Siemens has closed the fiscal year, which was characterized by the war in Ukraine and high write-downs on the former energy business, with a profit in the billions. After a strong fourth quarter, the bottom line is a plus of 4.4 billion euros, as the company announced in Munich on Thursday. Siemens intends to earn significantly more again in the new fiscal year, which began in October.

The central industrial business at Siemens was even at a record level. Siemens earned more than 10 billion euros there. The fact that the bottom-line profit fell by 34 percent was mainly due to a billion-euro write-down on the remaining shares in the energy business Siemens Energy, which was floated on the stock exchange a good two years ago. It had even resulted in the first loss-making quarter for the Group in more than a decade. The withdrawal from Russia also had a negative impact on business.

Nevertheless, sales increased nominally by just under 16% to 72 billion euros. Shareholders will not be affected by the decline in profits either: the dividend is to rise by 25 cents to 4.25 euros per share.

Siemens CEO Roland Busch spoke of an "extremely challenging year" and an "outstanding performance". Siemens had gained market share and the high demand for the Group's hardware and software products was continuing, he emphasized. In the fourth quarter of the fiscal year, the world was already back in order at Siemens with a healthy profit of 2.9 billion euros.

Further sales planned

The next possible sales are already being prepared. Siemens has been working for some time on spinning off its business with large drives (LDA). This is now set to become an even bigger deal: Siemens now also wants to bring in low-voltage and geared motors from the Motion Control division, the manufacturing technology subsidiary Sykatec and the specialty business Weiss Spindle Technology.

In total, a new unit with a turnover of around three billion euros and 14,000 employees is to be created in the course of the fiscal year. This is roughly twice the size of the LDA division, as Busch confirmed. "The new company will be extremely competitive," he said. In view of the expansion, however, CFO Ralph P. Thomas probably does not expect the deal to be closed in the current financial year. But that is not necessary, he emphasized. There is no time pressure.

Hagen Reimer, who is responsible for Siemens at IG Metall, notes: "We are still extremely skeptical about the spin-off itself." However, if it cannot be prevented, "then we consider it to be the most favorable prospect in its current expanded form. This will give the future company the most stable and broadest base."

Siemens expects a significant increase in profits for the current year. Adjusted for certain purchase price effects, it should rise to between €8.70 and €9.20 per share. That would be an increase of 59 to 68 percent - last year it was 5.47 euros per share.

The year in figures - High forecast for 2023

Order intake in fiscal year 2022 rose by 25% to €89.0 billion, while sales increased by 16% to €72.0 billion, resulting in a book-to-bill ratio of 1.24. On a comparable basis, order intake increased by 17%, while the comparable growth in sales of 8.2% exceeded Siemens' forecast.

Industrial Business earnings increased by 17% year-on-year to a record €10.3 billion in fiscal year 2022, while profit after tax amounted to €4.4 billion. Sales revenue in Digital Industries and Smart Infrastructure stood out in particular with double-digit percentage growth.

Currency translation effects supported the growth in incoming orders and sales revenue by eight percentage points each, the Group reports. Portfolio effects held back growth in incoming orders and sales revenue by one and two percentage points respectively. At EUR 8.2 billion, free cash flow from continuing and discontinued operations was on a par with the 2021 financial year.

The fourth quarter in figures

The Group's profit after tax more than doubled to EUR 2.9 billion in the fourth quarter of the 2022 financial year. The result was boosted by a strong industrial business and a gain from the sale of the mail and parcel processing business of Siemens Logistics.

In the fourth quarter, order intake rose to €21.8 billion (Q4/2021: €19.1 billion) and was characterized by strong growth, particularly at Smart Infrastructure and Siemens Healthineers. Sales also increased on a comparable basis by 12% to €20.6 billion (Q4/2021: €17.4 billion). All industrial businesses contributed to this growth, led by double-digit percentage growth in Digital Industries and Smart Infrastructure. At 1.06, the book-to-bill ratio remains well above 1.

Digital Industries

The growth in incoming orders was largely determined by a significant number of larger orders in the product lifecycle management (PLM) software business. Due to the high volume of customer orders brought forward in previous quarters, incoming orders in the factory automation business were lower than in the strong prior-year quarter (Q4/2021). Sales revenue increased in all business areas, with the Factory Automation and Motion Control business areas making the strongest contributions to growth. All reporting regions recorded growth. The strong increase in sales revenue in the software business was primarily attributable to the EDA business (Electronic Design Automation). The Group also recorded strong earnings growth in the automation business, supported by higher capacity utilization, price adjustments to compensate for cost inflation and a more favourable business mix. Earnings in the software business fell primarily due to lower sales revenue in the PLM business and higher expenses for cloud-based activities, including the effects of the switch to Software as a Service (SaaS)

Smart Infrastructure

The Smart Infrastructure division recorded double-digit growth rates in incoming orders across all businesses. This was driven by strong demand for data centers and digital building services. The Electrical Products business made a major contribution to sales growth. In geographical terms, all reporting regions recorded increases in volume, with the largest contribution to growth coming from the USA, particularly from the Electrification and Electrical Products business.

The increase in earnings in all businesses is primarily attributable to higher capacity utilization, price adjustments to compensate for cost inflation and cost savings from the implementation of the program to increase competitiveness to date.

In the fourth quarter, Smart Infrastructure completed the acquisition of Brightly Software, an American provider of cloud-based SaaS for asset and maintenance management as well as energy and sustainability management.

Mobility

The Mobility business unit's order intake in the fourth quarter of 2022 included a number of major orders for locomotives worth a total of around EUR 500 million, including an order for dual-power locomotives in Germany, a EUR 0.1 billion order for train sets in the USA and the expansion of an order for a SaaS reservation system in France by EUR 0.1 billion. The decline in order intake is due to a higher volume of major orders in Q4/2021.

According to Siemens, the growth in sales in all businesses is largely determined by the service business and rail infrastructure business. As in previous quarters, revenue growth in some businesses was held back by delays in the delivery of purchased materials and components and by the effects of COVID-19 (in particular employee absences due to illness). The increase in earnings is largely determined by the service and rail infrastructure business. In general, however, earnings and profitability were negatively impacted by delivery delays and the effects of COVID-19.

Healthineers

Siemens Healthineers recorded double-digit percentage volume growth in all businesses. Geographically, there was a strong volume increase in the reporting regions Asia, Australia and the Americas with significant positive currency translation effects.

The division recorded a broad-based increase in earnings, led by the Imaging and Diagnostics business, driven by sales revenue growth and boosted by lower negative subsequent measurement effects from purchase price allocation in connection with the acquisition of Varian Medical Systems compared with the previous year. Earnings were negatively impacted by cost increases, particularly in procurement and logistics.

The forecast for fiscal year 2023 is based on the assumptions that geopolitical tensions will not escalate further and that the challenges posed by COVID-19 and supply chain bottlenecks will continue to recede. Under these conditions and in view of the high order backlog, especially in the short-cycle businesses, Siemens expects the industrial businesses to continue to grow profitably.

For the Siemens Group, revenue growth on a comparable basis (adjusted for currency translation and portfolio effects) is expected to be in the range of 6 percent to 9 percent and the ratio of orders to revenue (book-to-bill ratio) is expected to be above 1.

Digital Industries expects to achieve like-for-like revenue growth of between 10% and 13% in the 2023 financial year. The earnings margin is expected to be between 19% and 22%.

Smart Infrastructure expects like-for-like revenue growth of between 8% and 11% and an earnings margin in the range of 13% to 14% in the 2023 financial year.

Mobility intends to achieve like-for-like revenue growth of between 6% and 9% in the 2023 financial year. The profit margin is expected to be between 8 percent and 10 percent.

Siemens expects that the profitable growth of the industrial businesses will result in basic earnings per share (for earnings after tax) before purchase price allocation effects (EPS pre PPA) in the range of €8.70 to €9.20 in fiscal year 2023.

This outlook excludes burdens from legal and regulatory issues as well as significant impairments.