Thursday, January 27, 2011

Class Act: "Emerging markets power Q1 profit surge at Siemens" (SI)

The stock closed yesterday at $129.28 up $3.97 on 11 times average NYSE volume (I didn't check the European bourses) and looks to open higher today.
We are fans.
It took a decade and some changes at the top but the turnaround at Siemens seems complete.
I'll get to the latest release shortly, first some history:

BusinessWeek June 5, 2000
Siemens' Turnaround Plan: A Report Card

In July, 1998, Siemens CEO Heinrich von Pierer set out a 10-point plan to 
rescue the company from plummeting profits. Here are some highlights:
GOAL                        PERFORMANCE

Turn around the             EXCELLENT Per-share earnings
semiconductor               rose sixfold in the last quarter.
division                    The April IPO of minority stake
                            in Infineon semiconductors unit
                            raised $5.4 billion.
Harvard Business Review-Case Study
June 24, 2003 
Siemens Medical Solutions: Strategic Turnaround
Describes how Siemens Medical Solutions (MED) accomplished a remarkable 
turnaround from a money-losing operation to one of Siemens' most 
profitable divisions....MORE 
The Economist
September 9, 2010
A giant awakens  
Europe’s biggest engineering firm used to be known for two things: 
making everything but a profit; and scandal. Now things look very different
IN A 100-year-old workshop in the centre of Berlin stands a gleaming piece of forged metal, four storeys high. It is thicker than a person’s body and weighs almost as much as Boeing’s new Dreamliner aeroplane. This single, enormous hunk of steel—in essence, a huge bolt—will soon be at the centre of a gas turbine big enough to meet the electricity needs of a small city.

Though precisely engineered, the bolt is not especially complex, technically speaking. Perhaps a dozen companies around the world can make something similar. Yet the fact that it stands in Germany’s capital city, at a time when industrial jobs are supposed to be leaving rich countries for cheaper places, serves as a powerful symbol of the resilience of the country’s manufacturing—and of the huge component’s maker, Siemens.

The bustle in this factory, where giant robots cut and grind the huge disks that go into gas turbines, points to a remarkable recovery in demand for German goods, not least Siemens’s, from Europe’s deepest recession since the second world war. For much of this year German manufacturing orders have been about one-quarter higher than in 2009. Those from abroad have been 30% up. Orders for Siemens’s continuing businesses were 16% higher at the end of June than a year earlier. Operating profit for the quarter jumped by 40%.

Siemens’s growth spurt has even placed it ahead of its archrival, General Electric (GE), long the world’s dominant industrial company, on some measures. In comparable sales, calculates Martin Prozesky, an analyst at BernsteinResearch, Siemens is now bigger than the company that made a fetish of being one of the top two in a market or getting out. As chart 1 shows, GE’s total sales in the first half of this year were 50% bigger than Siemens’s. But take out GE Capital, the American conglomerate’s financial-services arm, and Siemens’s small finance business (used almost entirely for vendor finance), and the two firms are about the same size. Remove GE’s media holdings, and Siemens takes the lead. In areas of more or less direct overlap—which would exclude GE’s jet-engine business, too—Siemens’s sales are 50% greater than GE’s.

In market capitalisation, GE ($165 billion) is still almost twice the size of Siemens (€68 billion, or $87 billion): no surprise, given GE’s broader range. But in 2007 it was more than three times as big. The narrowing of the gap has something to do with GE’s battering in the financial crisis: investors have been worried chiefly about GE Capital, which diversified into everything from credit cards to subprime mortgages. It has more to do, however, with a revitalisation of the sleepy German giant.

For decades Siemens was the problem child of European heavy industry, lurching from profit to loss almost quarter by quarter as big infrastructure projects went wrong or spending spiralled out of control. Even when it made a profit, its margins were too thin to cover its cost of capital—in the early 2000s Siemens’s margins were routinely half those of its main competitors, according to analysts at HSBC. Until the past few years its share price has also lagged behind its rivals’....MUCH MORE
If you can catch a turnaround that works, well, hallelujah brothers and sisters.
From Reuters:
* Q1 new orders in India up 160 pct, China up 49 pct
* Net profit from continuing ops 1.79 bln euros, beats poll
* Sees year net income from continuing ops up 25-35 pct
* Shares closed down 0.5 pct, outperform Germany's DAX
(Adds closing share price, trader's comment)
By Jens Hack and Marilyn Gerlach
MUNICH/FRANKFURT, Jan 25 (Reuters) - Siemens (SIEGn.DE), Europe's biggest engineering conglomerate, beat profit forecasts due to robust demand in fast-growing emerging economies and said signs for future sales were strong.

Like most of its German peers, Siemens relies heavily on exports of manufactured goods to China, Brazil, India and Russia to power growth, profiting from aggressive infrastructure investment in those countries.
Siemens and steelmaker ThyssenKrupp (TKAG.DE) have also benefited from emerging economies' appetite for German luxury cars, high-end engineering machinery and industrial equipment.

Latest data showed German manufacturing orders grew at their fastest rate in 10 months in November, quicker than economists expected, mainly due to strong demand from outside the euro zone for durable goods.

Siemens said growth was driven by its bread-and-butter Industry Sector, which makes equipment that large companies use to run factories, automation gear to help industrial plants run smoothly and LED lightbulbs to cut luxury cars' energy bills.
Businesses whose products take longer than four months to make, or long-cycle ones such as railway locomotives and power plants, also played catch-up in matching the short-cycle recovery in lightbulbs and automation drives.

"Orders and revenue grew in all regions, particularly in emerging markets," Siemens Chief Executive Peter Loescher said on Tuesday, referring to the first quarter to end-December....MORE