It was not a good morning for Siemens boss Roland Busch and CFO Ralf Thomas. Because although the business of the Munich technology group is going well despite the pandemic, the Ukraine war and the global economic slowdown, the two had to announce a high loss on Thursday morning. The bottom line was a minus of 1.53 billion euros in the third quarter, it is the first quarterly loss at Siemens in twelve years.
The reason for the deep red balance sheet: A multi-billion dollar write-down on the stake in the former energy technology subsidiary Siemens Energy. Siemens had already announced this at the beginning of July. The Munich are caught up with their past. Under the direction of Busch predecessor Joe Kaeser, the Munich company decided to part with the very volatile energy business. The division, which manufactures power plants, turbines and wind turbines, was spun off and listed on the stock exchange. Since then, Siemens itself has concentrated on other, more profitable areas. However, the group retained a stake of around 35 percent in the new listed energy company – at least for the time being. The hope was that the topic would be ticked off for now. But far from it.
Siemens Energy has not only been in the public eye as a quasi-political company for weeks, not only because of the maintenance of a turbine for the Russian gas pipeline Nord Stream 1. It also has massive, mostly home-grown problems at Spanish wind power subsidiary Siemens Gamsea. The result: losses and a collapsing share price. Siemens therefore had to write off its stake in Siemens Energy by 2.7 billion euros because the value had fallen so significantly. However, the company does not want to sell the shares for the time being, but rather wait for better times. That would otherwise be “unfortunate and unwise,” said CFO Thomas. Perspectively, the participation should initially drop to 25 percent.
Bad times for Siemens CEO Roland Busch, who took over from Joe Kaeser last year.
(Photo: Matthias Schrader/AP)
Siemens therefore had to lower the overall forecast – another thing that hasn’t happened for a long time. The group now expects less profit. The stock, which had suffered recently anyway, slipped further on Thursday.
Siemens is hardly affected by the energy crisis
This development is bitter, because things are actually going well at Siemens itself, as can also be seen from the quarterly report presented on Thursday. Incoming orders and sales in the third quarter were well above expectations. From April to June, orders worth more than 22 billion euros were received, slightly more than a year earlier. Excluding currency and other special effects, quarterly sales increased by four percent to 17.9 billion euros. The order backlog has reached a record level of almost 100 billion euros. “This shows that we have the right offer and the right strategy to be successful even in uncertain times,” said Busch. The operating profit from the industrial business rose significantly by 27 percent to 2.9 billion euros.
Siemens manufactures the ICE and has recently received large orders for it from Egypt, for example.
(Photo: Markus Mainka/imago)
However, the Zug Mobility division has slipped into the red if you exclude the special proceeds from the sale of a business area. It is particularly suffering from the announced withdrawal from Russia as a result of the Ukraine war. Siemens had already set aside almost 600 million euros for this in the previous quarter, and now another 600 million euros in charges are being added, which are reflected in net profit. To date, Siemens has delivered high-speed trains to Russia based on the ICE model. These connect Moscow and St. Petersburg. Now the group has withdrawn completely from Russia because of the brutal attack on Ukraine and has stopped all business.
Siemens is relatively unaffected by the energy and gas crisis. “Currently we see little direct impact on our factories because our production is not energy intensive,” Busch said. “And if gas runs out, we have taken preventive measures to keep our production going.” In Europe, Siemens covers almost all of its electricity needs from renewable sources. “We bought with foresight and made provisions for the long term,” emphasized Busch. He is more worried about the increased costs in purchasing and for the staff.