Siemens believes buoyant demand persists due to supply and cost pressures

The German industrial giant, reporting a quarterly net loss that fell short of expectations on Thursday, said it would double efficiency to offset resistance as well as shift higher costs to customers. 

"We're seeing strong demand from our markets even for three to four quarters," Chief Executive Officer Roland Busch said in an interview with Bloomberg Television. "With our price increases for customers, which we moderately adapt, we can over-compensate for the increase in costs from our suppliers."

The stock fell 1.7% at 9:30 a.m. in Frankfurt trading, bringing losses this year to nearly 30%. 

Manufacturers like Siemens have so far been rather immune to increasingly dim prospects marked by record inflation and slowing growth, as well as the war in Ukraine. Supply chain shortages caused by the chip crisis, now in its third year, have pushed order books to record levels, and companies expect it will take months to reduce pent-up demand. Also on Thursday, Daimler Truck Holding AG said it would fight to meet truck orders through the end of the year. 

At Siemens, orders hit a record high of 99 billion euros ($102 billion) after strong growth during the quarter to June. Still, there are signs of normalization, the company said. 

In the key division of Digital Industries, which produces software for automation of production and other labor-saving services, profitability in the third quarter was restrained by a shortage of semiconductors and higher costs for cloud activities, Siemens said. Future businesses will "clearly depend on price inflation," Bush said in speeches. The company expects to begin work on its order book starting in fiscal 2023. 

The forecast echoes BMW AG's view that improving the availability of semiconductors will help ease supply chain pressures, allowing for increased production.  

Quarterly orders at Smart's infrastructure division rose 26%, although revenue in China declined due to coronavirus lockdowns. The Digital Industries and Smart Infrastructure divisions play a central role in Siemens' progress towards more marginal software offerings. 

On Thursday, Siemens reduced the expected increase in earnings per share to 5.73 euros compared with 9.10 euros due to impairment costs. Siemens in June wrote off the value of its stake in Siemens Energy AG by 2.7 billion euros after repeated warnings to the turbine manufacturer about profits. On Thursday, he doubled the depreciation associated with his exit from Russia to 1.2 billion euros.  

Further write-offs on Siemens' business in Russia are possible in relation to its leasing business in the country, in the region of a small and medium three-digit amount of one million euros. 

Faced with a challenging economic environment marked by sanctions on Russia, high inflation and the effects of the pandemic, the company said it avoided "big disruptions" during the quarter.

Siemens is still in the process of modernizing its business towards more marginal, software-oriented product lines. The company has sold most of the smaller divisions destined for sale and is shifting its focus to areas with higher growth potential. In recent weeks, it bought U.S. software firm Brightly for $1.6 billion, launched a new digital business platform and bought a minority stake in Volkswagen AG's electric vehicle charging subsidiary Electrify America. 

Siemens Mobility, which makes trains, won orders for 2.8 billion euros. Yields fell due to the exit from Russia, and the company reduced its profit margin forecast to 8.5%, compared with 10.5%. 

Profits from the industrial business rose to 2.9 billion euros with a yield of 17% just below analysts' expectations.