Despite record results, the shareholders of the technology group Siemens are dissatisfied with the stock market valuation. It didn't help much that CEO Roland Busch referred to the record profit in the past 2022/23 financial year (as of September 30) at the annual general meeting (AGM), which was held virtually for the fourth time in a row on Thursday. The DWS fund manager, Sabrina Reeh, called for the focus on the two business areas of digital industry and smart infrastructure to be consistently continued. In your opinion, the stake in the medical technology company Siemens Healthineers must be reduced from the current 75 percent. The train technology (mobility) also doesn't suit the group.

Markus Frühauf

Business correspondent in Munich.

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    Ingo Speich, Head of Sustainability and Corporate Governance at the savings bank fund company Deka Investment, made similar statements. Despite the good performance of Siemens shares of plus 20 percent in 2023, he pointed to the ongoing valuation gap of 30 percent compared to the French competitor Schneider Electric. “The complexity of Siemens AG is still very high and must be reduced,” demanded Speich. The focus of the capital market is on lean and focused business models.

    Busch defended the group structure in the conference call on the first quarter figures. In his opinion, the technological core can be scaled and there are synergies between the four areas. For him, the two areas criticized fit very well with the aim of connecting the real and the digital world. The increasing demand for trains as a means of transport in the wake of climate change is reflected in the order intake between October and the end of September. In the train division, orders almost doubled compared to the same quarter last year to 5.6 billion euros. Earnings rose by 29 percent to 251 million euros. Nevertheless, Mobility remains the lowest-earning business area with a profit margin of 9.3 percent based on sales of 2.7 billion euros.

    The Digital Industry division, which is active in industrial automation, achieved a profit margin of 19.6 percent in the first quarter, although the division recorded a 31 percent lower order intake and a 20 percent decline in profits due to the weak economic environment. Siemens was particularly affected by the economic slowdown in China. CFO Ralf Thomas praised the outstanding performance in the smart building technology division. Sales increased by 9 percent to 4.8 billion euros. The division's profit rose by 26 percent to 885 million euros, which corresponded to a profit margin of 18.3 percent. Siemens Healthineers' profitability is almost five percentage points lower, although quarterly profit increased by 9 percent to 692 million euros. Busch pointed to synergies with other areas such as the software business or the collaboration at hospitals with the building technology division.

    The industrial result, i.e. the total profit of the four core divisions, reached a record level of 2.7 billion euros in the first quarter. Busch spoke of a successful start to the new financial year: “Siemens once again delivered a strong quarter and continued its profitable growth.” The share price initially fell by up to 2 percent, but subsequently rose by more than 3 percent to its record high increase by 174 euros. In China it could take longer for customers to reduce their inventories, Busch admitted. He believes that the bottom has been passed. Demand has already increased again compared to the previous quarter. Busch hopes for the development to continue.

    He hasn't been able to say anything new about Innomotics, which is focused on engines and large drives. The subsidiary with 15,000 employees is now largely independent. “We are looking at all options here,” said Busch. These ranged from an IPO to a sale. CFO Thomas reported great interest from market participants.

    The disappointing development at the energy technology group Siemens Energy caused criticism. DWS manager Reeh praised the solution found with the acquisition of the 18 percent stake in the Indian Siemens Ltd. However, she criticized the fact that the negotiations surrounding the state guarantees for Siemens Energy had tied up important Siemens management capacities. Deka expert Speich assesses the development of Siemens Energy, which was spun off from the group in September 2020, as an “absolute tragedy”. The representatives of Siemens AG did not shine here. By reducing the shareholding to 17 percent, Siemens no longer has to take Siemens Energy's business development into account in the balance sheet in the amount of the investment (at equity). This eliminates a significant influencing factor for the fluctuations in the profit and loss statement, added Thomas.

    Shareholders are dissatisfied with the virtual AGM. Daniela Bergdolt from the German Association for the Protection of Securities Ownership (DSW) spoke out in favor of an in-person event next year in the Olympiahalle. The AGM on Thursday was chaired by the deputy chairman of the supervisory board, Werner Brandt. He represented Supervisory Board Chairman Jim Hagemann Snabe, who is recovering from a leg injury. His term of office runs until February 2025. According to Brandt, the process for the successor began early in the nomination committee. But it is possible that Snabe will extend his term.