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Our global team delivered a solid quarter with revenue up 8% and net income growing by 7%. Our digital enterprise business impressively underscored its leading position in the market. We are fully on track with Vision 2020 and for another strong year,« said Joe Kaeser, President and Chief Executive Officer of Siemens AG. - Revenue rose 8% compared to Q3 FY 2016, to €21.4 billion, including a strong performance by short-cycle businesses
- Orders came in 6% lower, at €19.8 billion, due to sharply lower volume from large orders at Power and Gas and at Siemens Gamesa Renewable Energy, the business resulting from the merger of Siemens’ wind power business with Gamesa Corporación Tecnológica S.A. (Gamesa) beginning with Q3 FY 2017; the book-to-bill ratio for Siemens overall was 0.93
- On a comparable basis, excluding currency translation and portfolio effects, revenue rose 3% and orders were 9% lower
- Profit Industrial Business rose 3% to €2.3 billion; as expected, negative merger and acquisition effects related to Gamesa and Mentor Graphics Corporation (Mentor Graphics) reduced Industrial Business profit margin to 10.4%
- Net income rose 7%, to €1.5 billion; basic earnings per share (EPS) of €1.74, up from €1.64 in Q3 FY 2016 despite negative merger and acquisition effects
Siemens | | Q3 | % Change | | (in millions of €) | FY 2017 | FY 2016 | Actual | Comp. | | Orders | 19,824 | 21,060 | (6)% | (9)% | | Revenue | 21,413 | 19,804 | 8% | 3% | Profit
Industrial Business | 2,250 | 2,191 | 3% | | | therein: severance | (94) | (69) | | | | Profit margin Industrial Business | 10.4% | 10.8% | | | | excl. severance | 10.8% | 11.2% | | | | Income from continuing operations | 1,479 | 1,337 | 11% | | | therein: severance | (110) | (82) | | | | Net income | 1,464 | 1,372 | 7% | | | Basic earnings per share (in €) | 1.74 | 1.64 | 6% | | | Free cash flow (continuing and discontinued operations) | 941 | 1,822 | (48)% | | | ROCE (continuing and discontinued operations) | 12.1% | 13.7% | | | - Orders down due to a sharply lower volume from large orders year-over-year, particularly in Power and Gas and Siemens Gamesa Renewable Energy; orders rose significantly excluding the change in large order volume
- Industrial Business order backlog remained at €117 billion, as an increase from portfolio transactions was partly offset by negative foreign currency translation effects
- Revenue increased in the majority of industrial businesses, including sharp growth at Siemens Gamesa Renewable Energy due to the merger, as well as double-digit growth in Mobility and Digital Factory; revenue was up in all three reporting regions; as expected, significant decline in Power and Gas in contracting markets
- Portfolio transactions added three percentage points to order development and six percentage points to revenue growth; foreign currency translation effects had a minimal negative effect on volume development year-over-year
- Profit Industrial Business rose on improvements in the majority of the industrial businesses; Healthineers and Digital Factory made the largest contributions to profit and profit improvement, the latter on an excellent performance in its short-cycle businesses; as expected, Industrial Business profit margin development was clearly impacted by negative effects related to the acquisition of Mentor Graphics in Digital Factory and the merger with Gamesa into Siemens Gamesa Renewable Energy, amounting to 0.6 percentage points; also as expected, profit in Power and Gas declined in a highly competitive market environment
- Income from continuing operations and Net income: outside Industrial Business, amortization of intangible assets acquired in business combinations climbed by €161 million to €339 million due mainly to the merger with Gamesa and the acquisition of Mentor Graphics; lower tax rate than in the prior-year period
- Industrial Business generated strong Free cash flow in the first nine months of fiscal 2017, totaling €4.6 billion, up significantly from €3.5 billion in the prior-year period; Free cash flow from Industrial Business for the current quarter decreased to €1.397 billion from €1.914 billion in Q3 FY 2016; decline in Free cash flow was due mainly to Siemens Gamesa Renewable Energy, driven by a build-up of operating net working capital
- ROCE declined due to a substantial increase in average capital employed, primarily resulting from the acquisition of Mentor Graphics and the merger with Gamesa
- Provisions for pensions and similar obligations as of June 30, 2017: €9.8 billion (March 31, 2017: €10.5 billion); decreased clearly due mainly to higher discount rate assumptions
Power and Gas | | Q3 | % Change | | (in millions of €) | FY 2017 | FY 2016 | Actual | Comp. | | Orders | 2,674 | 4,512 | (41)% | (41) | | Revenue | 3,819 | 4,321 | (12)% | (11)% | | Profit | 369 | 480 | (23)% | | | therein: severance | (26) | 9 | | | | therein: integration costs Dresser-Rand | (14) | (14) | | | | Profit margin | 9.7% | 11.1% | | | | excl. severance and integration costs | 10.7% | 11.2% | | | - Sharply lower volume from large orders, particularly in the Americas region which in Q3 FY 2016 included an order in the U.S. totaling €0.7 billion and an order in Bolivia totaling €0.5 billion; the current quarter included an order in the U.S. related to the Division’s advanced-class gas turbine technologies in connection with a strategic partnership
- In contracting markets, revenue down in all reporting regions due mainly to weaker order intake in prior periods; declines particularly in the large gas turbine and compression businesses
- Profit down due to the revenue decline, lower capacity utilization, and higher severance; in addition, Q3 FY 2016 included positive effects from the measurement of inventories
- Global energy trends continue to reduce overall demand in markets for the Division’s offerings, resulting in declining new- unit business and corresponding price pressure due to overcapacities
Energy Management | | Q3 | % Change | | (in millions of €) | FY 2017 | FY 2016 | Actual | Comp. | | Orders | 3,030 | 3,102 | (2)% | (3)% | | Revenue | 3,038 | 2,894 | 5% | 5% | | Profit | 207 | 240 | (14)% | | | therein: severance | (8) | (6) | | | | Profit margin | 6.8% | 8.3% | | | | excl. severance | 7.1% | 8.5% | | | - Orders came in lower in the transformers business, which in Q3 FY 2016 won a large order in Asia, Australia; orders rose in the Division’s other businesses and reporting regions
- Revenue up in nearly all businesses; on a regional basis, increases in Asia, Australia and the region comprising Europe, C.I.S., Africa, Middle East (Europe/CAME)
- Profit held back by a less favorable business mix
Building Technologies | | Q3 | % Change | | (in millions of €) | FY 2017 | FY 2016 | Actual | Comp. | | Orders | 1,715 | 1,658 | 3% | 3% | | Revenue | 1,608 | 1,536 | 5% | 4% | | Profit | 165 | 140 | 18% | | | therein: severance | (3) | (3) | | | | Profit margin | 10.3% | 9.1% | | | | excl. severance | 10.5% | 9.3% | | | - Orders grew across the Division’s businesses, driven by strong demand in the U.S. and Germany
- Revenue growth was mainly driven by the product and service businesses; on a geographic basis, revenue increased in the Americas and Asia, Australia
- Profit momentum continues on the back of strong execution, with higher revenue and improved productivity
Mobility | | Q3 | % Change | | (in millions of €) | FY 2017 | FY 2016 | Actual | Comp. | | Orders | 2,328 | 1,112 | 109% | 111% | | Revenue | 2,042 | 1,795 | 14% | 15% | | Profit | 178 | 158 | 13% | | | therein: severance | (7) | (4) | | | | Profit margin | 8.7% | 8.8% | | | | excl. severance | 9.1% | 9.1% | | | - Orders up in all businesses and all reporting regions, driven by a number of large contract wins, including a large order for Mobility’s new commuter rail platform Mireo in Germany
- Broad-based revenue growth led by the rolling stock business, including execution of large projects and locomotive orders
- Profit rose on higher revenue; Q3 FY 2016 benefited from positive effects from larger contracts
Digital Factory | | Q3 | % Change | | (in millions of €) | FY 2017 | FY 2016 | Actual | Comp. | | Orders | 3,027 | 2,563 | 18% | 11% | | Revenue | 2,960 | 2,519 | 18% | 11% | | Profit | 485 | 395 | 23% | | | therein: severance | (30) | (13) | | | | Profit margin | 16.4% | 15.7% | | | | excl. severance | 17.4% | 16.2% | | | - Strong volume growth across the businesses; excellent performance in the short cycle businesses, which continued to benefit from a favorable market environment particularly in the automotive and machine building industries; the product lifecycle management software business grew sharply due to strong demand combined with new volume from the acquisition of Mentor Graphics
- On a geographic basis, volume increases in all reporting regions, including sharp growth in China and substantial growth in the U.S.
- Profit rose significantly, driven by the high-margin short-cycle businesses; profitability for the Division overall was held back by deferred revenue adjustments, transaction costs and integration costs totaling €77 million related to the acquisition of Mentor Graphics (Q3 FY 2016: €39 million related to the acquisition of CD-adapco), as well as severance and ongoing expenses related to further advancing Siemens’ MindSphere platform; expenses for MindSphere and profit margin impacts related to Mentor Graphics are expected to continue in coming quarters
Process Industries and Drives | | Q3 | % Change | | (in millions of €) | FY 2017 | FY 2016 | Actual | Comp. | | Orders | 2,257 | 2,117 | 7% | 7% | | Revenue | 2,182 | 2,247 | (3)% | (3)% | | Profit | 103 | 101 | 2% | | | therein: severance | (8) | (39) | | | | Profit margin | 4.7% | 4.5% | | | | excl. severance | 5.1% | 6.2% | | | - Orders rose due mainly to large orders in the solutions business; on a regional basis, order growth came primarily from Asia, Australia, particularly including China
- Slight revenue growth in the process automation business more than offset by declines in other businesses
- Profit and profitability continue to be held back by ongoing operational challenges, particularly in the large drives business
Healthineers | | Q3 | % Change | | (in millions of €) | FY 2017 | FY 2016 | Actual | Comp. | | Orders | 3,463 | 3,382 | 2% | 3% | | Revenue | 3,361 | 3,230 | 4% | 4% | | Profit | 579 | 534 | 9% | | | therein: severance | (11) | (13) | | | | Profit margin | 17.2% | 16.5% | | | | excl. severance | 17.5% | 16.9% | | | - Moderate order increase driven by the diagnostic imaging business; on a regional basis, growth in Europe/CAME and Asia, Australia
- Revenue up in nearly all businesses, particularly diagnostic imaging and advanced therapies; on a regional basis, largest increase in Asia, Australia driven by double-digit growth in China
- Continued strong earnings performance by the diagnostic imaging business
Siemens Gamesa Renewable Energy | | Q3 | % Change | | (in millions of €) | FY 2017 | FY 2016 | Actual | Comp. | | Orders | 1,398 | 2,729 | (49)% | (64)% | | Revenue | 2,693 | 1,722 | 56% | 3% | | Profit | 164 | 143 | 14% | | | therein: severance | (3) | 1 | | | | Profit margin | 6.1% | 8.3% | | | | excl. severance | 6.2% | 8.3% | | | - Merger of Siemens’ wind power business with Gamesa beginning with Q3 FY 2017
- Sharp decline in order intake; volatility in the offshore business which is characterized by tenders for large orders; order intake in the major onshore market India temporarily impacted by the introduction of an auction system for new wind-farm tenders
- Revenue supported by the offshore and service businesses; revenue in the onshore business impacted by the market conditions in India mentioned above
- Profitability held back by integration costs of €36 million
Financial Services - Increased income before income taxes due primarily to a lower level of credit hits
- Despite growth in new business, total assets decreased since the end of fiscal 2016, due mainly to substantial early terminations of financings along with negative currency translation effects
Reconciliation to Consolidated Financial Statements - Centrally managed portfolio activities (CMPA): primarily income from reversals of provisions for post-closing guarantees related to a former divestment and for warranties; Q3 FY 2016 included a negative result related to a major asset retirement obligation
- Results of CMPA are expected to remain volatile in coming quarters
- Siemens Real Estate: decrease in profit due primarily to lower gains from disposals of real estate
- Amortization of intangible assets acquired in business combinations: increase of €161 million related mainly to the merger with Gamesa and the acquisition of Mentor Graphics
- Eliminations, Corporate Treasury and other reconciling items: mainly positive effects related to changes in the fair value of derivatives not qualifying for hedge accounting
Outlook We confirm our expectations for fiscal 2017 presented with our results for Q2 FY 2017. We continue to expect modest growth in revenue, net of effects from currency translation and portfolio transactions, and anticipate that orders will exceed revenue for a book-to- bill ratio above 1. We expect the profit margin of our Industrial Business in the range of 11.0% to 12.0%, and basic EPS from net income in the range of €7.20 to €7.70. This outlook includes portfolio changes already closed in the first nine months of fiscal 2017, particularly the acquisition of Mentor Graphics and the Gamesa merger, which burden Industrial Business profit margin and basic EPS from net income in fiscal 2017. The outlook continues to exclude charges related to legal and regulatory matters as well as potential burdens associated with pending portfolio matters.
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