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Company News

UPDATE 3-Siemens sees broad recovery, lifts outlook

* Siemens Q3 oper profit 2.3 bln eur vs poll avg 2.1 bln

* Sales and new orders grow y/y, first time since Jul-Sep 08

* Sees FY09/10 oper profit clearly over 7.5 bln eur

* Shares ease in firmer German market

(Adds industry background, analyst comment, share price)

By Jens Hack and Marilyn Gerlach

MUNICH/FRANKFURT July 29 (Reuters) - Siemens SIEGn.DE, a bellwether for the German economy, broke a streak of nearly two years of declining sales as rising emerging market demand and a weak euro helped it swing back to growth in its third quarter.

The last time Europe’s number one engineering conglomerate posted an increase in both new orders and sales was in the quarter to the end of September 2008, at the onset of the deepest post-war recession in the euro zone’s biggest economy.

“We see solid growth across all parts of our businesses,” Chief Executive Peter Loescher told Reuters Insider TV after the company released quarterly results on Thursday. “What we see is particularly strong growth in emerging markets.”

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TO VIEW THE REUTERS INSIDER INTERVIEW: here

TO VIEW A CHART ON SIEMENS AND ITS PEERS:

here

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Siemens, which makes everything from lightbulbs and hearing aids to gas turbines and fast trains, said it saw a broad-based recovery across its businesses, particularly those more sensitive to cyclical or economic swings.

The upbeat view from Siemens mirrored strong results from peers ABB ABBN.VX and General Electric GE.N, which both said they were observing a strong economic recovery fuelled by strong sales in emerging markets. [ID:nLDE66KOV3] [ID:nN23241252]

Siemens’ bread-and-butter Industry sector was the main growth driver as carmakers ordered more light-emitting diodes (LEDS) and factories bought new industrial automation systems.

“The order intake and total sector profit are above my expectations,” said Commerzbank analyst Ingo-Martin Schachel.

Operating profit rose 40 percent to 2.3 billion euros ($2.99 billion), beating the most optimistic forecast in a Reuters poll of analysts, as did new orders -- a barometer of future sales.

That prompted Siemens to nudge up its guidance, for the second time this year. It forecast operating profit -- what it calls total sectors profit -- to be “clearly” higher than the previous year’s 7.5 billion euros. In April it said operating profit would be higher than last year.

The market expects full-year operating profit of 8.36 billion euros, according to a Reuters poll. [ID:nLDE66Q0I5]

COST CUTS HELP

Siemens’ earnings were flattered by a two-year programme to cut 1.2 billion euros in costs by this year. That includes bundling purchasing for better supplier discounts and increased sourcing from low-cost countries.

The euro’s recent weakness against key currencies helped boost results, Siemens said. A weaker euro makes Siemens’ exports cheaper to pay for in foreign currencies.

But Siemens also profited from a substantial pickup in manufacturing orders from its home country, Loescher said.

Reflecting growing optimism among German industry, the IFO business sentiment index in July jumped to its highest level in three years. [ID:nLDE66M0JV]

And the VDMA German engineering association, whose members include Siemens, ThyssenKrupp TKAG.DE and MAN MANG.DE, last week raised its output forecast for this year, saying Asian export growth was helping the sector recover from the economic crisis faster than expected. [ID:nLDE66I185]

At 1000 GMT, Siemens shares eased 0.3 percent in an overall firmer German market .GDAXI, where they have gained almost 19 percent so far this year.

“The shares are the fifth-best performer in the DAX year-to-date, so it could be some profit taking on good results,” said Commerzbank’s Schachel.

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