Siemens Does Its Best to Avoid GE's Fate -- WSJ
November 09 2018 - 3:02AM
Dow Jones News
German conglomerate has been more nimble than its U.S. rival in
restructuring
By Ruth Bender
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (November 9, 2018).
BERLIN -- Siemens AG on Thursday said it would raise its
dividend after recording solid full-year results, in the latest
example of how the German engineering giant is emerging from the
shadow of General Electric Co. and beginning to outshine its U.S.
nemesis.
Siemens, whose management for years used the much larger GE as a
benchmark, has faced many of the same challenges that have weighed
heavily on the U.S. group, notably investor pressure to streamline
its operations and slumping demand in its power business. Yet
Thursday's report from Siemens show it has generally been faster
and more successful at addressing them.
While GE last month slashed its quarterly dividend to a token
penny a share as it husbands cash for a restructuring, Siemens said
Thursday it would raise its annual dividend by 10 euro cents to
EUR3.8 a share and announced a share-buyback program.
Shares of Siemens, which edged higher Thursday, have dropped
about 11% this year, while GE shares have lost more than 50%.
The German group has come under pressure to simplify its
business and extract more value from its vast array of activities,
as investors fall out of love with the once mighty manufacturers of
everything. But while GE's turnaround efforts have faltered,
Siemens is using early returns from its restructuring efforts to
back further transformations.
"We have reached a lot with Vision 2020," Siemens Chief
Executive Joe Kaeser said at an annual press conference Thursday,
referring to the group's profitability campaign and reminding
reporters of a time when Siemens was in a much weaker spot. "We
have a clear plan that we are implementing consistently and
carefully," he said.
Mr. Kaeser has led an effort to refocus the sprawling
conglomerate since he took over as CEO in 2013, shedding
underperforming businesses in favor of a narrower selection of more
profitable units and slashing costs across the board, including
thousands of job cuts.
In August, Siemens said it would combine its five industrial
businesses into three -- essentially, power turbines and gas,
manufacturing software and automation, and infrastructure. Under
the new structure, to take effect at the end of March, 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 and moved Siemens's wind-power business into a
joint venture with a Spanish rival to form Siemens Gamesa Renewable
Energy SA. The conglomerate is also planning to merge its train
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."
Analysts say Siemens has been taking steps in the right
direction to draw more value out of a conglomerate encompassing a
number of businesses with little overlap.
But some have criticized its restructuring announcement in
August as low on details, such as estimated savings from
head-office cutbacks. Others argue Siemens could go further, for
example, by merging or selling its power business, which like GE's
has been hit by a sharp fall in demand for large gas turbines.
Jefferies analyst Peter Reilly said Siemens's 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 surfaced in Siemens's latest quarterly results.
Profit for the fiscal fourth quarter ended Sept. 30 nearly halved
to EUR681 million ($780.2 million) from EUR1.25 billion a year
earlier because of charges related to 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, the company posted flat 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 09, 2018 02:47 ET (07:47 GMT)
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