MUNICH: Siemens, the German industrial and technology conglomerate, reported last week weaker than expected full-year results, refused to give an outlook on the coming year and failed to answer questions about the strategic direction of its two problem divisions.
But the shares rose as investors focused on strong underlying profitability after stripping out an unexpected euro800m ($939m) charge for the sale of its mobile handsets business and disappointing results from its struggling SBS IT services unit and its Com telecoms equipment division.
Some analysts and investors had hoped to learn more about how Klaus Kleinfeld, chief executive, intended to turn around Com and the loss-making SBS. But he refused to elaborate on the measures announced in September under which 2,400 jobs will be cut at SBS as part of attempts to save euro1.5bn by 2007.
Siemens has been criticised by investors for failing to get high enough margins out of its 11 operating businesses, which make everything from lightbulbs to power plants. Mr Kleinfeld stuck late last week by his ambitious profit targets for April 2007, which five of the 11 divisions are currently failing to meet.
Heinz-Joachim Neuberger, chief financial officer, said various positive and negative effects, including further restructuring costs and uncertainty over the direction of the German government, meant no outlook was possible for this year. "We are focused on our targets for 2007," he added. SBS, which has a target margin of 5.0-6.0 per cent, had one of minus 12.8 per cent last year while Com, which is meant to achieve 8.0-11 per cent by 2007, earned 3.5 per cent.
Ben Uglow, analyst at Morgan Stanley, said that when these two divisions were stripped out, the underlying results were nearly 20 per cent ahead of expectations, driven by strong performances at the medical and power generation units where orders surged.
"Across the board on an underlying basis this was probably the best quarter from Siemens for about a year. But the big shock was SBS and they haven't laid out a road map for it," he said. SBS made a loss of euro427m in the fourth quarter alone and one of euro690m for the entire year.
Lower interest rates caused its pension liabilities to rise, leading to a euro1.5bn cash injection which, added to the euro3.1bn in cash spent on acquisitions, meant the net cash position for the year was minus euro1.5bn.
Fourth-quarter net profit fell 88 per cent to euro77m. Full-year net income fell from euro3.4bn to euro2.2bn, on sales up 7.0 per cent at euro75bn and orders up 11 per cent at euro84bn. The dividend rose 8.0 per cent to euro1.35.