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Global Economy

First loss for Siemens since 2010

The high write-downs on the stake in Siemens Energy and other burdens in connection with the withdrawal from Russia brought the German industrial group Siemens a billion-dollar loss in the third quarter of the financial year. The company therefore lowered its earnings outlook today.

After taxes, there was a deficit of around 1.5 billion euros, after a profit of almost 1.5 billion euros in the previous year, as Siemens announced. According to the company, it is the first loss since the fourth quarter of 2010.

Problems with Siemens Gamesa

Siemens had to write off 2.7 billion euros on Siemens Energy because of the weak development. Siemens Energy shares fell 40 percent between January and June. The energy technology manufacturer – which is independent and has been on the stock exchange since the end of 2020 – is having a hard time with the crisis at its Spanish subsidiary Siemens Gamesa. Despite high demand, the wind turbine manufacturer is making high losses. There is currently a strong price war on the market, and there are also management errors.

The Siemens Group also put the burdens related to Russia at almost 600 million euros. According to CFO Ralf Thomas, the exit from the Russian market, which affects the train division in particular, has cost Siemens around 1.1 billion euros so far.

Worse prospects

Siemens lowered its earnings forecast for the current fiscal year 2021/22 (as of the end of September). The company expects earnings per share of just EUR 5.33 to EUR 5.73, after EUR 8.32 in the same period of the previous year. Previously, Siemens had expected 8.70 to 9.10 euros.

Siemens wants to earn more by selling parts of the company than initially planned. The group estimated the expected profits at around 2.2 billion euros, after previously announced 1.5 billion euros. The sales forecast was confirmed.

High order backlog

Otherwise, Siemens referred to "strong growth dynamics", especially in the industrial business. The group received new orders worth 22 billion euros in the third business quarter. "Our order backlog reached a new record of EUR 99 billion – and it is of high quality," said CEO Roland Busch.

"It wasn't an easy quarter," Busch said. Like almost the entire economy, the group is struggling with bottlenecks in the supply chains and rising labor and purchasing costs. In China, the corona-related lockdowns weighed on production. Since June, however, the company has recorded a strong recovery here. Siemens intends to absorb higher costs through price increases and increases in efficiency.

Gas shortage hardly affects Siemens

Siemens is relaxed about a possible gas bottleneck. "Currently we see little direct impact on our factories because our production is not energy intensive," said Busch. Siemens covers almost 100 percent of the power requirements in Europe from renewable energies. "We bought with foresight and made provisions for the long term," said the CEO.

Natural gas is only used in a few downstream areas of production. "And if gas runs out, we have taken preventive measures to keep our production going."

Concerns about purchasing costs

Busch is more worried about the increased costs in purchasing and for staff. Prices would rise, productivity would have to be increased to offset the inflationary effects. "In the next few months, businesses will be particularly disciplined when it comes to spending in order to maintain margins," announced Busch.

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