Adjusted earnings before interest, taxes and amortisation from the main industrial business rose 7% to 2.41 billion euros (US$2.7 billion), the company said in a statement Wednesday, beating an average analyst estimate of 2.23 billion euros compiled by Bloomberg.
Chief Executive Officer Joe Kaeser, announcing the plan for a share sale by 2020 on Tuesday evening, is dismantling Siemens’s conglomerate structure to resembling a holding company to help speed up decision-making. Order growth at Siemens’ health-care Healthineers unit and strong returns at the digital factory division, which supplies factory automation services, helped drive profits.
“We’re entering a new era to become an even stronger and more focused Siemens,” Kaeser said in prepared remarks on Wednesday.
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The separation will be the latest in a series of de-consolidation moves by Kaeser after previously bringing the health-care division to market and merging the wind power unit with a Spanish competitor.
He also tried and failed to merge its train unit with French rival Alstom SA. The rail deal was blocked by European antitrust regulators. Revamping the company from a position of strength may help to head off the type of investor agitation that has plagued rival conglomerates such as General Electric Co. and Koninklijke Philips NV.
The carve-out “is a major step in the history of the company, as Siemens moves further toward a ‘break up’ scenario,” Morgan Stanley analyst Ben Uglow said in a note. “Management is doing what many companies struggle to do in more forgiving labour environments.”
Job cuts
Siemens will retain “somewhat less than 50%” of the new entity, which will include its 59% stake in Siemens Gamesa Renewable Energy, to create a company with 30 billion euros in business volume.
The division has operations spanning oil and gas as well as conventional power generation and transmission, while Siemens Gamesa develops wind farms and makes renewable energy equipment.
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In addition to the structural revamp, Kaeser also unveiled job reductions at its core divisions to save about 2.2 billion euros by 2023. These include 4,900 cuts at digital industries, 3,000 at so-called smart infrastructure and 2,500 jobs at its central corporate unit. At the same time, Siemens plans to hire about 20,500 new employees.
Gas and Power had the lowest profit margin of all divisions last year, according to figures that were revised to reflect the four wholly-owned units Siemens created in an April 1 reorganisation. A global collapse in turbine orders has also hit rival General Electric Co., contributing to the US company’s deep slump.
Siemens had been looking at other options for the business. Bloomberg News reported in March that Mitsubishi Heavy Industries Ltd. was in talks with Siemens on a possible combination of the gas turbine business with its own operations, and that the German company also had discussions with other firms on a full or partial sale of the division.
In a statement, union representatives confirmed the options, saying the carve-out made the most sense for the labor representatives that make up half the supervisory board.
“In a joint venture with, for example, a Japanese competitor, we would have seen too great a risk,” Birgit Steinborn, chief employee representative on the supervisory board, said in the statement.