OREANDA-NEWS. Orders in the third quarter climb 19 percent.
Order backlog reaches a new high of EUR 102 billion
Revenue down two percent
Total Sectors Profit declines due to charges for Siemens 2014
Net income rises to EUR 1.1 billion

In the third quarter of fiscal 2013, Siemens made progress in strengthening its core business activities. Orders rose considerably on a major contract win. Total Sectors Profit declined due to charges related to the implementation of the Siemens 2014 program. Revenue declined slightly owing to a weak market environment.

In the third quarter of fiscal 2013, which ended on June 30, 2013, new orders soared 19 percent year-over-year to EUR 21.1 billion primarily due to a major contract win for the company's train business in the UK in the Infrastructure & Cities Sector. Revenue was down two percent to EUR 19.2 billion. Revenue increases at Infrastructure & Cities and Healthcare were more than offset by declines at the Energy and Industry Sectors. The ratio of new orders to revenue (book-to-bill ratio) was 1.10 in the third quarter. The order backlog for all Sectors totaled EUR 102 billion at the end of the quarter.


In the Energy Sector, new orders totaled EUR 5.4 billion, an increase of two percent. Uncertainties in the German and European energy markets resulted in a decline in new orders at the Fossil Power Generation Division. However, this was offset by double-digit increases at the other Divisions. Sector revenue declined in the third quarter five percent year-over-year to EUR 6.6 billion due to strong, ongoing competitive pressure. New orders and revenue at the Healthcare Sector remained roughly at prior-year levels. Sector revenue increased one percent to EUR 3.4 billion, while new orders were down one percent to EUR 3.3 billion.

The third quarter saw the first signs of stabilization in the Industry Sector's market environment. As in the comparable period a year earlier, new orders at the Sector totaled EUR 5.1 billion. Revenue declined two percent to EUR 5 billion. The Infrastructure & Cities Sector profited in the third quarter primarily from the major Thameslink order at the Rail Systems Division. With a volume of EUR 3 billion, the order, which encompasses the supply and maintenance of 1,140 regional trains for London, is the largest that Siemens has ever won in the UK. New orders at the Sector climbed 79 percent year-over-year to EUR 7.5 billion. Revenue increased four percent to EUR 4.5 billion.


Profit

In the third quarter, Total Sectors Profit was EUR 1.3 billion – 31 percent below the comparable prior-year figure of EUR 1.8 billion. This decline was due primarily to third-quarter charges of EUR 436 million in connection with Siemens 2014, of which EUR 180 million were taken at the Infrastructure & Cities Sector, EUR 140 million at the Industry Sector, EUR 102 million at the Energy Sector and EUR 14 million at the Healthcare Sector.

Income from continuing operations fell 13 percent to EUR 1 billion. This decline in Total Sectors Profit was partially offset, in particular, by a positive effect of EUR 301 million related to the announced sale of Siemens' stake in Nokia Siemens Networks (NSN) and a smaller loss on the NSN investment. Net income improved 43 percent to EUR 1.1 billion thanks to a positive profit contribution from discontinued operations. The primary factor in this improvement was a positive contribution of EUR 42 million from Osram, which had reported a negative EUR 354 million in the comparable prior-year quarter.

In the third quarter, the Energy Sector reported a profit of EUR 430 million, compared to EUR 683 million a year earlier. In addition to charges in connection with Siemens 2014, the Sector recorded a profit impact of EUR 91 million related to the inspection and retrofitting of onshore wind turbines. The Sector's profit margin declined in the third quarter from 9.7 percent to 6.5 percent. Profit at the Healthcare Sector rose in the third quarter 26 percent to EUR 499 million, while the margin climbed from 11.8 percent to 14.8 percent. This substantial increase in profit was due to cost improvements resulting from the Sector's Agenda 2013 program.

Industry Sector profit of EUR 347 million was about one-third below the prior-year figure. This decline is primarily attributable to the above-mentioned charges related to Siemens 2014. The Sector's profit margin fell from 10.2 percent to 7.0 percent. The Infrastructure & Cities Sector reported a loss of EUR 15 million, after a profit of EUR 215 million in the comparable period a year earlier. This decline, too, was largely the effect of costs relating to Siemens 2014. The Sector's profit margin fell from 5.0 percent in the comparable prior-year quarter to a negative 0.3 percent in the third quarter of fiscal 2013.


Siemens 2014

With the announced sale of its NSN stake to Nokia and the successful spinoff of Osram, Siemens has now further strengthened its focus on its core business activities. At the beginning of July, Nokia and Siemens agreed that Nokia would acquire Siemens' 50 percent stake in the joint venture Nokia Siemens Networks. The transaction will probably be concluded in the third quarter of the current calendar year. The initial public offering of Osram Licht AG was recently implemented.


Outlook

For fiscal 2013, Siemens expects clear order growth and a moderate decline in revenue compared to the prior year, both on an organic basis. Charges associated with the Siemens 2014 program in the Sectors are expected to total approximately EUR 1.0 billion for the full fiscal year.

Given these developments and financial results for the first nine months, the company expects income from continuing operations of EUR  4.0 billion in fiscal 2013 including the solar business and NSN. This outlook excludes other significant portfolio effects and legal and regulatory matters in the fourth quarter.