German engineering giant, Siemens has disclosed a Q3 financial report that fell short of profit forecasts, citing a decline in demand across various markets, notably China. The company, renowned for its contributions to industries ranging from train manufacturing to factory automation, highlighted the sluggish recovery in China’s manufacturing sector post the zero-COVID shutdown last year.
Siemens noted a transition towards a “normalization of demand” after customers had engaged in pre-buying activities in the previous year to avert shortages. Orders displayed a 10% growth during the three-month period ending June, marking a decline from the 13% rise in the preceding quarter. This trend, the company added, is anticipated to continue over the next several quarters, as global customers draw down their stocks of components.
CEO Roland Busch emphasized the visible normalization of demand in short-cycle businesses, particularly in China and Europe. However, he acknowledged a slower-than-expected recovery in China’s manufacturing sector, leading to an expectation of a sustained flat trend.
In the Q3 financial report, Siemens reported a 4% decline in its industrial profit – encompassing mobility, smart infrastructure, and factory automation businesses – reaching 2.75 billion euros ($3.02 billion). This figure missed the consensus expectation of 2.90 billion euros projected by analysts. Consequently, the company’s premarket activity saw a decrease of 3.6% in its shares.
Siemens maintained its annual outlook for the period ending September but revised its expectations for the digital industries segment, responsible for supplying factories with controllers. Previously projected growth of 17% to 20% for the division was adjusted to 13% to 15%. Notably, digital industries witnessed a significant decline of 37% in order intake during the quarter, with a particular impact on the short-cycle factory automation business.
Nonetheless, the digital industries division reported an increase in revenue and profit, propelled by its robust order book and enhanced capacity utilization at its factories. Siemens, renowned for its role in automating factories and equipping transportation networks, serves as a barometer for the global economy’s health. The recent slowdown in manufacturing activity, evident through weakening purchasing manager data in Europe and China, underscores this link.
During Q3, Siemens’ order volumes surged by 10%, amounting to 24.24 billion euros, surpassing predictions of 22.19 billion euros. Although revenue experienced a 6% increase, reaching 18.89 billion euros, it fell short of the projected 19.27 billion euros. Net profit reached 1.44 billion euros, failing to meet initial forecasts.
Siemens remains resolute in its guidance at the group level, projecting a comparable revenue growth ranging from 9% to 11% for the twelve months ending in September, alongside an earnings per share range of 9.60 to 9.90 euros.
Featured Image: Unsplash @ kaganin
