Siemens AG (SI) reported earnings per share from continuing operations of €2.00 ($2.71 per ADR) for the first quarter of fiscal 2011 compared with €1.70 per ADR in the year-ago quarter. The Zacks Consensus Estimate for the quarter was earnings per ADR of $2.33.
Revenue
The company recorded strong growth in orders and revenue, positively affected by currency translation impacts. Total revenue was €19.49 billion ($26.47 billion) compared with €17.35 billion in the first quarter of fiscal 2010. Revenue was up 12% year over year.
Orders in the quarter increased by 19% year over year, due to growth in all regions, notably Asia, Australia and the Americas. India led the growth in Asia. The Americas combined higher orders in the established U.S. market with fast growth in emerging markets. Emerging markets grew significantly faster than orders overall, at 31%, and accounted for €7.834 billion or 35% of total orders for the quarter.
The book-to-bill ratio was 1.16 and the backlog for the sectors totaled €92 billion.
Sector Performance
The company has three operating sectors, Industry, Energy and Healthcare.
Industry sector revenue rose 13%, to €9.114 billion, on increases in all three regions and at all Divisions except Industry Solutions. Revenue and orders for Healthcare rose 11% and 10%, respectively, compared to the first quarter a year earlier, led by double-digit growth in Asia, Australia and the Americas.
Energy sector revenue rose 14% year-over-year, to €6.378 billion, on strong conversion of orders from the backlog. All Divisions contributed to the increase, and revenue also rose in all three regions.
All Sectors reported double-digit order growth compared to the prior-year period, highlighted by a higher volume from large orders in Energy and Industry, particularly at Fossil Power Generation and Mobility. Order volumes also benefited from currency translation effects as noted above. All regions delivered order growth in the first quarter, led by Asia, Australia and the Americas.
Income and Expenses
Total Sectors profit for the first quarter rose 6% year-over-year, to €2.229 billion, burdened by €261 million related to previously announced special employee remuneration. This amount was accrued centrally in the fourth quarter of 2010 and allocated to the Sectors during the current quarter. This impact cut 1.4% from Total Sectors profit as a percentage of revenue, which was 12.0%.
Free cash flow from continuing operations rose to €908 million from €725 million in the first quarter a year earlier, including higher free cash flow at the Sector level. Other factors contributing to the increase included higher cash inflows from Corporate Treasury activities and lower cash outflows related to staff reduction measures, partly offset by higher payments for income taxes.
The deficit of Siemens’ principal pension plans increased to approximately €6.1 billion, compared with a deficit of €7.4 billion at the end of September 2010. This is due to a decrease in defined benefit obligation led by increase in discount rate assumption, partially offset by negative actual return on plan assets.
Outlook
Siemens expects order levels in fiscal 2011 to increase organically from the level in fiscal 2010 with improving market conditions. Strong backlog at the end of the year will support organic revenue growth in fiscal 2011 and income from continuing operations is expected to increase by 25% to 35% year over year, excluding effects of legal and regulatory issues.
Siemens AG is a German industrial conglomerate with interests in information services, automation and controls, medical equipment, power generation, transportation systems, automotive electronics, lighting, and many other areas. With a focus on electronics and electrical engineering, the company is a major multinational with over 405,000 employees in more than 190 countries. ABB Ltd (ABB) is a major c ompetitor.
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