Earnings Release Q2 FY 2017(January 1 to March 31, 2017):Another strong quarter – profitable growth continuing
04 May 2017
"We delivered another strong team performance and continue to outperform the markets. In the second half of the fiscal year, we will focus on duly integrating Mentor Graphics and on a successful start of Siemens Gamesa Renewable Energy, while keeping a close eye on our operational performance. And there is more work to do," said Joe Kaeser, President and Chief Executive Officer of Siemens AG.
Revenue rose 6% compared to Q2 FY 2016, to €20.2 billion, including a strong performance by short-cycle businesses, and orders were €22.6 billion, up 2% despite a high basis of comparison including orders totaling €3.1 billion in Q2 FY 2016 in Egypt; the book-to-bill ratio was 1.12
Strong margin expansion in nearly all industrial businesses due to strong operational execution, and a €138 million positive effect from pension plan amendments, took Industrial Business profit margin up to 12.1%
At the end of Q2 FY 2017, Siemens acquired all shares of Mentor Graphics Corporation (Mentor Graphics) and, at the
beginning of Q3 FY 2017, closed the merger of Siemens’ wind power business with Gamesa Corporación Tecnológica S.A. (Gamesa)
Order growth in nearly all industrial businesses, with the strongest contributions from Wind Power and Renewables and Energy Management, both with large contract wins; substantial decline in Power and Gas relative to the high basis of comparison in Q2 FY 2016, which included orders totaling €3.1 billion in Egypt
Profit Industrial Business: up in all but one industrial business; highest profit from Healthineers, from Digital Factory with very strong contributions from its short-cycle businesses, and from Power and Gas; largest profit increase from Building
Technologies due to strong operating performance and a €94 million positive effect related to amendments of pension plans (total effect for Industrial Business: €138 million); Q2 FY 2016 benefited from positive €130 million effects resulting from revised estimates related to contracts in Iran in Power and Gas
Industrial Business generated strong Free cash flow in the first half of fiscal 2017, totaling €3.2 billion, up sharply from € 1.5 billion in the prior-year period. Free cash flow from Industrial Business for the current quarter increased to €1.951 billion from €1.477 billion in Q2 FY 2016 due mainly to Power and Gas; this improvement was more than offset by cash outflows outside Industrial Business mainly due to higher income tax payments
We confirm our expectations for fiscal 2017 presented with our results for Q1 FY 2017. We continue to expect modest growth in revenue, net of effects from currency translation and portfolio transactions, and anticipate that orders will exceed revenue for a book-to-bill ratio above 1. We expect the profit margin of our Industrial Business in the range of 11.0% to 12.0%, and basic EPS from net income in the range of €7.20 to €7.70.
This outlook now includes portfolio changes already closed by the middle of fiscal 2017, particularly the acquisition of Mentor Graphics and the Gamesa merger, which are expected to burden Industrial Business profit margin and basic EPS from net income in fiscal 2017. The outlook continues to exclude charges related to legal and regulatory matters as well as potential burdens associated with pending portfolio matters.