Release Date: February 13, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Siemens AG (SIEGY, Financial) reported a solid start to fiscal year 2025 with a book-to-bill ratio of 1.09, indicating strong demand and a record-high order backlog of EUR118 billion.
- The company achieved a solid profit of EUR2.5 billion in its Industrial business, surpassing market expectations.
- Siemens AG (SIEGY) is making significant progress in sustainability, with offerings sold in fiscal 2024 expected to avoid around 144 million tons of greenhouse gas emissions.
- The company is successfully transitioning its DI software business towards Software-as-a-Service, with ARR growth reaching 14% over the prior year.
- Siemens AG (SIEGY) continues to strengthen its leadership in industrial AI, with strong traction in bringing real-world impact for customers and launching new AI products at CES.
Negative Points
- Group orders were 8% below the prior year, with a notable decline in Mobility orders due to less volume from large contracts.
- The Automation business faced challenges with revenue substantially lower due to continued destocking, particularly in China.
- Economic activity remains sluggish in key regions, with Europe lacking momentum and Germany still in crisis mode.
- The company faces macroeconomic uncertainties, including high volatility from political decisions around tariff regimes.
- Siemens AG (SIEGY) anticipates a challenging first half of fiscal 2025 for Digital Industries, with revenue expected to be down high single digits in the second quarter.
Q & A Highlights
Q: Can you provide insights into the software business, particularly regarding the order pipeline and expectations for the rest of the year?
A: Ralf Thomas, CFO, explained that while the first quarter saw strong orders, particularly in the EDA business, this is not expected to repeat in the second and third quarters. However, the fourth quarter looks promising. The company is focused on profitable growth rather than rapid expansion. The transition to a SaaS business model is progressing well, with a target to reach 50% cloud-based ARR by the end of fiscal 2025.
Q: There has been speculation about Siemens' stake in Healthineers. Can you clarify your position on this?
A: Roland Busch, CEO, stated that Siemens is not limited in decision-making regarding Healthineers and is focused on seeing synergies from the Varian acquisition. The company plans to sell a portion of shares to finance the Altair acquisition but is not dogmatic about its shareholding. A strategy update will be provided at the Capital Markets Day in December.
Q: Can you elaborate on the 14.5% margin in Digital Industries (DI) and the dynamics between software and automation?
A: Ralf Thomas, CFO, noted that the strong software profitability in the second half of last year was due to large license revenues. The software margin has normalized, and the focus is on transitioning to SaaS. Automation is seeing stabilization in some markets, with positive momentum in electronics and semiconductors. Cost savings from severance and reskilling are expected to impact margins positively.
Q: How confident are you in reaching the growth guidance for DI this year, given the expected revenue decline in the first half?
A: Ralf Thomas, CFO, expressed high confidence in meeting the growth guidance, despite the first half being affected by destocking. Encouraging signs of new orders in automation, including in China, support the expectation of momentum in the second half of the fiscal year.
Q: Can you provide more color on the strong free cash flow performance and its drivers?
A: Ralf Thomas, CFO, highlighted that free cash flow was strong due to advanced payments, particularly in Smart Infrastructure (SI), driven by large orders, including data centers. The company aims to maintain double-digit cash return on sales for the full fiscal year, with a strong focus on operational management of resources and assets.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
