Siemens beats forecasts

City A.M. Reporter
Siemens, Europe's biggest engineering conglomerate, beat forecasts for its first-quarter profit helped by robust demand in fast-growing emerging economies.

Net profit from continuing operations – which exclude units planned to be spun off – rose 17 per cent to 1.79bn euros (£1.5bn) in the quarter, beating the average forecast of 1.47bn euros in a Reuters poll.

Like most peers in Germany's capital goods industry, Siemens relies heavily on exports of manufactured goods to China, Brazil, India and Russia to power growth, profiting from aggressive infrastructure investment in those countries.

Siemens and steelmaker ThyssenKrupp have also benefited from emerging economies' appetite for German luxury cars, high-end engineering machinery and industrial equipment.

Latest data showed German manufacturing orders grew at their fastest rate in 10 months in November, rising far more than economists expected mainly due to strong demand from outside the euro zone for durable goods.

"Orders and revenue grew in all regions, particularly in emerging markets," Chief Executive Peter Loescher said on Tuesday, referring to the company's first quarter to end-December.

Siemens said emerging markets grew significantly faster than orders overall, at 31 percent, and accounted for around a third of total orders for the quarter.

It said quarterly order intake – an indicator of future sales – rose 160 per cent from India and 49 per cent from China.

Overall new orders rose, partly thanks to supply gas turbines for GS Electric power plant in South Korea, a rolling mill for China's steelmaker Xiangtan Iron, a wellhead compression solution for Russia's Technogarant, and transmission technology for power grids in Brazil and Paraguay.

China, where Siemens generated nearly 8 percent of group revenues last year, in 2009 vaulted past the United States into pole position as buyer of German engineering products.

Siemens, whose products range from steam turbines and fast trains to hearing aids and light bulbs, made around 30 percent of sales in emerging markets last year and has been increasingly making lower-priced products to suit demand.

Its bread and butter Industry Sector, which makes equipment that large companies use to run factories and automation gear to help industrial plants run smoothly, posted an increase of 22 per cent in quarterly profit.

Siemens reiterated its forecast of a 25 per cent to 35 per cent growth in profit from continuing operations for fiscal year to September 30, 2011, "clear growth" in order intake and "moderate" organic revenue growth.