of its healthcare business, a move Kaeser said would give the unit more flexibility to respond to "profound changes" in technology.

Asked about the future of healthcare, Kaeser praised the state of the business and made clear that a spin-off was not on the near-term agenda.

"The main event is understanding the scope and ultimate intent on the healthcare separation," said Ben Uglow, an analyst at Morgan Stanley. "While this is not a full legal carve-out per se, it is a major step in that direction."

The revamp comes as Siemens mulls a formal offer for the energy business of French rival Alstom, which is already the target of a bid from US giant General Electric (GE).

The French government views the GE bid with scepticism and has encouraged Siemens to enter the race despite lingering resentments between the European rivals over the German firm's push to snap up Alstom assets a decade ago when it was forced to accept a state bailout.

Kaeser said he had discussed the risks and opportunities of a bid for Alstom assets with German Chancellor Angela Merkel, whose own government has sent positive signals about a Franco-German deal, but made clear that a decision to make an offer would "not be forced on us".

"We have an opportunity to look at the assets for four weeks and then we will make a decision," said Kaeser. "We are pretty cool about the process."

Under former CEO Loescher, Siemens went on an aggressive drive for growth, leaving it lumbered with a complex portfolio of businesses.

Now Kaeser, 56, a 34-year veteran of Siemens who previously served as its finance chief, is boosting employee share ownership and trying to restore pride at a company that has lagged its biggest competitors in terms of innovation and profitability.

For the fiscal second quarter ended March 31, total sector profit, or operating profit, came in at €1.57bn on revenues of €17.45bn. According to a Reuters poll, analysts had expected profit of €1.7bn on revenues of €18.1bn.

Profit in the energy sector tumbled 54 per cent to €255m, largely due to €310m in project charges related to two high-voltage direct current transmission projects in Canada.

"The second quarter showed that we still have a lot to do to improve our operating performance," said Kaeser. "Nevertheless we are on course to reach our targets for the fiscal year," he said, confirming a goal to increase earnings per share by at least 15 per cent in the current fiscal year.

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