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Siemens eyes major revamp as energy woes sap profit

Falling demand for gas turbines weighed on Siemens's quarterly earnings Thursday, but the German conglomerate stuck to its confident outlook as it unveiled a major revamp to make its industrial divisions more profitable.

Siemens eyes major revamp as energy woes sap profit
Photo: DPA

Net profit at the sprawling group plunged 14 percent to 1.2 billion euros ($1.4 billion) in the third quarter of its financial year, compared with the same period a year earlier.

Revenue at Siemens — which also builds trains, industrial robots and medical scanners — fell four percent to 20.5 billion euros, slightly below analysts' expectations.

Siemens blamed “a sharp decrease in profit” at its ailing power and gas unit, as well as overall “negative currency effects” and higher taxes for the slump.

Quarterly income was driven by the group's digital services, led by a spike in profits at its factory automation arm.

The group also highlighted a 16-percent increase in overall orders, boosted by demand for big-ticket items like trains and wind turbines, while orders in its Healthineers medical devices business were flat.

“Our global team delivered a strong quarter, highlighted by outstanding order intake,” chief executive Joe Kaeser said in a statement.

“We diligently address our opportunities and challenges going forward,” he added.

Siemens said it would embark on a major restructuring in October, trimming its industrial units from five to three to make them more independent and better able to respond quickly to market demands.

The overhaul has been spurred by troubles in Siemens' power and gas unit, which has long been grappling with “structurally” lower demand as energy trends shift towards renewables.

Some 7,000 jobs are set to be slashed at the division.

As part of its new “Vision 2020+” revamp, announced in a statement late Wednesday, Siemens said it would strengthen its digital offerings, focussing on the internet of things, industrial automation and electric mobility.

Looking ahead to the remainder of its financial year, Siemens confirmed it expects “modest growth” in revenue, adjusted for currency and portfolio effects.

The sweeping changes planned at Siemens come as conglomerates around the world are offloading units and reshaping unwieldy businesses in a bid to keep pace with fast-changing industry landscapes.

“Today we are a single tanker. We must become a coordinated and efficient fleet of ships,” Kaeser told German media last year.

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BUSINESS

Volvo profits plummet on rising material costs

Swedish automaker Volvo Cars said on Thursday that rising raw material costs and inflation had driven down profits in the third quarter.

Volvo profits plummet on rising material costs

The group posted a net profit of 665 million kronor ($61 million) in the July-September period, a drop of 71 percent compared to 2.3 billion kronor during the same quarter a year ago.

The figure was far below analysts’ forecasts of between 2.15 and 2.19 billion kronor, according to Bloomberg and Factset.

The company’s share price was down by around seven percent in midday trading on the Stockholm stock exchange.

Chief executive Jim Rowan said the company was hit hard by rising raw material prices, record inflation, higher interest rates and the war in Ukraine.

“The macroeconomic uncertainties around the world weighed on our third quarter performance”, he said in a statement.

Revenue meanwhile rolled in slightly higher than analysts’ expectations, rising by 30 percent to 79.3 billion kronor, boosted by “robust” demand for the company’s SUVs.

Analysts had predicted third quarter sales of between 78.1 and 78.7 billion kronor.

Retail sales declined however in some markets, including its main markets Europe and the United States, where the number of vehicles sold fell by 14 and 32 percent respectively.

The carmaker insisted however that its order book remained solid.

Volvo Cars, which aims to have an all-electric fleet by 2030, also reported “sharp pick-up” for its fully-electric vehicles at the end of the quarter, especially in September.

It said sales of fully-electric cars soared by 87 percent in the third quarter, accounting for seven percent of its total sales during the period.

The company, a subsidiary of Chinese group Geely, said manufacturing output continued to improve in the third quarter, but “unforeseen factors” such as power outages and Covid-19 related lockdowns in China “slowed down the pace of normalisation”.

It expected production, wholesale and retail growth in the second half of the year.

“For the full year 2022, we expect slightly lower wholesale volumes than 2021, assuming no further major supply chain disturbances. Wholesale and retail volumes will be on similar levels”, it said.

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