Siemens Raises Guidance as China Recovery Bolsters Profits

(Bloomberg) -- Siemens AG raised its annual guidance after better-than-expected sales and profit in the first quarter, the latest sign Europe's biggest engineering company is benefiting from a strong rebound in China.

Siemens now sees full-year net income rising to as much as 5.5 billion euros ($6.6 billion) from 4.2 billion euros last year, well above previous expectations for moderate growth. That's after comparable revenue increased in all four of its industrial businesses, including at its high-margin software segment.

“Some of the industries we lead have recovered clearly faster than expected,” co-Chief Executive Officer Roland Busch said Wednesday, adding that China stood out as a bright spot.

The results are a bookend to the tenure of long-time boss Joe Kaeser, who hands over the reins of the Munich-based firm to Busch Wednesday. During his seven-year run, Kaeser streamlined Siemens's sprawling conglomerate structure to help it focus on high-margin businesses such as factory-automation software.

“The lift to the net income guidance of 20% is higher than we and most investors we spoke to since the pre-announcement expected,” Andreas Willi, an analyst at JP Morgan Chase & Co., said in a note to clients.

Siemens rose as much as 3% in early Frankfurt trading. The stock has climbed about 15% this year.

Demand from China, which has roared back to pre-pandemic growth rates, has given key support to global trade and to some of Germany's biggest exporters, including automakers Volkswagen AG and BMW AG.

Still, Siemens cautioned that it continues to expect a “complex” macroeconomic environment because of the pandemic and said its outlook is based on economies continuing to recover.

Pandemic Uncertainty

“It's very uncertain what the global development will do in terms of both supply chain as well as of course on the demand side,” Kaeser said in an interview on Bloomberg Television. “That's why it's so important that we get the vaccine rolled out to everybody.”

Group sales rose 7% on a comparable basis in the first quarter, with operating profit at its industrial business jumping 39%.

In China, Siemens won orders to help BMW increase manufacturing capacity and digitize the factories of a local glassmaker. In Egypt, the company signed a memorandum of understanding to build the country's first high-speed rail system.

Siemens has weathered Covid-19 better than some of its automotive and industrial clients partly because it was able to keep its factories running virtually uninterrupted. It's also had an easier ride than U.S. rival General Electric Co., which is reliant on aviation customers hit by the collapse in air travel.

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