Siemens, Philips Warn Market Conditions Remain Challenging

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Siemens AG (NYSE:SI) (FRA:SIE) and Koninklijke Philips NV (NYSE:PHG) warned that the market conditions remain challenging despite reporting strong quarterly financial results today. The two largest industrial companies in the European region provided a cautious outlook because of the strength of the euro compared with other major currencies.

Over the past two weeks, some of the leading companies in Europe that reported its quarterly financial performance issued a similar bleak outlook, and profit warnings.

Siemens financial results and outlook

Joe Kaeser, president and CEO of Siemens AG (NYSE:SI) (FRA:SIE) said, “We delivered a sound quarter to start our fiscal year. As expected, market conditions were not in our favor. We continue to focus on our productivity program for the year, and on the actions we will take beyond 2014.”

Siemens AG (NYSE:SI) (FRA:SIE) said its net income increased 20% year-over-year to €1.457 billion or €1.70 earnings per share. According to the company, orders for the December quarter increased 9% to €20.836 billion, but its revenue was 3% lower to €17.32 billion.

According to the company, its total sector profit climbed 15% to €1.789 billion due to the strong performance in infrastructure and cities. Its income from continuing operations rose 21%.

Siemens AG (NYSE:SI) (FRA:SIE) indicated in its financial statement that its markets are expected to remain challenging in 2014. The company said, “Our short-cycle businesses are not anticipating a recovery until late in the fiscal year.”

The company projected that its orders will exceed revenue for a book-to-bill ratio above 1. Siemens AG (NYSE:SI) (FRA:SIE) expects its earnings per share to increase by at least 15% from €5.08 last year assuming that its organic revenue remains the same year-over-year. The estimate is based on its 843 million outstanding shares as of September 30, 2013.

Kaeser also said the company’s return to strong profitability is taking a “bit longer” than expected while Europe’s economy is still bottoming out.

Philips financial results and outlook

Similarly, Frans van Houten, CEO of Koninklijke Philips NV (NYSE:PHG) said, “The year will start a bit slow.”  He added, “2014 will be a modest step toward our 2016 targets, also taking into account restructuring to drive the new productivity targets and investments in additional growth initiatives.”

Koninklijke Philips NV (NYSE:PHG) posted €6.799 billion sales in the fourth quarter, up from €6.759 billion in the same period a year earlier. Its net income was €412 million or €0.44 earnings per share compared with €420 million net loss or €0.46 losses per share.

According to the company, its comparable sales for the quarter rose 7% and its operational results improved 20%. Its EBITA was €884 million, 13% of sales compared with €50 million loss in the same quarter in 2012. Koninklijke Philips NV (NYSE:PHG) ended the quarter with €608 million free cash flow.

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