Siemens’ Q4 Profit Surge Comes with Cautious Outlook

Siemens’ Q4 Profit Surge Comes with Cautious Outlook

MUNICH, Germany — Siemens today released its Q4 Fiscal Year 2019 (July 1-September 30, 2019) earnings report.

“The weakening of the global economy accelerated clearly during fiscal 2019. Nevertheless, we were again able to underscore Siemens’ performance aspiration with a brilliant fourth quarter. We fully achieved our fiscal-year guidance in all aspects! Our Vision 2020+ strategic concept is beginning to get traction. In particular, this includes the progress of the planned high priority public listing of Siemens Energy where we are well on track. The global Siemens team has done an excellent job once again in fiscal 2019. In addition to a strong operating performance, we also successfully launched the largest transformation in our company’s history. I am proud of this extraordinary team and look forward to sharing our tasks in the new fiscal year,” said Joe Kaeser, President and Chief Executive Officer of Siemens AG.

Fiscal 2019

  • Orders increased 7% to €98.0 billion (USD $108.21 billion) and revenue rose 5% to €86.8 billion (USD $95.84 billion); the book-to-bill ratio was 1.13
  • On a comparable basis, excluding currency translation and portfolio effects, orders rose 6% and revenue increased 3%, with the majority of industrial businesses contributing to growth
  • Adjusted EBITA Industrial Businesses increased slightly to €9.0 billion (USD $9.94 billion), including a clear increase for Siemens Healthineers; most other industrial businesses close to prior-year levels
  • Adjusted EBITA margin Industrial Businesses was 10.9%; excluding severance charges of €0.5 billion (USD $.55 billion), Adjusted EBITA margin was 11.5%, well within the guidance range of 11% to 12%
  • Net income of €5.6 billion (USD $6.18 billion), below the prior year which included largely tax-free gains from the transfer of Siemens’ shares in Atos SE to Siemens Pension-Trust e.V. and the sale of OSRAM Licht AG shares; basic earnings per share (EPS) at €6.41 (USD $7.08); basic EPS excluding severance charges were €6.93 (USD $7.65), at the top end of the guidance range of €6.30 (USD $6.96) to €7.00 (USD $7.73)
  • Free cash flow was €5.8 billion (USD $6.40 billion), level with the prior year
  • Siemens proposes to raise the dividend €0.10 (USD $.11) per share, to €3.90 (USD $4.31) per share

Q4 Fiscal 2019

  • Siemens delivered a powerful growth performance in its fourth quarter despite deteriorating industrial investment sentiment, reporting revenue of €24.5 billion (USD $27.05 billion), an 8% increase year-over-year, and orders of €24.7 billion (USD $27.27), up 4% from the high level a year earlier, for a book-to-bill ratio of 1.01
  • Revenue and order growth were 6% and 2%, respectively, on a comparable basis
  • Adjusted EBITA Industrial Businesses surged to €2.6 billion (USD $2.87 billion); Adjusted EBITA margin Industrial Businesses of 11.3%; Adjusted EBITA margin excluding severance charges was 12.5%
  • Net income climbed to €1.5 billion (USD $1.66 billion) and basic EPS rose to €1.63 (USD $1.80); excluding severance charges, basic EPS of €1.90 (USD $2.10)


  • Strong order intake continued, due mainly to a significantly higher volume from large orders year-over-year; significant increases in Gas and Power and in Siemens Gamesa Renewable Energy (SGRE) along with clear growth in Smart Infrastructure and Siemens Healthineers; substantial decline in Mobility which posted a sharply higher volume from large orders in Q4 FY 2018 
  • Very strong revenue on increases in all industrial businesses, led by double-digit growth in Siemens Healthineers and SGRE 
  • Book-to-bill ratio of 1.01; order backlog at a new high of €146 billion (USD $161.21 billion), benefiting from positive currency translation effects 
  • Currency translation effects added two percentage points each to order and revenue growth; portfolio effects had a minimal effect on volume growth year-over-year 
  • Adjusted EBITA rose in all industrial businesses except SGRE; strongest growth contributions from Siemens Healthineers, driven by its imaging business, and from Digital Industries on strength in its software business; these two industrial businesses also benefited from positive currency effects; Adjusted EBITA for Gas and Power turned positive due mainly to lower severance charges year-over-year 
  • Strong positive development outside Industrial Businesses, most notably within Corporate items and for Portfolio Companies 
  • Net income benefited from a substantially lower income tax rate year-over-year; Q4 FY 2018 was impacted by income tax expenses from carve-out activities related to Mobility 
  • Strong working capital management drives Free cash flow from Industrial Businesses to a high level of €5.235 billion (USD $5.78 billion) from €3.135 billion (USD $3.46 billion) in Q4 FY 2018; the largest factor in the increase was improved customer payments particularly at Gas and Power 
  • Provisions for pensions and similar obligations as of September 30, 2019: €9.9 billion (USD $10.93 billion) (June 30, 2019: €9.5 billion — USD $10.49 billion); increased due mainly to lower discount rates which was partly offset by positive return on plan assets 
  • ROCE: increase due to higher net income, held back by a clear increase in average capital employed

Digital Industries

  • Double-digit revenue growth in the software business and a clear increase in the process automation business lifted revenue for Digital Industries overall in a strong year-end finish; these businesses also posted increases in orders supported by positive currency translation effects and additional volume from recent acquisitions, while the factory automation and motion control businesses faced deteriorating demand particularly from the automotive and machine-building industries 
  • On a geographic basis, higher revenue in the Americas and Asia, Australia regions more than offset a decline in Europe, C.I.S., Africa, Middle East (Europe/CAME), while an order increase in the Americas was more than offset by declines in the other two reporting regions 
  • Growth in Adjusted EBITA driven primarily by a sharp increase in profitability in the software business compared to Q4 FY 2018, which more than offset a moderate earnings decline in the shortcycle businesses; Adjusted EBITA also benefited from positive currency effects

Smart Infrastructure

  • Volume growth driven by the solutions and services business; higher volume from large orders
  • On a geographic basis, orders rose on double-digit growth in the Americas and Asia, Australia; revenue growth was strongest in the Americas 
  • Adjusted EBITA rose on higher revenue in the solutions and services business, partly held back by expenses related to expansion of grid edge activities and a less favorable business mix

Gas and Power

  • Substantial order growth in the new-unit business, particularly a €0.4 billion (USD $0.44 billion) order for a combined-cycle power plant in France, including service, and several large orders in the Americas 
  • Revenue growth driven by the service business; on a geographic basis, increases in the Americas and Asia, Australia were partly offset by a decline in Europe/CAME 
  • Adjusted EBITA improved year-over-year mainly due to substantially lower severance charges; strong contribution from the service business


  • Sharply lower volume from large orders compared to Q4 FY 2018, which included rolling stock orders amounting to €0.6 billion (USD $0.66 billion) and €0.4 billion (USD $0.44 billion) from Germany and Austria, respectively 
  • Revenue growth driven by double-digit increases in the rolling stock business, which ramped up large projects, and in the customer services business 
  • Strong Adjusted EBITA and profitability were supported by higher revenue and also benefited from positive effects related to project execution and completion

Siemens Healthineers

  • Volume up in all businesses, led by the imaging business; on a geographic basis, double-digit order and revenue growth in China and in the U.S. which benefited from positive currency translation effects 
  • Higher Adjusted EBITA year-over-year on increases in the imaging and advanced therapies businesses, partly offset by a decline in the diagnostics business which included increases in costs for Atellica Solution; profitability benefited from currency tailwinds

Siemens Gamesa Renewable Energy

  • Significant order growth year-over-year on higher orders in all businesses, led by the onshore and service businesses; on a geographic basis, growth in Asia, Australia, particularly in India, partly offset by a decline in the Americas 
  • Revenue up in all businesses, led by significant growth in the onshore business; on a geographic basis, revenue increased in all three reporting regions, with strongest growth in Europe/CAME 
  • Adjusted EBITA positively influenced by higher revenue and improved productivity, more than offset by price pressure, a less favorable project mix and higher integration costs year-over-year

Financial Services

  • Income before income taxes was level with Q4 FY 2018, with both periods including moderate income from the equity business; Financial Services concluded another strong fiscal year with return on equity after tax of 19.1%, within its raised target range 
  • The increase in total assets since the end of fiscal 2018 included positive currency translation effects

Portfolio Companies

  • Broad-based volume growth, with the strongest contribution to orders from the process solutions business and to revenue from the large drives applications business 
  • Adjusted EBITA also improved due mainly to lower severance charges in fully consolidated units year-over-year; excluding this factor there was also a strong earnings improvement that was largely offset by a sharply lower result from equity investments 
  • Results from equity investments are expected to remain volatile in coming quarters

Reconciliation to Consolidated Financial Statements

  • The change in Corporate items was due primarily to a positive result from revised estimates related to provisions 
  • Severance charges within Corporate items were €31 million (USD $34.23 million) (€43 million — USD $47.48 million — in Q4 FY 2018)


We expect global macroeconomic development to remain subdued in fiscal 2020, with risks particularly related to geopolitical and geoeconomic uncertainties. We assume a moderate decline in market volume for our short-cycle businesses. Given the foregoing, we expect the Siemens Group to again achieve moderate growth in comparable revenue, net of currency translation and portfolio effects, and a book-to-bill ratio above 1.

Digital Industries expects fiscal 2020 comparable revenue to remain level compared to the prior-year, outperforming the broader market, despite continued weakness in its most important short-cycle markets, particularly the automotive and machine tool industries. Adjusted EBITA margin is expected at 17% to 18%.

Smart Infrastructure expects to achieve moderate comparable revenue growth in fiscal 2020, driven by its longer-cycle solutions and service business, even as its short-cycle industrial products business faces headwinds from a market slowdown. Adjusted EBITA margin is expected at 10% to 11%.

Economic cycles have limited impact on the markets for Mobility, which anticipates mid-single-digit comparable revenue growth in fiscal 2020 driven by its rolling stock business, which ramped up several large rail projects toward the end of fiscal 2019. Adjusted EBITA margin is expected at 10% to 11%.

While energy markets are assumed to remain challenging with some signs of stabilization, Gas and Power expects a moderate comparable revenue growth particularly including execution on its large order backlog. Adjusted EBITA margin is expected at 2% to 5%.

As previously announced, we plan to carve out Gas and Power and to contribute our 59% stake in Siemens Gamesa Renewable Energy (SGRE) to create a new entity, Siemens Energy. For this entity, we plan a spin-off and public listing before the end of fiscal 2020, with Siemens Energy becoming part of discontinued operations prior to the spin-off. We expect this to result in substantial positive effects within discontinued operations, including a substantial gain at spin-off, which cannot yet be reliably quantified.

For our EPS guidance we assume these positive effects will offset carve-out costs and tax expenses related to the spin-off and Groupwide severance charges for the fiscal year. Taken together with our previously mentioned expectations for fiscal 2020, we expect this to result in basic earnings per share (EPS) from net income in the range from €6.30 (USD $6.96) to €7.00 (USD $7.73) compared to €6.41 (USD $7.08) in fiscal 2019.

This outlook excludes charges related to legal and regulatory matters.

Tagged with , ,

Comment on the story

Your email address will not be published. Required fields are marked *