Siemens Plans 4 Billion-Euro Buyback as Charges Decline
Siemens AG (SIE), Europe’s largest engineering company, will buy back 4 billion euros ($5.4 billion) of shares over the next two years after reporting fourth-quarter profit that beat analyst estimates on lower charges for delayed energy projects.
Income from continuing operations fell 13 percent to 1.08 billion euros in the quarter ended Sept. 30, the Munich-based company said in a statement today. Analysts surveyed by Bloomberg had on average estimated 997 million euros. Revenue declined 1.3 percent to 21.2 billion euros.
“We’re looking ahead and concentrating on measures aimed at improving our profitability, which we are implementing rigorously and prudently,” Chief Executive Officer Joe Kaeser, who took over in August, said in the statement, adding that 2013 was “an eventful year.”
Former finance chief Kaeser became CEO after predecessorPeter Loescher slashed a profit target five times in his six-year tenure. To match the profitability of rivals such as ABB Ltd. (ABBN) and General Electric Co. (GE), Kaeser needs to reduce charges for mismanaged projects that have weighed upon Siemens’s earnings in recent years.
Loescher, who started a savings plan aimed at shaving 6.3 billion euros from costs by the end of 2014, said in July that Siemens would miss a 12 percent profit margin target. The German company’s 9.5 percent profit margin last year lagged the 10.3 percent and 15 percent of ABB and GE.
Job Cuts
Siemens forecast earnings per share to grow at least 15 percent next year from the annual 5.08 euros it reported today. The company proposed an unchanged dividend of 3 euros per share.
The company has 60 sub-units that make products including trains, gas turbines, medical scanners and factory-automation gear. The manufacturer raised its forecast in July for charges associated with the Siemens 2014 efficiency program to 1 billion euros for this fiscal year from an earlier prediction of 900 million euros. The costs may increase by a further 100 million euros, Kaeser told analysts at the time.
About 15,000 jobs will be eliminated as part of the program, Kaeser said Sept. 30. That’s four percent of the 370,000 employees Siemens had globally at the end of last year.
Kaeser is also selling assets as he focuses on businesses he deems to have better growth prospects. Yesterday, Siemens said it agreed to sell part of its water-technologies division to AEA Investors for 640 million euros.
Infrastructure Revamp
The CEO said last month the infrastructure division, the least profitable at Siemens, needs to better identify the markets it wants to target. The division has faced investor criticism since it was carved out by Loescher from existing units in 2011. Without saying how it got the information, Germany’s Manager Magazin reported Oct. 17 that Kaeser was considering disbanding the sector as soon as next October.
Siemens should sell the division’s transportation unit, adding to already planned divestments of postal and baggage handling businesses, while reshaping the company structure over the next five years, Societe Generale SA analysts including Gael de Bray has said.
Spinning off the healthcare sector could also unlock value of six euros per share, the analysts added, questioning whether the division fitted into Kaeser’s attempt to focus Siemens “along the electrification chain”.
Source: Bloomberg
