Commenting at its annual shareholders meeting yesterday on its first quarter figures, Siemens AG said that sales and orders for the year to September would grow at a faster pace than previously expected but that profits would only remain steady – and they fell 5% during the first quarter, a slippage blamed on weak semiconductor prices at the end of 1996. Chairman Heinrich von Pierer insisted that the fall in profits was a temporary dent. We expect sales and orders to exceed the somewhat muted original forecast for the year. The present favorable currency situation and the low interest level are largely responsible for this unforeseen growth, he said. And the dollar’s current strength could boost sales at Siemens 2% in the current business year, chief financial officer Karl-Hermann Baumann said. The slippage in profit was not reflected in the company’s sales and orders for the first quarter, which rose sharply on the back of favorable foreign exchange markets and low German interest rates. Incoming orders jumped 22% to the equivalent of $16bn and sales were up 6% to $12.41bn. Of the total, domestic orders rose 8% to $5.64bn and foreign orders jumped 31% to $10.39bn. The highest growth was achieved in the Asia-Pacific region, where orders soared 130%, and the Americas, where orders grew 37%. Favourable foreign exchange markets and low German interest rates boosted orders and sales in the first quarter. Strong growth in the first quarter was due to special factors and should not be extrapolated for the entire year, von Pierer said, adding that he remained confident for earnings in the full year. In coming years the foreign share of group sales would rise to around 70% from 60% now, he said. According to Reuter, von Pierer dismissed speculation that Siemens might break up the group into smaller units and list these on stock exchanges.
Would destroy value
Splitting up our company would not create additional value, but rather would destroy value, he said, adding that those who call for such a move fail to recognize the value Siemens achieves from synergies between its divisions. He reiterated that Siemens aims to improve its position in world markets and its profitability by spinning off dead-end businesses, acquiring others with better prospects, and expanding in new fields. Von Pierer said the core business would remain electrical engineering and electronics, where the global market was growing at an annual 7%. Each of its 250 business fields needed to develop and sustain profitability and competitive strength and be able to achieve a leading position on the global market, he said. In the foreseeable future we plan to divest a sales volume of roughly $1.8bn, he said, citing cardiac pacemakers, industrial lasers and high performance printers, which have already gone. Unfortunately we are not yet finished with our job reductions in Germany, he added. Von Pierer described the government’s planned income tax reform as a step in the right direction towards improving conditions for domestic investment, but made no pledges to curb the company’s plans to continue to cut domestic jobs. He said Siemens was not growing on the German market, but rather in international markets, but added that the pace of domestic job cuts was already slowing. He insisted the goal of a 15% return on capital could be achieved by the year 2000, saying he stands by the goal, even though the current return is in the bottom of the middle range, in international comparison.