Siemens is becoming more optimistic after a strong start to the new fiscal year. Both revenue and profit are expected to increase slightly more than planned in 2022/23 (as at the end of September). Siemens performed better than expected in the first quarter. The digitalization businesses more than compensated for weaknesses in the train division and at the medical technology subsidiary Siemens Healthineers.

Revenue in 2022/23 on a comparable basis - i.e. excluding the effects of acquisitions, disposals and currency translation - is now expected to increase by 7 to 10%, as the DAX-listed company surprisingly announced on Wednesday evening in Munich ahead of the Annual General Meeting on Thursday. The range was thus increased by one percentage point at each end. Siemens raised its expectations for sales growth and profitability for both the Digital Industries and Smart Infrastructure divisions.

In the first quarter, the Group benefited from stronger than expected development in the smart infrastructure business. The digitalization division continued to score with a strong automation business. Weaknesses in the Train Division, which suffered from ongoing delivery delays, and at Siemens Healthineers, where the high demand for coronavirus rapid tests in the past has now virtually disappeared, were more than offset.

Group sales increased by 10%

Siemens increased its consolidated sales by 10% to just under €18.1 billion. The comparable growth was 8%. The result of the industrial businesses increased by 9% to just under €2.7 billion. Analysts had previously expected an operating result at around the previous year's level. However, profit after tax fell to around 1.6 billion euros. Among other things, a higher loss at Siemens Energy had a negative impact here. In addition, Siemens had benefited from a special gain in the same quarter of the previous year.

The 7% drop in order intake to €22.6 billion was a minor downer. However, Siemens had benefited greatly last year from orders brought forward, particularly in the Digitalization division, as well as major orders at Siemens Mobility. Analysts had also expected less here.

"With earnings of €2.7 billion in the industrial business, we have made the strongest start to a new fiscal year to date," commented CEO Roland Busch on the figures. According to the manager, the increase in the forecast was also made in view of the record order backlog of 102 billion euros.

The divisions at a glance

Digital Industries

"With an impressive increase of 23%, Digital Industries' automation business once again stands out. Also compared to the competition. We have gained further market share," says Busch. According to Busch, the result of the industrial business amounted to 2.7 billion euros, which is "a record figure" for the first quarter. However, incoming orders in the automation business are falling behind the high level in Q1/2022.

The increase in incoming orders in the software business was mainly due to larger orders in the product life cycle management software business. However, sales revenue in the software business fell due to the lower volume from larger orders in the electronic design automation business. Earnings in the software business fell due to lower sales revenue and higher expenses for cloud-based activities, including the effects of the switch to Software as a Service (SaaS).

Both earnings and profitability increased in all automation businesses and were supported by higher capacity utilization as well as a more favorable business mix with improved component availability for high-margin products. The book-to-bill ratio for Digital Industries was 1.24.

Digital Industries now expects to achieve like-for-like revenue growth of between 12% and 15% in the 2023 financial year (previously 10% and 13%). The earnings margin is now expected to be between 20% and 22% (previously 19% and 22%).

Smart Infrastructure

Incoming orders in the Smart Infrastructure division increased in all businesses. In particular, strong growth in the Electrification business due to a number of major orders, including from the semiconductor industry, contributed to this growth. Sales revenue also grew in all businesses, with the strongest contributions coming from the Electrical Products and Electrification businesses with continued increases in data centers. Higher volumes and capacity utilization are also contributing to increased earnings and growing profitability, as are positive currency effects and cost savings from the implementation to date of the ongoing program to increase competitiveness, according to Siemens.

Smart Infrastructure now expects revenue growth on a comparable basis of between 9% and 12% (previously 8% and 11%) and an earnings margin in the range of 13.5% to 14.5% (previously 13% to 14%) in fiscal year 2023.

Mobility

In the Mobility division, a series of major orders ensured a good order intake. These include a EUR 0.9 billion order for a turnkey metro system in Australia and orders for locomotives worth a total of around EUR 300 million in Europe. Compared to the same period of the previous year (Q1/2022), however, it is down; the Group emphasized, however, that the first quarter of 2022 recorded the highest order intake ever achieved in a single quarter.

Sales revenue increased in most businesses, led by double-digit percentage growth in the rail infrastructure business. Both earnings and profitability continue to be impacted by delivery delays for sourced materials and components as well as less favorable business mix. According to Siemens, these effects were largely offset by positive effects primarily from the sale of previously written-off inventories.

Mobility still intends to achieve revenue growth on a comparable basis of between 6% and 9% and an earnings margin of between 8% and 10% in fiscal year 2023.

Healthineers

Siemens Healthineers is feeling the effects of the sharp decline in coronavirus antigen rapid tests in the Diagnostics business compared to the same period of the previous year as well as lower sales from tests for routine examinations in China before the end of the lockdowns there late in the quarter. This was offset by a significant increase in sales revenue in the Imaging business. Despite the higher earnings contributions from the Imaging and Varian businesses, the division recorded an overall decline in earnings and profitability. As already mentioned, this decline is primarily due to lower sales in the Diagnostics business, which also recorded charges in connection with its transformation program, as well as cost increases, particularly in procurement and logistics.

Portfolio Companies

In the Portfolio Companies segment, Siemens reported growth in order intake. This was led by the airport logistics business of Siemens Logistics, which recorded a higher volume of major orders compared to Q1/2022. Large Drive Applications made the strongest contribution to the broad increase in revenue. The sale of Siemens Logistics' mail and parcel handling business at the beginning of the fourth quarter of 2022 held back growth in order intake and revenue by portfolio effects of 16 and 18 percentage points respectively.

Portfolio Companies recorded a gain of €140 million from the successful sale of the Commercial Vehicles business, which was completed in November 2022.