Long In Awe of GE, Siemens Emerges From U.S. Rival's Shadow
November 08 2018 - 8:00AM
Dow Jones News
By Ruth Bender
BERLIN -- Siemens AG Thursday said it would raise its dividend
after solid full-year results in the latest example of how the
German engineering giant, after years of living in the shadow of
rival General Electric Co., is beginning to outshine its U.S.
nemesis.
Siemens, whose management for years used the much larger GE as
their benchmark, has been hit by many of the same headwinds that
have troubled the U.S. group, yet it has fared surprisingly better
in the heavy bellwether.
While GE last month slashed its quarterly dividend to a token
penny a share so as to preserve the little cash it currently
generates for restructuring the company, Siemens said on Thursday
it would raise its fiscal-year dividend by 10 euro cents to EUR3.8
a share and announced a share buyback program.
Like other conglomerates, the German group has come under
pressure to streamline its businesses and extract more value from
its vast array of activities under pressure from investors who have
fallen out of love with the once mighty manufacturers of
everything.
But while GE has been grappling with tumbling results and
management crises, Siemens has been reaping the first rewards of
longstanding restructuring efforts in recent years to back further
transformations.
"We have reached a lot with Vision 2020," Siemens CEO Joe Kaeser
told reporters at its annual results press conference, referring to
the group's plan toward better profitability and reminding of time
when Siemens was in a much weaker spot. "We have a clear plan that
we are implementing consistently and carefully."
Mr. Kaeser has led an effort to refocus the sprawling
conglomerate since he took over as CEO in 2013, shedding
underperforming businesses to focus on a narrower selection of more
profitable units, cutting thousands of jobs and slashing costs
across the board.
In August, Siemens said it would combine its current five
industrial businesses to three -- essentially power turbines and
gas, manufacturing software and automation, and infrastructure.
Under the new structure, to take effect at the end of March 2019,
Siemens units will get more autonomy to make decisions but also
carry more responsibility for meeting financial targets.
Mr. Kaeser also listed the medical technology unit Siemens
Healthineers AG, moved Siemens' wind power business into a joint
venture with a Spanish rival to form Siemens Gamesa Renewable
Energy SA and is planning to merge its trains activities with
France's Alstom SA.
The CEO, whose term runs until 2021, said the decision to float
Healthineers had been vindicated by a 36% share-price gain since
the new stock started trading.
"This shows that pure plays in today's world have a totally
different significance," Mr. Kaeser said. "Medical technology has
very impressively used the freedom we gave them."
While General Electric's shares have lost over 50% since the
beginning of the year, Siemens shares have only dropped some
11%.
Analysts say Siemens has been taking steps in the right
direction to draw more value out of a company that is still doing
business in a number of areas with little overlap.
But some have criticized the August restructuring announcement
as low on details, for instance about how much it would save by
reducing head-office functions. Others argue Siemens could go
further, for example by merging or selling its troubled power
business, which has been hit by a sharp fall in demand for large
gas turbines.
Jefferies analyst Peter Reilly said Siemens future "remains more
obscure than we would like" after the company Thursday failed to
provide more details on its current internal reorganization.
The short-term cost associated with any large-scale
restructuring was apparent in Siemens's latest quarterly results.
Fourth-quarter net profit nearly halved to EUR681 million ($780.2
million) from EUR1.25 billion a year earlier due to charges
incurred from job cuts at the power and gas business. Revenue edged
up to EUR22.61 billion from EUR22.22 billion, driven by all
businesses except the power unit.
For the full fiscal year, which for Siemens ends Sept. 30, the
company posted flat net profit of EUR6.12 billion.
In addition to raising its dividend, Siemens said it would
launch a EUR3 billion share buyback program that will run until
November 2021.
Write to Ruth Bender at Ruth.Bender@wsj.com
(END) Dow Jones Newswires
November 08, 2018 07:45 ET (12:45 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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