Despite another strong showing by its Automation and Drives group, Siemens AG reported slowing sales gains and lower overall orders in the fourth quarter of its 2006 fiscal year, which ended on September 30.
For the quarter, Siemens' Automation and Drives group -- which is responsible for the company's industrial automation and controls products -- reported sales of €3.55 billion, a 12% increase from the like period last year. The group's profit of €451 million represented a 31% increase over the prior year. The group recorded €3.5 billion in new orders in the fourth quarter of 2006, up 18% compared to new orders in the year-earlier period.
The fourth-quarter results brought the Automation and Drives group's sales for fiscal 2006 to €12.8 billion, up 24% compared to 2005 results. The group's 2006 profit, at €1.57 billion, was up 25% compared to the year earlier. And, for the year, the group's new orders climbed 32% to €14.1 billion.
Siemens' CEO Klaus Kleinfeld, in remarks to analysts, called the Automation and Drives group one of Siemens' earnings drivers in 2006. "A&D had strong organic growth ... so that is very good," Kleinfeld said.
Siemens attributed the strong showing by Automation and Drives in part to investments made by the company to enhance its distribution network, particularly in growth markets. Group sales in the Asia-Pacific region during the quarter grew by 50% over 2005.
The solid performance of Siemens' Automation and Drives group continues the run of reasonably upbeat financial reports posted by industrial automation vendors in the most recent period (see relevant links above), including one recorded earlier this week by Emerson Electric. The diversified industrial products company on Tuesday reported record revenues for fiscal 2006 of $20.1 billion, a 16% increase from last year, as earnings reached $1.8 billion, or $4.48 a share, a 30% increase from fiscal 2005. Emerson attributed a good deal of the growth to continued strength in its Industrial Automation and Process Management business units.
The story is a little different at Siemens. Despite the Automation group's strong fourth quarter, Siemens' overall growth slowed somewhat in the period. Besides industrial automation, Siemens operates in several businesses including medical products, power generation and transmission equipment, and automotive products. Siemens' fourth-quarter results showed sales of €23.9 billion, up 8.2% from the year-earlier period. That growth rate, however, was below what Siemens has experienced in recent quarters. For the full fiscal year 2006, Siemens reported a 15.7% growth in sales to €87.3 billion.
Siemens also reported lower fourth-quarter orders. During the period, the company received €22.6 billion worth of new orders, down 2.1% compared to new orders in the fourth quarter of 2005.
Siemens' fourth-quarter net income of €614 million was up substantially from the €77 million in net earnings the company reported in the corresponding period of 2005. The fourth quarter of last year, however, included what the company called a "significant loss" resulting from the discontinuation of its mobile devices business.
For the full year, Siemens reported net income of €3.1 billion, up 38.2% over net income for 2005.
Kleinfeld, in prepared remarks during a conference call with financial analysts, noted that fiscal 2006 saw what he called a "strategic reorientation" of Siemens' Information and Communications and Logistics and Assembly groups. In light of those efforts, he told analysts, "We have resolved almost all of our strategic goals, and we have invested massively in future-oriented growth areas."
Regarding Siemens' somewhat slower fourth-quarter sales growth, Kleinfeld declared, "That doesn't really concern us." Further, he said, it does not suggest that the company's strong growth record through the first three quarters of the year won't reassert itself. The fourth-quarter sales comparison was skewed, Kleinfeld said, by several unusually large power generation and transportation system deals in the fourth quarter of 2005.
Siemens' Industrial Solutions and Services group, another of its automation and controls-related businesses, also reported strong fourth-quarter results. The group saw sales increase 15% to €2.5 billion and profits climb 37% to €82 million. New orders for the group, however, fell 3% to €2.1 billion.
Overall, Siemens reported that for the year most of its growth came outside of its home market of Germany. International markets showed 19% sales growth during the year, and 18% growth in orders. In Germany, Siemens' sales grew 4%, and its orders grew 1% compared to 2005 levels.
Emerson's strong fiscal 2006 performance, meanwhile, was propelled by solid fourth-quarter results. Sales for the period ended September 30 were $5.5 billion, an increase of 19%, much of which came from organic sources. Earnings for the quarter were $526 million, or $1.29 a share, a 26% spike from the year-earlier period.
Emerson's overall performance in fiscal 2006 owed a lot to strong results posted by its Industrial Automation and Process Management businesses, the company said. Sales in the company's Industrial Automation business, for instance, reached $3.8 billion in 2006, a 16% increase year-over-year, aided by the favorable global capital spending environment. Year-over-year revenue growth was similar across the company's three major geographies: U.S. (12%), Europe (10%), and Asia (13%). Gross margin was 15.1%, an increase of 80 basis points from fiscal 2005, the company said, attributing the improvement primarily to higher sales and benefits from prior cost-reduction activities.
Process Management revenues also increased 16% to $4.9 billion in fiscal 2006. Revenues jumped 15% in the U.S. and Asia, and 20% in Latin America year over year, the company noted.
"The sales performance for both the year and the fourth quarter was exceptional," said Emerson Chairman and Chief Executive Officer David N. Farr, in a prepared statement. "Customer adoption of our technologies has been strong all year, and our global platforms enabled Emerson to capture accelerating growth outside the United States during the fourth quarter."
Emerson's outlook for fiscal 2007 remains bright, although the company expects growth to moderate in the coming year. The company expects revenues to grow between 7% and 11%, contributing to earnings-per-share growth of between 12% and 15% in fiscal 2007.
Online Editor Alan Alper contributed to this report.