[May 07, 2014]BERLIN (Reuters)
— German engineering giant
Siemens unveiled a long-awaited restructuring on Wednesday in a bid
to catch up with more profitable rivals and said it would not be
forced into making an offer for the energy assets of French rival
Alstom.
The Munich-based firm's Chief Executive Joe 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.
Ahead of Kaeser's presentation at the firm's historic "Siemensstadt"
site in Berlin, the company posted weaker-than-expected earnings for
its fiscal second quarter, hit by charges in its energy business,
and announced a series of smaller deals.
Siemens said it was buying energy assets from Rolls-Royce for
950 million euros ($1.32 billion) and transferring a majority stake
in its Austrian metals business to Japan's Mitsubishi Heavy
Industries for undisclosed terms.
As part of the overhaul, dubbed "Vision 2020" the company is also
streamlining its divisional structure, publicly listing its
hearing aids business and separating out management of its
healthcare business, a move several analysts said could be a first
step towards a spin-off.
Asked about the future of healthcare, Kaeser praised the business
and made clear a spin-off was not on the near-term agenda, but
suggested capital markets could be tapped in the future if big
acquisitions were required.
The steps are aimed at strengthening Siemens' focus on
electrification, automation and digitalization -- processes to help
industrial companies produce more efficiently. Taken together, they
are expected to deliver productivity gains of 1 billion euros per
year from the end of fiscal 2016.
Siemens shares, which pushed to a six-year high above 100 euros
earlier this year, rose 1.4 percent to 95.3 euros by 1000 GMT,
slightly outperforming a flat European industrials index and
German benchmark DAX.
But according to Reuters data, the company still trades at a 7.3
percent discount to its major European peers on a 12-month forward
EV/EBITDA basis.
ALSTOM & PUTIN
The revamp comes as Siemens mulls a formal offer for the energy
business of French rival Alstom <ALSO.PA>, which is already the
target of a bid from U.S. giant General Electric
The French government views the GE bid with skepticism 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 a possible combination with German
Chancellor Angela Merkel, whose government has sent positive signals
about it, and would not be considering an offer for the Alstom
business unless he was serious.
But he made clear that a decision to make an offer would "not be
forced on us" and said Siemens, which has been given four weeks to
study Alstom's finances before committing.
Kaeser also expressed regret for referring to the crisis in Ukraine
as "short-term turbulences" when he paid a controversial visit to
Russian President Vladimir Putin in late March.
"The situation has escalated and I am very concerned about
developments," he said.
Under former CEO Loescher, Siemens went on an aggressive drive for
growth, leaving it lumbered with a complex portfolio of businesses.
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.
Siemens posted an EBITDA margin of 10.5 percent last year,
falling short of Swiss engineer ABB's 14.8 percent and
GE's 18.9 percent, according to Thomson Reuters data.
The presentation at the vast "Siemensstadt" industrial complex --
built in the early decades of the 20th century and site of Siemens
headquarters between the two world wars -- is a sign of Kaeser's
determination to take the company back to its proud roots. Siemens
was founded in 1847 in Berlin as an electrical telegraph company.
CANADA TRANSMISSION HIT
For the fiscal second quarter ended March 31, total sector profit,
or operating profit, came in at 1.57 billion euros on revenues of
17.45 billion, missing consensus.
According to a Reuters poll, analysts had expected profit of 1.7
billion euros on revenues of 18.1 billion.
Profit in the energy sector tumbled 54 percent to 255 million euros,
largely due to 310 million euros in project charges related to two
high-voltage direct current transmission (HVDC) projects in Canada.
Chief Financial Officer Ralf Thomas said he could not rule out
further charges on the project over the course of the year.
"The scale of these ongoing losses is surprising - it remains the
key weakness in the group, and despite management changes (removal
of two divisional CEOs) the problems persist," said Morgan Stanley
analyst Ben Uglow.
Kaeser acknowledged that the second quarter showed Siemens still had
a lot to do to improve its operating performance.
Siemens confirmed a goal to increase earnings per share by at least
15 percent in the current fiscal year, but said it was no longer
providing an operating profit target for the entire group, and
instead offering margin target ranges for its individual divisions.
