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Siemens launches Share-Buyback Program as Profit Slips

Friday, Nov 13, 2015

German industrial giant Siemens AG on Thursday announced a new share-buyback program, even as it reported a 33% slide in fourth-quarter net profit.

The program will have a volume of up to €3 billion over the next 36 months, Siemens said. In a further nod to shareholders, the company proposed a dividend of €3.50 for fiscal 2015, up 6% from the previous year.

Siemens said net profit fell to €959 million ($1.03 billion) in the three months ended September from €1.45 billion a year earlier. Analysts had forecast a net profit of €1.2 billion, according to a recent poll conducted by The Wall Street Journal.

Revenue rose 4% to €21.33 billion, while new orders climbed 15%, helped by the tailwind of the euro’s weakness against major currencies, the company said.

The decline in net profit reflected an impairment charge of €138 million in connection with Siemens’s stake in Primetals Technologies Ltd., and squeezed margins at its conventional energy and industrial-drives units.

The company—whose activities range from making power equipment to trains and medical scanners—reported a 10.1% profit margin for its industrial businesses in the year to Sept. 30, at the lower end of the range of its target range of 10% to 11%.

“We delivered what we promised and are well prepared to deliver on our plans for the year ahead,” said Siemens Chief Executive Joe Kaeser.

Revenue growth was driven by the company’s energy-management, digital-factory and health-care divisions. The digital-factory unit, which produces hardware and software for high-tech manufacturing, faces pressures as a result of the economic slowdown in China, Siemens said.

Profitability at the group’s power and gas business was primarily held back by severance charges and lower margins in the gas-turbine business, though the acquisitions of Rolls-Royce ’s energy business and U.S. oil equipment manufacturer Dresser-Rand boosted revenue and orders. This was the first quarter that Dresser Rand—the $7.8 billion deal closed in June—was consolidated into Siemens’s results.

That acquisition, first announced last year, was part of a larger move by Mr. Kaeser to focus the company more squarely on energy, a strategy that has come under pressure amid lower global oil prices over the past year.

Analysts at DZ Bank called the results “better than expected” and the guidance “unsurprisingly conservative,” while analysts at Jefferies called the figures “quite good.”

 

wsj.com

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