So it isn’t chaos at Siemens. Or so says Joe Kaeser, long-time finance director at the German behemoth who was promoted to chief executive yesterday. Investors, watching ugly internal ructions as predecessor Peter Löscher fought for his job following last week’s profit warning, might have differed. Still, a measure of calm has now descended with Mr Löscher’s departure, three years before his contract expired. And Siemens’ shares have weathered the storm with a 2 per cent fall, to €82.
Whether they enjoy much short-term traction is doubtful, though. Third-quarter results were drab: sales fell 1 per cent, year-on-year, to €19bn, while operating profit from the four main divisions was down by a third at €1.3bn. True, restructuring charges accounted for four-fifths of the profit decline. Even so, the only significant bright spot was in healthcare, where margins improved. Looking ahead, Mr Kaeser was downbeat about market conditions, citing stagnation in Europe and weakening US demand. As for margins, last week’s warning tore up a 2014 target of 12 per cent, and the new boss is understandably cautious about suggesting a new objective. He did note, however, that the make-up of Siemens’ recent order growth – backlog is a record €100bn – will mean future margin dilution.
Siemens’ big overhaul, aiming to find €6bn of cost cuts and productivity gains, seems to be largely on track. But even here, procurement savings may fall short due to lower business volumes. Mr Kaeser has, by some accounts, been an advocate of faster streamlining, and Siemens has never been a disaster story – just very average. Its shares, on a 2014 consensus earnings multiple of 11, price in some disappointment. Even so, investors may need persuading that a long-time insider can secure gains that his predecessor, plucked from outside Siemens for the first time, could not.