Siemens Gains on Spinoff Plans, Solid 2Q Results
May 08 2019 - 3:40AM
Dow Jones News
--Siemens trades more than 4% higher as market welcomes
power-and-gas spinoff
--Move away from fossil-fuel generation to boost valuation,
sharpen focus on digital core
--Second-quarter profit fell but still beat consensus
estimates
By Nathan Allen
Shares in Siemens AG (SIE.XE) traded higher Wednesday morning
after the German industrial conglomerate said it plans to spin off
its beleaguered power-and-gas unit and posted solid second-quarter
earnings.
Under the new plan, Siemens will effectively combine the
power-and-gas unit with its majority stake in wind-turbine maker
Siemens Gamesa Renewable Energy SA (SGRE.MC) and spin off the new
company to shareholders. The move is part of Chief Executive Joe
Kaeser's broader pivot away from the group's traditional focus on
power generation and toward faster-growing digital technology
businesses.
By distancing itself from the division, which posted a 76%
decline in profit in fiscal 2018, Siemens hopes to remove some of
its conglomerate discount, find around 2.3 billion euros ($2.57
billion) in savings and create over 10,000 jobs.
At 0753 GMT Siemens was trading 4% higher at EUR106.60.
Analysts at JPMorgan said the news was very positive, describing
the plan as the biggest corporate change at Siemens since the
company exited the telecom market in 2006.
While Siemens's structure will remain fairly complex and will
likely still trade at a discount, the focus on digital businesses
will provide more visibility to the market and should attract
long-term investors, the analysts said.
"Overall we regard this as a major step in the right direction,"
Jefferies analyst Peter Reilly said.
The company posted second-quarter net profit of EUR1.81 billion
on revenue of EUR20.94 billion, comfortably outstripping analysts'
expectations, though investors are more focused on the
restructuring efforts.
Write to Nathan Allen at nathan.allen@dowjones.com
(END) Dow Jones Newswires
May 08, 2019 04:25 ET (08:25 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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