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Siemens credits simpler structure for overtaking US rival GE

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Siemens’ early decision to call time on its conglomerate structure helped it overtake historic rival GE, the industrial group said on Thursday, as it defied global supply chain disruptions to post healthy full-year profits.

“We are years ahead [of GE],” chief executive Roland Busch told analysts, adding that Siemens — once Germany’s most valuable public company — had restructured “out of a position of strength.”

A 174-year old manufacturing business that grew into one of the world’s largest conglomerates, Siemens has slimmed down in recent years, after former chief executive Joe Kaeser spun off its large energy and health divisions, and divested a handful of smaller businesses.

This week, long-term competitor General Electric — once America’s most valuable company — announced that it would in effect follow suit, splitting into three companies focused on healthcare, energy and aviation.

Shares in Siemens, which Kaeser repeatedly complained were trading at a “conglomerate discount,” have reached all-time highs, helping the company reach a market value of $145bn — more than $20bn above GE.

The Munich-based company’s stock price rose a further 2 per cent to €149.80 on Thursday morning, after it reported that margins at its core businesses, which do everything from equipping factories with robotics to building trains, rose to 15 per cent for the 12 months to the end of September, up from 14.3 per cent in the 2020 fiscal year, and 14.4 per cent in 2019.

Net income for the last fiscal year came in at €6.7bn, up from €4.2bn in the pandemic-hit 2020 period and €5.65bn in 2019, while free cash flow reached a record €8.2bn. By comparison, GE made a net loss of $2.7bn in the nine months to the end of September.

Busch, who took over from Kaeser earlier this year, resisted suggestions that Siemens, which still owns 75 per cent of its spun-off health division, and in effect 35 per cent of Siemens Energy, could benefit from rapidly reducing its stakes in those businesses and rushing through divestments.

The group, which still has a centralised supply chain management team, used its size to avoid the worst effects of the current crisis, the former physicist said.

“We have the power of Siemens, which we leverage,” Busch said, “we pool demand for raw materials and components [across businesses]”.

The company’s customers also appreciate the complementary strengths of Siemens’ disparate divisions, Busch added.

“Mercedes-Benz comes to us because they don’t only want to automate their manufacturing, they also want to make it green,” he told reporters at a press conference on Thursday, referring to Siemens’ factory services business, as well as its building technology arm.

Busch’s comments are a departure from his predecessor’s proclamation that “synergies don’t create growth . . . focus does.”

But Kaeser’s handpicked successor was clear about the company’s trajectory: “I see Siemens as a company that delivers growth . . . because we have the right technologies”

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