Although Siemens AG (NYSE: SI; Frankfurt: SIE) has reported solid 2011 growth in revenues, profits, and new orders, all signs point to a cautious outlook for 2012 as the global economic situation remains uncertain.
The German conglomerate, which makes everything from hearing aids to turbines, saw revenues climb 7 percent year-over-year to 73.515 billion (US$99.781 billion) and orders increase 16 percent to 85.6 billion ($116.156 billion). Profit across all sectors jumped 36 percent from last year to 9.1 billion ($12.346 billion), said Chief Executive Peter Loescher during a press conference Thursday. You can read the full report here.
The downside, he noted, is that the current "volatile environment" touched the company's fourth-quarter results and sets the stage for a leveling off of growth for the coming year. Revenue rose 5 percent from the year-ago quarter, but new orders came in 2 percent lower, according to the company.
"2011 was a year of unusually extreme peaks and valleys in the macroeconomic environment, especially in recent weeks," said Loescher, juxtaposing the unpredictability of the ongoing debt crisis in the US and the European eurozone with continued growth in emerging markets. "For fiscal 2012, we expect revenue to grow moderately and new order volume to remain significantly higher than revenue."
Although Loescher predicts little profits growth for next year, there is a bright spot keeping executive optimism high: the promise of emerging markets, namely, Russia, the Middle East, and Asia/Pacific countries.
"In 2011, we won our largest order ever in Russia," said Loescher. "In the emerging countries, our growth was especially strong. Revenue increased 12 percent, and new orders jumped 18 percent. Overall, emerging countries now account for 33 percent of our total revenue."
What also caught my eye and is worth noting here is Siemens's commitment to research-and-development investment. Typically, when the economy cools, so does R&D spending at most companies, a strategy I personally have always thought to be a rather backwards, knee-jerk reaction to changing fiscal climates. Down economic cycles, I believe, are the best time to examine where innovative ideas can lead companies when markets turn and strengthen.
Siemens, a bellwether for Germany's economic health and the European region's technology and industrial companies, apparently thinks so, too.
The company is planning to increase its R&D budget by 500 million ($678.466 million) next year, Loescher told reporters. And, the company is launching an investment program in Russia that involves pouring in 1 billion over the next three years, doubling its workforce there, and systematically expanding its presence in what Siemens considers a core market.
The investment is part of Siemens's plans to play a key role in Russia's modernization. In August, Siemens announced a joint venture with the Russian company, Power Machines, to manufacture, market, and service gas turbines. The deal is awaiting approval from antitrust authorities.
Russia's R&D focus is aimed at new construction or expansion of production, R&D, and services in places like Yekaterinburg, Perm, St. Petersburg, and Voronezh, and the creation of about 4,000 specialist jobs. Another significant part of the planned investments will focus on the future-oriented energy market and rail technology development.