Siemens stock: fall from the metaverse

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by Stephan Bauer, €uro on Sunday

Et’s a lot going on at the Siemens headquarters. CEO Roland Busch recently met Jensen Huang, head of US semiconductor manufacturer Nvidia. The managers drummed for a new software platform for industrial software, Huang had jetted to Munich especially for this. With “Xcelerator”, the tech companies want to create an “industrial metaverse”, according to the marketing slogan. Thanks to high-performance chips and AI software, industrial customers should be able to simulate and optimize their production processes effectively and realistically. “We help companies to adapt their innovations to the speed at which software development is progressing,” said Busch. And Huang, boss of the technically brilliant graphics chip specialist, conceded that the Munich-based company would become one of the largest technology companies in the world.

The day after, the past brought the Bavarians from the future and the metaverse back down to earth. The subsidiary Siemens Energy (SE), which was listed on the stock exchange as a spin-off by the group in autumn 2020 after the former energy technology business had been brought in there, is causing a billion-euro burden. A write-down of 2.8 billion euros is due on the 35 percent stake in the third business quarter just ended. The reason: The share price of SE, at the end of June at only 13.99 euros, was “significantly below book value”, according to Siemens. This in turn is due to the fact that the wind power business of the associated Siemens Gamesa recently issued several profit warnings and is making a strong minus.

Experts expect profit

Until recently, analysts at Siemens had expected net profits of around 1.5 billion euros for the third quarter at the end of June. Now, instead of a decent plus, there is even a minus. At the same time, the annual forecast is on the brink. With the write-down on SE alone, net earnings per share are well below the forecast EUR 8.70 to EUR 9.10 per share. The bad news pushed the Siemens share significantly below the 100 euro mark at times.

It would be the first profit warning in the young era under boss Busch. The prognosis could save the current wave of sales among the people of Munich, who are selling their peripheral businesses step by step. The letter and parcel logistics business and the road traffic technology division Yunex Traffic have just been sold, as well as a share in electric car-Joint venture Valeo changed hands. The total proceeds from divestments in the current financial year are well over two billion euros.

Operational construction site

However, the structural problems at SE have not been solved. Siemens actually wanted to reduce its SE shares, but then the profit warnings from the energy subsidiary weighed on the price. One would “depending on the market environment decide carefully,” it said recently. Meanwhile, the pressure on SE boss Christian Bruch is increasing. With Christian Eickholdt, he sent a proven renovator to the top of the ailing wind power division at the beginning of March. SE still only holds two-thirds of the shares in Gamesa. Since the end of May, Bruch has had the green light for a complete takeover in order to take action on the Spanish permanent construction site. That could cost around four billion euros.

Investors are now curious to see how Digital Industries (DI), Siemens’ main profit maker, is doing. In the first half of the financial year, the division, which includes automation technology and industrial software, increased profits by seven percent to 1.8 billion euros. The margin dropped significantly to almost 20 percent because software sales are being switched to a subscription model. The key question is whether the automation business will continue to grow significantly given the stuck supply chains and the needs of many corporate customers. This will be the focus of the quarterly meeting on August 11th. However, the industrial metaverse does not have the slightest influence on the annual forecast.

INVESTOR INFO

Siemens

In addition to fears of a recession, energy technology is currently weighing on the price of the DAX share. In the old core business, however, it is no longer the gas turbines, but the wind power plants that cause problems. The repair will take time. The new core business, especially the digital industry, is doing well and bringing in healthy margins. The medical technology subsidiary Healthineers, in which Siemens still holds 75 percent, is also a sustainable source of profits. buying opportunity.

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