- Key digital industries unit sees slower-than-expected business
- Shares drop most in seven months after CFO flags muted demand
Siemens AG fell the most in seven months after flagging disappointing demand in China for its key digital industries division.
New business for the unit that makes factory-automation products has been slower than expected in Siemens’s third-biggest market since the start of the year, Chief Financial Officer Ralf Thomas said Tuesday. China’s slow recovery is also resulting in lower demand in central Europe.
China’s economic stimulus “doesn’t immediately translate into new orders at the moment,” Thomas said at an investor conference in London.
The industrial sector is grappling with weaker demand in China, where consumers and businesses have cut back on spending amid rising inflation and interest rates. Siemens, which has many European customers that export to China, expects the Asian country’s economy to recover in the second half with Beijing’s push to boost high-tech manufacturing.
Siemens slumped as much as 6.9%, the steepest intraday decline since Aug. 10. The stock is still up nearly a quarter in the past year.
Bloomberg Intelligence analyst says:
Siemens Digital Industries’ margin in fiscal 2Q could trend below the 20-23% 2024 guidance amid low capacity utilization, dilution from software and product-mix headwinds. The automation unit’s fiscal 1H order prospects and 2024 sales forecast rely on China’s recovery (along with Germany) and a slow demand pickup from the countries — based on the CFO’s comments at a Bank of America conference — may pause sequential order growth in 2Q.
— Omid Vaziri, BI industrials analyst
Orders at Siemens’s digital industries division fell 31% in the fiscal first quarter after new business in China more than halved. Siemens has in recent years revamped its business to focus on software-driven product lines with higher profitability levels. The unit’s software businesses are doing better than expected, Thomas said Tuesday.
Written by: Wilfried Eckl-Dorna @Bloomberg
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