Siemens (SIEGn.DE) has reported a Q3 profit that fell short of predictions, highlighting decreasing demand in various markets, including China, the German engineering company stated on Thursday.
The manufacturer of trains and factory automation noted that China, which has long been a driving force in global manufacturing and is its third-largest market, had experienced only a modest recovery following its zero-COVID shutdown last year.
Siemens indicated that it was currently observing a “normalization of demand,” as customers had pre-purchased goods last year to prevent shortages. Orders increased by 10% during the three months ending in June, a decrease from the previous three months’ 13% rise. Siemens added that global customers were depleting their stocks of components, and this trend is expected to continue over the next few quarters.
CEO Roland Busch informed reporters, “In Q3 the normalization of demand was clearly visible in orders at our short-cycle businesses, most notably in China, but also in Europe.” He added that the recovery of China’s manufacturing sector has been slower than initially projected, and experts anticipate this trend to remain relatively flat.
In Q3, Siemens’ industrial profit, encompassing its mobility, smart infrastructure, and factory automation divisions, fell by 4% to 2.75 billion euros ($3.02 billion), disappointing analysts who had expected 2.90 billion euros according to the company’s compiled consensus.
Premarket activity
The company’s premarket activity saw its shares drop by 3.6%. While Siemens maintained its overall outlook for the year until the end of September, it revised its expectations for its digital industries segment, which supplies controllers to factories. This crucial division is now anticipating comparable revenue growth of 13% to 15%, lower than its previous projection of 17% to 20%.
Digital industries witnessed a 37% drop in order intake during the quarter, especially in the short-cycle factory automation sector, as stated by Siemens. Nevertheless, the division managed to increase revenue and profit as it worked through its substantial order book, benefiting from higher capacity utilization in its factories and the sale of more profitable products.
Siemens’ performance, given its role in automating factories and equipping transportation networks, offers insights into the global economy’s health. The manufacturing activity has been gradually declining in recent months, evidenced by weakening purchasing manager data in Europe and China.
In Q3, Siemens registered a 10% rise in orders, reaching 24.24 billion euros, surpassing forecasts of 22.19 billion euros. Revenue climbed by 6% to 18.89 billion euros, although it fell short of predictions for 19.27 billion euros. The net profit of 1.44 billion euros also failed to meet expectations.
The company retained its guidance at the group level, anticipating comparable revenue growth of 9% to 11% for the twelve months ending in September, along with earnings per share ranging from 9.60 to 9.90 euros.
