Siemens raises financial targets and announces share buyback

Chief executive pivots industrial giant toward software to boost shareholder returns

Siemens  raised its targets last month on the back of a booming Chinese economy and a recovery in the global automotive sector.  Photograph: iStock

Siemens raised its targets last month on the back of a booming Chinese economy and a recovery in the global automotive sector. Photograph: iStock

 

Siemens raised financial targets and announced its first share buyback since 2015 as the German industrial giant’s new chief executive officer pivots toward software to boost shareholder returns.

Siemens will buy back as much as €3 billion of shares over a five-year period starting from 2022, the Munich-based manufacturer said on Thursday in a statement. The company also hiked targets for revenue and profit over its three- to five-year business cycle with an expected boost to earnings per share of just under 10 per cent annually.

“Digitalisation, automation and sustainability are growth engines for our business,” CEO Roland Busch said in the statement accompanying Thurday’s capital markets day. “As a focused technology company, we want to strengthen our position in all our markets.”

Siemens said it’s targeting acquisitions to break into “highly attractive” new markets “adjacent” to its existing businesses that offer as much as €120 billion in potential revenue. In May, the company agreed to pay $700 million to buy supply-chain management firm SupplyFrame Inc that provides intelligence on factory outages and material-cost changes.

Siemens reversed an initial gain to fall 1.2 per cent in early Frankfurt trading. The shares have gained 15 per cent this year.

Conglomerate structure

The new financial goals and share buyback mark the first significant step by Mr Busch (56), who took the helm in February to succeed long-term leader Joe Kaeser. After an era marked by spinoffs and disposals that streamlined Siemens’ conglomerate structure, Busch is working to boost profitability and close a valuation gap with rivals – a feat that eluded his predecessor.

While the company’s share price has gained amid the spinoffs of Siemens Healthineers and Siemens Energy, profit margins continue to lag those of competitors like Schneider Electric. Siemens on Thursday confirmed its earnings guidance for fiscal 2021. It raised its targets last month on the back of a booming Chinese economy and a recovery in the global automotive sector.

The manufacturer serving customers in transportation, healthcare and infrastructure is also betting on growing demand for so-called software-as-a-service offerings to spur higher recurring revenues than the hardware-based products that made the firm a byword for German engineering prowess. At the capital market day, Siemens said software revenue of €5.3 billion in fiscal 2020 is expected to grow at a compound annual rate of around 10 per cent over the business cycle until 2025.

Siemens also raised profit targets for its Smart Infrastructure unit, a division that makes systems for controlling power grids, traffic and buildings, and its Mobility business, which makes trains as well as related software and equipment. – Bloomberg