Siemens : Q4 FY2016 Earnings Release and Financial Results

Twice-raised guidance exceeded - historic success through strong team performance

»The fiscal year just ended was one of the strongest in the history of our company. Setting aside portfolio divestments, it was actually the best. We worked hard and I am proud of what our global team has achieved. In fiscal 2017 we will continue working with full concentration on the execution of Vision 2020,« said Joe Kaeser, President and Chief Executive Officer of Siemens AG.

• Orders and revenue both 5% higher compared to fiscal 2015, at €86.5 billion and €79.6 billion, respectively, for a book- to-bill ratio of 1.09; excluding currency translation effects, orders and revenue both up 6%

• Industrial Business profit up 13%, at €8.7 billion; strong increases in Power and Gas, Energy Management, and Wind Power and Renewables and growth in other Divisions and Healthineers, more than offsetting a substantial decline in Process Industries and Drives

• Industrial Business profit margin reached 10.8%, with all industrial businesses except Process Industries and Drives within their target ranges

• Net income of €5.6 billion reflects the strong operating performance; fiscal 2015 net income of €7.4 billion included

  €3.0 billion related to divestments of the hearing aid business and Siemens' stake in BSH Bosch und Siemens Hausgeräte GmbH (BSH)

• Basic earnings per share (EPS) of €6.74, above the raised target range announced in the third quarter; basic EPS of €8.84 a year earlier included €3.66 related to the sale of the hearing aid business and the BSH stake

• Siemens proposes a dividend of €3.60 per share

  Q4 Fiscal 2016

• Fourth-quarter orders of €20.3 billion, 14% lower than the prior-year period which included a substantially higher volume from large orders; excluding the change from large orders, orders rose moderately

• Revenue 3% higher, at €22.0 billion, for a book-to-bill ratio of 0.93; excluding currency translation effects, revenue up 5%, orders down 13%

• Industrial Business profit remains strong at €2.4 billion, with a 10.9% profit margin; increases in most Divisions largely offset by a negative swing in Process Industries and Drives due to previously announced capacity adjustments

• Net income up 18%, at €1.2 billion; basic earnings per share (EPS) up 21%, at €1.42 compared to €1.18 in Q4 FY 2015

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• Currency translation effects took one percentage point from order and two percentage points from revenue development; portfolio effects had a minimal effect on volume development year-over-year

• Orders down due to a lower volume of large orders, particularly in Power and Gas and Wind Power and Renewables; orders rose moderately excluding the change from large orders

• Industrial Business order backlog was €113 billion

• Revenue increase in all industrial businesses except Process Industries and Drives, and driven by double-digit growth in Power and Gas, due mainly to a sharp increase in Egypt

• Profit Industrial Business: increases in most of the Divisions offset by Process Industries and Drives, where profit turned negative due mainly to severance charges related to previously announced capacity adjustments

• Income from continuing operations: improvement due mainly to Centrally managed portfolio activities, which benefited from a strong positive swing relating to a major asset retirement obligation and also included a lower loss from at- equity investments

• Decrease in Free cash flow from Industrial Business, to €4.034 billion from a high level of €4.952 billion in Q4 FY 2015. Free cash flow in the prior-year period benefited from significantly higher project prepayments at Power and Gas

• ROCE increase driven by higher net income

• Underfunding of Siemens' pension plans as of September 30, 2016: €12.8 billion (June 30, 2016: €12.7 billion)

  Q4			% Change
  (in millions of €)	FY 2016	FY 2015	Actual	Comp.
  Orders	3,218	5,297	(39)%	(38)%
  Revenue	4,545	4,118	10%	12%
  Profit	509	418	22%
  therein: severance	(23)	(91)
  therein: integration costs Dresser-Rand	(14)	(19)
  Profit margin	11.2%	10.2%
  excl. severance and integration costs	12.0%	12.8%

   Orders came in substantially lower due to a smaller volume from large orders compared to Q4 FY 2015, when the Middle East recorded several large orders including in Egypt; the book-to-bill ratio dropped below 1 for the current quarter

  • Revenue growth driven by strong execution from the backlog particularly including large orders in Egypt; increases in all three reporting regions

  • Profitability influenced by a less favorable revenue mix, including a lower share from the service business; the current period includes lower severance as well as positive effects totaling €70 million from measurement of inventories; Q4 FY 2015 included a positive effect of €55 million related to a project settlement

  • Overcapacities continue to create an aggressive competitive environment, resulting in increased price pressure

    Wind Power and Renewables

    Q4			% Change
    (in millions of €)	FY 2016	FY 2015	Actual	Comp.
    Orders	1,205	2,716	(56)%	(56)%
    Revenue	1,597	1,504	6%	11%
    Profit	132	72	84%
    therein: severance	(2)	(3)
    Profit margin	8.3%	4.8%
    excl. severance	8.4%	5.0%

    Q4			% Change
    (in millions of €)	FY 2016	FY 2015	Actual	Comp.
    Orders	3,376	3,290	3%	4%
    Revenue	3,573	3,473	3%	5%
    Profit	299	259	15%
    therein: severance	(52)	(51)
    Profit margin	8.4%	7.5%
    excl. severance	9.8%	8.9%

    Energy Management

• After very strong order growth in the first nine months, lower volume from large orders in the fourth quarter; Q4 FY 2015 included a €1.2 billion order for an offshore wind-farm, including service, in Germany and several large orders in the onshore business

• Clear revenue increase in the offshore new unit business despite negative effects from currency translation

• Continued strong profitability driven by higher revenue, improved productivity in production and installation, increased capacity utilization, and a larger contribution from the service business

• Increase in orders mainly due to growth in the high voltage products and digital grid businesses

• Revenue up mainly due to growth in the solutions and transformer businesses; increase in all three reporting regions

• Robust profit development compared to the strong year-end quarter a year earlier, including profitability improvements in a majority of businesses led by the high voltage products and solutions businesses

  Q4			% Change
  (in millions of €)	FY 2016	FY 2015	Actual	Comp.
  Orders	1,770	1,662	7%	7%
  Revenue	1,698	1,679	1%	2%
  Profit	196	222	(12)%
  therein: severance	(10)	(7)
  Profit margin	11.5%	13.2%
  excl. severance	12.1%	13.6%

   Continued strong order growth driven mainly by contract wins in the solutions business for energy efficiency projects in the U.S.

  • Revenue growth in Asia, Australia and the Americas

  • Strong profit contribution in typically robust year-end quarter

    Mobility

    Q4			% Change
    (in millions of €)	FY 2016	FY 2015	Actual	Comp.
    Orders	2,274	2,387	(5)%	(3)%
    Revenue	2,070	1,998	4%	8%
    Profit	173	171	1%
    therein: severance	(5)	(34)
    Profit margin	8.4%	8.6%
    excl. severance	8.6%	10.2%

    Q4			% Change
    (in millions of €)	FY 2016	FY 2015	Actual	Comp.
    Orders	2,700	2,520	7%	7%
    Revenue	2,787	2,661	5%	4%
    Profit	515	468	10%
    therein: severance	(21)	(28)
    Profit margin	18.5%	17.6%
    excl. severance	19.2%	18.6%

    Digital Factory

• Lower volume from large orders year-over-year; sharp order growth in the Americas due mainly to a contract win worth

  €0.4 billion for light rail vehicles in the U.S.

• Strongest revenue growth from the rolling stock businesses

• Solid project execution resulted in approval of operations and homologation in Germany for the Division's new high-speed train series, the ICE 4, according to the original plan

• Profitability impacted by a less favorable revenue mix, due to a larger share from the lower-margin rolling stock business

• Broad-based order and revenue growth; strongest contributions from the product lifecycle management (PLM) software business, which benefited from the acquisition of CD-adapco, and from the factory automation business

• Orders and revenue up in all regions, particularly in China

• Business performance of CD-adapco ahead of plan

• Profit at record high driven by the PLM and factory automation businesses