Electronics and electrical engineering company Siemens AG (SI) Tuesday reported an increase in first quarter net profit, reflecting lower costs and gain on sale of business, despite lower revenues from all businesses and decrease in orders. Going forward, the company anticipates a mid-single-digit percentage decline in organic revenues in fiscal 2010 and also cautioned that manufacturing sector and world financial markets will remain challenging in 2010.
For the first quarter, the Munich, Germany-based company's net income attributable to shareholders was EUR 1.48 billion or EUR 1.68 per share as compared with EUR 1.20 billion or EUR 1.39 per share in the prior-year period.
Income from continuing operations increased 21% year-on-year to EUR 1.53 billion or EUR 1.68 per share from EUR 1.26 billion or EUR 1.42 per share a year ago, reflecting higher total sector profit. Siemens also noted that corporate treasury results rose on lower interest expense and higher results from interest rate derivatives not qualifying for hedge accounting.
On a continuing basis, return on capital employed or ROCE for the 2010 first quarter rose by 3 percentage points year-over-year to 15.9%, reflecting higher income from continuing operations.
Siemens operates mainly in three sectors: Industry, Energy and Healthcare. Total sectors profit in the first quarter increased 11% to EUR 2.26 billion from EUR 2.03 billion a year earlier, reflecting higher profits in the Energy and Healthcare sectors. The company noted that sectors profit is earnings before financing interest, certain pension costs and income taxes.
The first quarter total sectors profit also included EUR 45 million with regard to gain at Mobility on the sale of a business. Siemens stated that Healthcare sector was the primary driver of the increase in total sectors profit, with a double-digit profit increase in its imaging business and a profit rebound in solutions business compared to the prior-year quarter.
Total group revenues for the quarter declined 12% to EUR 17.35 billion from EUR 19.63 billion in the first quarter. On an organic basis, excluding currency translation and portfolio effects, revenues were down 8%. The company noted that the decline in revenues year-over-year was smaller, in part because divisions with strong order backlogs were able to convert prior orders to current business.
According to Siemens, Industry Sector was the primary factor in lower revenue year-over-year, reporting a 13% decline in the first quarter on lower sales at Drive Technologies, Industry Solutions, Building Technologies and Industry Automation.
The company noted that the sharpest decline in revenues came in the Americas, including strong negative currency translation effects from the US. Within the decrease in Asia and Australia, Siemens noted that both India and China posted higher revenues compared to the first quarter a year ago. Gross profit for the first-quarter period was EUR 5.29 billion compared to EUR 5.64 billion a year ago.
Sector-wise, industry revenues dropped to EUR 8.07 million from EUR 9.29 million in the previous year, energy sector revenues were EUR 5.62 million versus EUR 6.23 million in the last-year quarter, and revenues from healthcare sector decreased to EUR 2.83 million from EUR 2.94 million in the corresponding period last year. The company's revenues from total sectors slumped to EUR 16.52 million from EUR 18.46 million in the comparable period prior year.
Siemens IT solutions and services generated revenues of EUR 1.03 million for the quarter as compared with EUR 1.29 million a year ago. Revenues from Siemens Financial Services rose to EUR 205 million from EUR 188 million in the same quarter last year.
For the fourth quarter, Siemens Real Estate revenues were EUR 434 million versus EUR 429 million in the previous-year quarter, while revenues from corporate items and pensions dropped to EUR 103 million from EUR 142 million a year earlier.
For the three-month period, cost of goods sold and services rendered totaled EUR 12.06 billion versus EUR 13.99 billion in the year-ago period, and marketing, selling and general administrative expenses were EUR 2.54 billion compared to EUR 2.87 billion last year. Research and development costs decreased to EUR 822 million from EUR 914 million in the previous-year quarter. Other operating costs for the quarter were EUR 56 million as compared with EUR 117 million in fiscal 2009, and interest expense fell to EUR 466 million from EUR 629 million a year earlier.
Quarterly interest income declined to EUR 517 million from EUR 577 million last year, and other operating income was EUR 169 million versus EUR 185 million last year.
Siemens noted that fourth-quarter orders came in 15% below the same period a year earlier at EUR 18.98 billion, including anticipated contraction in industrial and energy infrastructure markets that typically lag macroeconomic cycles. On an organic basis, excluding currency translation and portfolio effects, orders were down 11%.
The company said that orders came down for all its sectors compared to the last year, and, as anticipated, market development was mixed in the first quarter. While certain short-cycle businesses saw signs that demand is stabilizing at a lower level, certain industrial and energy infrastructure businesses experienced further market contraction, and therefore, orders came in below the previous-year period, Siemens added.
On a geographic basis, orders have declined in all regions, including substantially lower volume from large fossil power generation contracts in the region comprising Europe, Commonwealth of Independent States, Africa and Middle East.
In the preceding fourth quarter, the company's attributable net loss narrowed to EUR 1.13 billion or EUR 1.31 per share from a loss of EUR 2.46 billion or EUR 2.85 per share in the previous year. Total group revenues for the fourth quarter were down 9% to EUR 19.71 billion from EUR 21.65 billion in the prior year. On an organic basis, excluding currency translation and portfolio effects, revenues declined 7%.
Moving ahead to full year 2010, Siemens expects conditions in manufacturing sector and world financial markets to remain challenging, and anticipates only a mid-single-digit percentage decline in 2010 organic revenues due to the stabilizing effect of its strong order backlog, following a double-digit decrease in fiscal 2009 orders.
For the full year 2010, the company estimates total sectors profit to be in the range of EUR 6 billion to EUR 6.5 billion, and income from continuing operations to be up by nearly 20% compared to EUR 2.46 billion last year.
Siemens said the outlook is conditional on no material deterioration in its pricing power during the fiscal year and on improving market conditions in the second half, particularly for its shorter-cycle businesses. Furthermore, the company stated that the outlook excludes major impacts that may arise during the fiscal year from restructuring, portfolio transactions, impairments, and legal and regulatory matters.
In Monday's regular trading session, SI closed trading at $89.31 per share on the New York Stock Exchange. In the past 52-week period, the shares have been trading in a range of $47.53 to $103.08.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.