Siemens unveils overhaul

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Reuters

Siemens Chief Executive Joe Kaeser attends a news conference in Berlin on May 7, 2014. Picture: Thomas Peter

Berlin - German engineering giant Siemens unveiled a long-awaited strategic overhaul on Wednesday to catch up with more profitable competitors and said it would not be forced into making a formal offer for the energy assets of French rival Alstom.

The Munich-based firm's Chief Executive Joe Kaeser has been working on the new strategy since taking power last summer following a boardroom coup that pushed out his predecessor Peter Loescher after a series of profit warnings.

Ahead of his presentation at the firm's historic “Siemensstadt” site in Berlin, the company posted weaker-than-expected earnings for its fiscal second quarter, hit by charges in its energy business, and announced a series of smaller deals.

Siemens said it was buying energy assets from Rolls-Royce for roughly 950 million euros ($1.32 billion) and transferring a majority stake in its Austrian metals business to Japan's Mitsubishi Heavy Industries for undisclosed terms.

As part of the overhaul, dubbed “Vision 2020” the company is also streamlining its divisional structure, spinning off its hearing aids business and separating out management of its healthcare business - all steps aimed at strengthening its focus on electrification, automation and digitalisation.

The strategic revamp comes as Siemens mulls a formal offer for the energy business of French rival Alstom, which is already the target of a bid from US giant General Electric .

The French government views the GE bid with scepticism and has encouraged Siemens to enter the race despite lingering resentments between the European rivals over the German firm's push to snap up Alstom assets a decade ago when it was forced to accept a state bailout.

Kaeser said he had discussed the risks and opportunities of a bid for Alstom assets with German Chancellor Angela Merkel, whose own government has sent positive signals about a Franco-German deal, but made clear that a decision to make an offer would “not be forced on us”.

Under former CEO Loescher, Siemens went on an aggressive drive for growth, leaving it lumbered with a complex portfolio of businesses.

Kaeser, 56, a 34-year veteran of Siemens who previously served as its finance chief, has vowed to restore the sense of pride at a company that has lagged big competitors like GE and Philips in terms of innovation and profitability.

The presentation at the vast “Siemensstadt” industrial complex - built in the early decades of the 20th century and site of Siemens headquarters between the two world wars - is a sign of Kaeser's determination to take the company back to its proud roots.

Siemens was founded in 1847 in Berlin as an electrical telegraph company.

For the fiscal second quarter ended March 31, total sector profit, or operating profit, came in at 1.57 billion euros on revenues of 17.45 billion, missing consensus.

According to a Reuters poll, analysts had expected profit of 1.7 billion euros on revenues of 18.1 billion.

Profit in the energy sector tumbled 54 percent to 255 million euros, largely due to 310 million euros in project charges related to two high-voltage direct current transmission (HVDC) projects in Canada.

“The second quarter showed that we still have a lot to do to improve our operating performance,” said Kaeser. “Nevertheless we are on course to reach our targets for the fiscal year,” he said, confirming a goal to increase earnings per share by at least 15 percent in the current fiscal year.

Earlier this year, shares in Siemens rose above the 100 euro mark for the first time in six years. But according to Reuters data, the company still trades at a 7.3 percent discount to its major European peers on a 12-month forward EV/EBITDA basis. - Reuters


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