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Siemens Reports Growth but Expects Slower 2012

Although {complink 4929|Siemens AG} 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.

10 comments on “Siemens Reports Growth but Expects Slower 2012

  1. Daniel
    November 11, 2011

    Jennifer, most of the companies are showing a better sales and profit rate in Q1-Q3 of 2011. But due to the economic slowdown and financial crises they are not expecting the same rate of growth and production in 2012. This is quiet natural and in such a situation, keeping a lower target is very much appreciable.

  2. FLYINGSCOT
    November 11, 2011

    I enjoyed your article.  It is great to see a company like Siemens doing so well.  I wish they could sprinkle some of their pixie dust over the rest of Europe.

  3. Houngbo_Hospice
    November 12, 2011

    The good news is that, those companies will have a good revenue margin before facing 2012 challenges and they might do relatively well next year as the market is promising due to recent change of heads in Europe.

  4. Jennifer Baljko
    November 13, 2011

    Hi

    Yes, some pixie dust would be nice. And, as the others mention, it will be interesting to see how companies who know the economy is slowing respond and if Wall Street gives them some leeway in how numbers shake out the next few quarters.

     

  5. Taimoor Zubar
    November 14, 2011

    Interesting article, Jennifer. Any idea how other electronic giants (particularly the ones in Europe) are doing in terms of profits and growth? Comparing the performance with them will give a better idea of how Siemens is really doing.

  6. jbond
    November 14, 2011

    It is great news that Siemens has been growing, and not exactly surprising that they are expecting a slowdown. The good news is that they are focusing on some emerging markets, and this should help the company grow for the long term.

  7. Mr. Roques
    November 14, 2011

    Great news from Siemens, and I guess it also has to do how Germany is doing, the EuroZone is going to pieces (Greece, Italy… and other to follow?) but Germany has been growing. Lets hope that it can continue to grow.

  8. Jennifer Baljko
    November 15, 2011

    Hi. Here's a quick  recap of how a few other European companies are faring.

    Philips: http://www.ebnonline.com/author.asp?section_id=1061&doc_id=233618

    ST reported earnings a few weeks back: http://www.ebnonline.com/author.asp?section_id=1061&doc_id=234925&

    And Infineon announces results tomorrow, which I'll post here as well.

  9. Himanshugupta
    November 15, 2011

    Hi Jennifer, increasing RnD by 500Million is really a lot. In which areas is Siemens spending apart from gas turbine? I read a report on The Economist that the emerging nations are the most enery hungry and potential targets of the energy related investments.

  10. bolaji ojo
    November 15, 2011

    @Himanshugupta, Siemens is a big company with almost $100 billion in annual revenue so the increase in its R&D budget isn't as huge as it sounds. However, you are right to wonder what the company wants to spend the money on and I agree energy will be a major part.

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