New orders and revenue slumped at Siemens during the fiscal fourth quarter, and the company hinted on Thursday that more layoffs may be in the offing. Siemens also inched closer to resolving a long-standing bribery scandal, announcing that it had come to terms with a slate of former executives.
In the quarter ended Sept. 30, Siemens’ revenue was &euro19.7 billion, down 9% from &euro21.7 billion in the prior year. On an annual basis, revenue held nearly steady, easing just 1% to &euro76.7 billion. But in what may be a harbinger of things to come, new orders took a major hit, falling 16% both in the quarter and for the full year. New orders registered nearly &euro79 billion for the year, compared with &euro93.5 billion in fiscal 2008.
The company took a loss of &euro 1.1 billion in the fourth quarter, compared with a loss of &euro2.4 billion in Q4 of 2008. For the year, Siemens tallied net income &euro2.5 billion, compared with &euro5.9 billion the previous year.
All geographies for the global conglomerate underperformed against the prior year, with the steepest declines in the Americas and Europe, the Commonwealth of Independent States, Africa, and the Middle East (Europe/CAME).
In a statement, CEO Peter Loscher described the company’s plans and the challenges ahead. “We see substantial further potential worldwide in the area of environmental technology. To ensure the sustainable viability of businesses that have been particularly affected by the crisis, we are continuing to rigorously implement all necessary measures. The overall market environment will remain challenging in 2010.”
Four years ago, former Siemens CEO Klaus Kleinfled declared, "Thanks to our balanced portfolio, a growth rate double that of the world economy is not only ambitious, but also feasible." Today Siemens again pointed to its “outperform” ambitions, this time in the context of a world economy that has faltered. “Siemens had set the goal of seeing its revenue decline at less than half the rate of the global economy.” Citing an expected GDP contraction of 2.1% in 2009, Siemens said its 1% revenue decline met expectations. Meanwhile, its 3% increase in R&D spending is expected to pay dividends in the future.
Of its three businesses, Energy and Healthcare led the way in fiscal 2009, turning in slight year-over-year increases in revenue — although new orders in the Energy division fell 10%. The manufacturing-heavy Industry sector proved to be Siemens’ albatross, with new orders dropping 20% for the year to &euro8.1 billion, while revenue fell 13% to &euro8.7 billion. CFO Joe Kaeser told a press conference today that the recession hit that business hardest, but the company believes it has “seen the trough” for lines such as industrial automation. Still, for longer-cycle businesses, including drive technologies and industrial solutions, “we will see further decline, probably.”
Siemens touted its success in cutting expenses during the year, saying it had exceeded its goal to strip out &euro1.2 billion in SG&A cost, realizing €2 billion in savings a year ahead of schedule. Part of the cost savings came by way of a major layoff program that affected nearly 17,000 Siemens workers. Another component is Siemens’ supply chain management initiative, which, Loscher said, is “making solid progress.” The company now works with 97,000 suppliers, down from 113,000 and within sight of its mid-range goal of 91,000. “Fewer suppliers means greater efficiencies and reduced administrative costs,” he said during today’s press conference.
The performance of its businesses and an expectation of a sustained economic slump inspired Siemens to plan for changes. After clarifying that there will be “no group restructuring program at Siemens for 2010,” Loscher said that, in specific instances, business units might find that “certain measures for adaptation are necessary.” He continued, “The restructuring measures that are ahead of us will be made as socially palatable as possible.” He rebuffed the assertion that 10,000 layoffs were in the offing, warning against “sketch[ing] scenarios in which the law of the big figure plays a role … We will see, step by step, what will happen. … There is no figure as the 10,000 you mention; there is no such program.”
The company looked ahead cautiously. “Following a double-digit decline in orders in fiscal 2009, Siemens expects only a mid-single-digit percentage decline in organic revenue in fiscal 2010,” saying that the market outlook was “challenging,” and noting that the guidance is conditioned in part on an improved economy in the second half of the fiscal year and “excludes major impacts that may arise during fiscal 2010 from restructuring, portfolio transactions, impairments, and legal and regulatory matters.”