German giant reports net income of €815 million, a near 30% increase compared with a year ago

July 29, 2004

6 Min Read

Munich -- Siemens AG has reported its financial results for the third quarter (April 1 to June 30) of fiscal 2004.

  • Net income was €815 million, up 29% from €632 million in the third fiscal quarter a year ago.

  • Group Profit from Operations was €1.239 billion, up 21% from €1.023 billion in the same period a year earlier.

  • Orders rose 11% to €19.077 billion and sales were up 5% to €18.216 billion from the third-quarter levels of fiscal 2003.

  • Net cash from operating and investing activities for the third quarter was €279 million, up from €266 million in the third quarter a year earlier.

    "I am pleased about the developments in the third quarter. Order intake is developing well, supported particularly by a very strong June. Also, net income is progressing ahead of our expectations and should allow us to exceed our own earnings objectives for the full year,” said Siemens CEO Heinrich v. Pierer. “These trends show that improvement in the broader macroeconomic environment is now arriving in our industry, and that we are succeeding with our enterprise-wide initiative, ‘Go for profit and growth’. To ensure our earnings momentum into the next fiscal year we are targeting further operational improvements by the Groups."

    For the third quarter ended June 30, 2004, Siemens reported net income of €815 million compared to €632 million in the same period a year earlier. Basic and diluted earnings per share rose to €0.91 and €0.88, respectively, compared to €0.71 per share in the prior-year period. Net income rose on the strength of Group Profit from Operations, which climbed to €1.239 billion from €1.023 billion in the same period a year ago.

    In Operations, a majority of Siemens’ Groups achieved double-digit earnings growth and higher profit margins compared to the same quarter of fiscal 2003. Top earnings performers included Automation and Drives (A&D), Power Generation (PG), Medical Solutions (Med), Siemens VDO Automotive (SV), and Osram. Challenges remain at Transportation Systems (TS) and Siemens Business Services (SBS), which reported losses.

    Third-quarter orders climbed 11% to €19.077 billion from €17.215 billion a year earlier, and third-quarter sales rose 5% to €18.216 billion from €17.380 billion in the prior year. Business volume was particularly strong in the closing month of the quarter. International business drove order growth, rising 16% year-over-year. Significantly reduced capital expenditures for rail transportation projects contributed to an 8% decline in orders in Germany year-over-year.

    Operations generated €379 million in net cash in the third quarter, despite a build-up in net working capital associated with volume growth. In the prior-year period, Operations used net cash of €569 million due to major investments. The two other components of Siemens worldwide, which include Financing and Real Estate and Corporate Treasury activities, used net cash of €100 million in the current period, particularly reflecting renewed asset growth in the financing business. In contrast, these activities provided net cash of €835 million in the prior-year period. In aggregate, net cash from operating and investing activities for Siemens worldwide was €279 million in the third quarter, up year-over-year from €266 million.

    Operations in the third quarter of fiscal 2004

    Information and Communication Networks (ICN)

    ICN posted Group profit of €51 million compared to a loss a year earlier, when the Group took €72 million in charges primarily related to Efficient Networks, Inc. Third-quarter earnings at the Carrier Networks and Services business were €15 million compared to a loss of €128 million in the prior-year period, which included the charges mentioned above. Sales were €816 million, up from €801 million a year earlier. The Enterprise Networks division contributed €49 million in third-quarter earnings on sales of €859 million, compared to €62 million and €893 million in the prior-year quarter. For ICN overall, third-quarter sales were nearly level with the prior-year total, while orders were down 8%.

    Information and Communication Mobile (ICM)

    ICM improved third-quarter Group profit year-over-year to €64 million in a market that remained intensely competitive. Earnings at the Mobile Networks division were €133 million on sales of €1.180 billion, compared to earnings of €36 million on sales of €968 million in the third quarter a year earlier. The Mobile Phones division generated €996 million in sales on a volume of 10.4 million handsets, up from €922 million and 8.1 million units in the same period a year earlier. Average selling price declined year-over-year, contributing to a loss of €88 million in the third quarter. For comparison, the division posted a loss of €42 million in the prior-year quarter, which included a positive effect related to warranty performance. For ICM as a whole, sales rose 13%, to €2.446 billion. Order growth of 23% included a major infrastructure order in Italy and market interest in the Mobile Phones’ new 65 series.

    Income statement highlights for Operations in the third quarterIn Operations, net sales increased to €18.077 billion, up from €17.249 billion a year earlier. Third-quarter gross profit margin improved to 29.4% of sales, from 28.9% a year ago. Most of Siemens’ Groups increased their gross profit margins, led by significant improvements at A&D and SV. Gross profit margins were lower at TS and Med. Research and development expenses remained level with the prior year, but represented a smaller percentage of sales due to revenue growth year-over-year. Marketing, selling, and general administration expenses rose more slowly than revenues, decreasing to 17.7% of sales from 18.1% in the same period a year earlier. Other operating income (expense), net was a negative €1 million, compared to a positive €81 million in the prior-year period, which reflected higher cancellation gains at PG and a gain arising from Med’s contribution of assets to a joint venture. Income from investments in other companies, net improved to €51 million compared to a negative €3 million in the third quarter a year earlier. The prior-year period included a negative €43 million representing Siemens’ equity share of Infineon’s net loss.

    Income and earnings per share in the first nine months

    Net income for the first nine months of fiscal 2004 increased to €2.751 billion from €1.721 billion in the same period a year earlier. Group Profit from Operations contributed much of the increase, rising 15% year-over-year, to €3.676 billion, despite expected earnings reductions at PG related to the U.S. power generation market and losses at TS due to charges in its rolling stock businesses. The current period also benefited from a pre-tax gain of €590 million related to the sale of Infineon shares and reversal of €246 million in deferred tax liabilities, partially offset by a €433 million goodwill impairment. These effects occurred in the second quarter. Basic and diluted earnings per share for the first nine months were €3.09 and €2.96, respectively, well above basic and diluted earnings per share of €1.93 in the same period a year earlier.

    Siemens AG

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