Germany’s diminished conglomerates Siemens and Thyssenkrupp have begun to reap the rewards of their radical restructuring as profits surged, helped by the streamlining of their businesses.
Despite a tough economic backdrop with raw material prices rocketing and supply bottlenecks throttling production, earnings of both groups handsomely beat analysts’ expectations in the last quarter of 2021.
Net profits at Siemens, which has spun-off its health and energy units, jumped by a fifth to €1.8mn in the most recent quarter compared with the same period in the pandemic-hit 2020.
The figure is almost €200mn higher than consensus estimates, and €500mn more than recorded in the previous quarter.
Orders also rose by 42 per cent as customers clamoured for Siemens’ factory-building services in the rush to construct new semiconductor plants and expand cloud computing facilities.
Thyssenkrupp, which has endured a more painful downsizing after years of heavy losses, posted a net income of €106mn compared with a loss of €145mn in the same three months of 2020.
Orders rose by 33 per cent, thanks in part to strong demand for hydrogen-producing electrolysis technology at its Nucera unit, which Thyssenkrupp plans to list later this year at a multibillion-euro valuation.
“The turnround at Thyssenkrupp is in full swing,” chief financial officer Klaus Keysberg said, although he acknowledged the group was “still not where we want to be” after free cash flow slumped to a negative €858mn.
“Our next major milestone is to reach break-even in cash flow,” he added, confirming that this would likely happen in the coming months.
Once the titans of German industry, Siemens and Thyssenkrupp have taken different paths to becoming smaller companies.
The former, spearheaded by ex-chief Joe Kaeser, was ahead of competitors such as GE in deciding to do away with the conglomerate structure, and spun-off major units before being forced to do so by activist investors.
Thyssenkrupp, in contrast, was coerced into selling its prized lifts unit for €17bn in 2020 at the behest of shareholders such as Cevian, after years of mismanagement and ill-fated expansion left the steel and materials company deep in the red.
Both Siemens and Thyssenkrupp have been pressing ahead with more divestments in recent months.
On Wednesday, Siemens announced the sale of its mail and parcel business to Germany’s Körber for €1.15bn and the relinquishing of its 50 per cent stake in an automotive joint venture with France’s Valeo, for €277mn.
Thyssenkrupp sold its carbon components and infrastructure businesses last year, as well as an Italian stainless steel plant.
Siemens in particular had been under pressure from investors for not achieving profit margins that are in line with its competitors, such as Schneider Electric, despite its renewed focus.
“Our results impressively demonstrate that we are a leader in accelerating digitalisation and sustainability,” said chief executive Roland Busch, who pledged to improve profitability.
However, Busch is likely to face further challenges from investors after the spin-off of Siemens Energy, in which the company still has a 35 per cent stake, registered a quarterly net loss of €240mn on Wednesday due to the turmoil engulfing its Spanish wind turbines business, Siemens Gamesa.
