Industrial strength boosts Siemens

Engineering and technology giant Siemens ended 2004 in robust shape – thanks to strong performances from some of its traditional industrial divisions.

The German group, which employs about 18,000 people in the UK, said its operations in areas such as automation and drives had delivered solid growth, offsetting problems in its mobile phones and transportation businesses.

Siemens’ operating profit for the year to September came in a whisker under e5bn (£3.5bn), a rise of 16 per cent on its 2003 level. Sales were three per cent higher at e75.1bn.

Chief executive Heinrich von Pierer said 10 out of 13 operational divisions within Siemens had increased profits this year, with the ‘lion’s share’ of group earnings coming from automation and drives, medical systems and power generation.

The company said automation and drives ‘exemplified the success of Siemens’ profit and growth initiative in 2004.’ Its profit margins improved due to increased productivity and higher use of capacity.

The division saw strong demand internationally, with a 25 per cent growth in the Asia-Pacific region. Siemens’ industrial solutions and services division also had a good year, with sales up seven per cent and orders 10 per cent higher at e4.4bn.

Power generation increased its order level by 27 per cent, partly thanks to the inclusion of industrial turbine businesses acquired in the second half of 2003. Power transmission and distribution also saw a rise in orders, with growth in Europe and Asia-Pacific particularly strong.

Improvements in its automotive division and a continued strong performance by Siemens Medical completed the good news for the majority of the group’s operations.

The garden was not completely rosy for Siemens, however, with problems afflicting its mobile phones and transportation units.

Fierce competition in the handset market pushed down the price of mobiles, hitting profitability. Siemens’ new 65 series of handsets also suffered a technical glitch, delaying their introduction until the problem could be ironed out and contributing to a e152m loss for the mobile phones division.

Transportation was also afflicted by technical problems to the Combino light rail-car programme. The company said solutions have now been identified and are being implemented.

The transportation unit also faced a general slowdown in demand for rail systems, particularly in Germany, adding up to a loss of e434m. Pierer, who is stepping down as chief executive in January, told shareholders that the specific issues in transportation and mobile phones would be addressed.

‘We are also pursuing further operational improvements at our groups, given that factors such as a weakening US dollar and rising commodity prices may make the macroeconomic environment more challenging,’ he said.

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