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Earnings Release Q2 FY 2018 - Investments in digital industry making an impact

10 May 2018

"Most of our businesses, primarily our digital offerings, showed impressive performance and operationally more than offset
structural challenges in fossil power generation. By raising our guidance, we demonstrate our commitment to the company’s capability to master structural change and shape digital industry," said Joe Kaeser, President and Chief Executive Officer of  Siemens AG.

  • Revenue was €20.1 billion, nearly unchanged from Q2 FY 2017, and orders were also strong at €22.3 billion, 2% below the high basis of comparison a year earlier which included a substantially higher volume from large orders; the book-to-bill ratio was 1.11

  • On a comparable basis, excluding currency translation and portfolio effects, revenue was level and orders declined by 1%

  • Industrial Business profit of €2.3 billion and Industrial Business profit margin of 11.0%; strong performance led by Digital
    Factory, held back by a sharp decrease in profit and profitability at Power and Gas

  • Net income of €2.0 billion included a €0.7 billion profit from Centrally managed portfolio activities; basic earnings per share (EPS) increased to €2.39, up from €1.75 in Q2 FY 2017

  • The successful initial public offering (IPO) of Siemens Healthineers AG included the float of a 15% interest in the business

  • Strong order intake, only slightly below the high basis of comparison in Q2 FY 2017; lower volume from large orders,
    particularly in Siemens Gamesa Renewable Energy (SGRE), which was formed via merger between the periods under
    review, in Energy Management and in Power and Gas; orders rose clearly excluding the change in large order volume

  • Order backlog rose to €129 billion

  • Revenue includes a sharp increase at SGRE due to the merger and double-digit growth in Digital Factory; as expected,
    continuing substantial revenue decline for Power and Gas in contracting markets

  • Negative currency translation effects took seven percentage points from order and six percentage points from revenue
    development; portfolio transactions added six percentage points each to order and revenue development

  • Profit Industrial Business declined due predominantly to Power and Gas where market forces drove a €325 million reduction in profit year-over-year; continued strong performance in a majority of the other industrial businesses, most prominently in Digital Factory, which sharply increased its profit on strength in its short-cycle and product lifecycle management software businesses; Mobility surpassed the high profitability it achieved in Q2 FY2017;BuildingTechnologies and Siemens Healthineers again made strong profit contributions, but reported declines due to a €94 million gain related to amendments of pension plans for Building Technologies in Q2 FY 2017 (total effect for
    Industrial Business: €138 million) and negative currency effects for Siemens Healthineers

  • Outside Industrial Business, Centrally managed portfolio activities (CMPA) recognized a €900 million gain related to
    Siemens‘ investment in Atos SE, as a result of transferring Siemens‘ Atos shares to Siemens Pension-Trust e.V.; this was partly offset by a €154 million impairment loss related to an equity investment, also within CMPA. While costs within
    Corporate items came in lower, this was largely offset by higher amortization of intangible assets acquired in business
    combinations resulting mainly from the SGRE merger and the acquisition of Mentor Graphics

  •  Income from continuing operations and net income benefited from a lower income tax rate year-over-year due to effects from release of tax provisions and the largely tax-free gain from the above-mentioned transfer of shares in Atos SE; these factors more than offset negative income tax effects related to establishing the Siemens Healthineers Group

  • The successful IPO of Siemens Healthineers in March 2018 with a total placement volume of €4.2 billion resulted in cash inflows (net of transaction costs) of €3.6 billion in the current quarter and €0.5 billion at beginning of Q3 FY 2018; these cash inflows are not part of Free cash flow

  • ROCE benefited from higher net income in the current quarter that more than offset an increase in average capital employed due primarily to the SGRE merger and the acquisition of Mentor Graphics


We continue to expect geopolitical uncertainties such as trade restrictions that may affect investment sentiment.
Following the strong results achieved in the first half of fiscal 2018, we raise our outlook for basic EPS from net income to the range of €7.70 to €8.00, excluding severance charges, up from the range of €7.20 to €7.70. Furthermore we confirm our expectation of modest growth in revenue, net of effects from currency translation and portfolio transactions, and continue to anticipate that orders will exceed revenue for a book-to-bill ratio above 1 for the full fiscal year. We continue to expect a profit margin of 11.0% to 12.0% for our Industrial Business also excluding severance charges.
This outlook excludes charges related to legal and regulatory matters and potential effects which may follow the introduction of a new strategic program

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