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Siemens on successful path in uncertain times

Revenue and net income were both below their prior-year levels, but exceeded market expectations and outpaced competitors – in some cases significantly. In a persistently uncertain environment, Siemens confirms the second-quarter estimates of its outlook for fiscal 2020 and expects a moderate decline in revenue on a comparable basis. The book-to-bill ratio – that is, the ratio of orders to revenue – is expected to remain above 1. Due to the continuing volatility of sales markets and to regulatory uncertainties in connection with measures for combating the COVID-19 pandemic, the company refrains from giving guidance for basic earnings per share from net income for fiscal 2020.
“Despite the global crisis, which remains very severe, we’re maintaining our course successfully and delivered strong operating performance in Q3,” said Joe Kaeser, President and CEO of Siemens AG. “At the same time, we rigorously drive our company’s realignment forward. Our strategy concept Vision 2020+ is gaining traction, and Healthineers is testimony that shows the program’s strategic and transformational power. Our employees and our partners have my deep gratitude and respect for this outstanding performance under extremely difficult circumstances.”

Revenue and net income down year-over-year

At €13.5 billion, the Group’s revenue declined five percent in Q3, with Siemens Mobility posting a slight increase. In total, adjusted EBITA in the Industrial Businesses – the core of the future Siemens AG, comprising Digital Industries, Smart Infrastructure, Siemens Mobility and Siemens Healthineers – climbed eight percent year-over-year to €1.8 billion. This increase was partly due to a strong performance at Digital Industries – specifically in the software business. In addition, a revaluation of Siemens’ stake in Bentley Systems, Inc. resulted in a positive profit contribution of €211 million.
Discontinued operations reported a loss of €451 million (Q3 2019: a positive €78 million). This figure mainly reflects a large loss at SGRE. This loss has already been reported by SGRE. However, adjusted EBITA before special items was slightly positive at Siemens Gas and Power.
In addition, a higher income tax rate reduced the Group’s net income to €535 million, a 53 percent decline. At €14.4 billion, order intake was seven percent lower on a comparable basis due to the COVID-19 crisis, despite an increase in major orders. This decline was primarily the result of softer demand at Siemens Healthineers and Smart Infrastructure due to the COVID-19 crisis.

Strong free cash flow

Free cash flow – which is extremely important particularly in times of crisis – significantly improved in Q3 to a positive €2.5 billion at Group level (Q3 2019: €0.4 billion). All units, but most notably Siemens Mobility, contributed to this substantial improvement. Discontinued operations achieved a positive free cash flow of €433 million (Q3 2019: a negative €287 million). The primary driver of this improvement was a series of asset management measures at Siemens Energy.

Individual Industrial Businesses

Despite substantial COVID-19 effects, the decline in orders at Digital Industries was cushioned above all by China’s economic recovery and major contract wins in the software business. Revenue at the automation business fell significantly. Cost savings and a significant rise in revenue at the software business boosted profit considerably. A groundbreaking partnership with SAP aims to develop an integrated solution for the end-to-end management of products and assets across their lifecycles. This partnership will drive digitalization and deliver a comprehensive solution for the Fourth Industrial Revolution (Industrie 4.0).
In an environment marked by challenging market conditions, orders also declined at Smart Infrastructure. Lower revenue in the high-margin product business impacted both profit and profitability in Q3.
In contrast, orders and revenue at Siemens Mobility developed positively. The increase in orders was due to a large number of new major orders in different areas of the unit’s business. This positive momentum was supported, in particular, by the €1.1 billion order from German railway operator Deutsche Bahn (DB). Beginning in 2022, 30 new high-speed trains from Siemens will reinforce DB’s long-distance fleet. Revenue also increased in Q3, driven primarily by growth in the rolling stock business. The unsatisfactory profit level in Q3 will improve again and be within its target range in Q4.

Global uncertainties due to pandemic continuing in Q4

Siemens expects the economic consequences of the COVID-19 pandemic to continue to strongly impact its fiscal fourth quarter financial results. However, the macroeconomic developments and their influence on Siemens still cannot be reliably assessed.
The company continues to expect a moderate decline in comparable revenue in fiscal 2020, net of currency translation and portfolio effects, with the book-to-bill ratio remaining above 1. The decline in demand most strongly affects the Operating Companies Digital Industries and Smart Infrastructure.
The company is adhering to its plan to complete the spin-off and public listing of Siemens Energy before the end of fiscal 2020. Siemens expects to record a spin-off gain within discontinued operations, the amount of which cannot yet be reliably forecast. The company continues to expect material impacts on net income from spin-off costs and tax expenses related to the carve-out and sub-group creation of Siemens Energy.

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Siemens AG (Berlin and Munich) is a global technology powerhouse that has stood for engineering excellence, innovation, quality, reliability and internationality for more than 170 years. The company is active around the globe, focusing on the areas of intelligent infrastructure for buildings and distributed energy systems, and automation and digitalization in the process and manufacturing industries. Through the separately managed companies Siemens Energy, the global energy business of Siemens, and Siemens Mobility, a leading supplier of smart mobility solutions for rail and road transport, Siemens is shaping the energy systems of today and tomorrow as well as the world market for passenger and freight services. Due to its majority stakes in the publicly listed companies Siemens Healthineers AG and Siemens Gamesa Renewable Energy (as part of Siemens Energy), Siemens is also a world-leading supplier of medical technology and digital healthcare services as well as environmentally friendly solutions for onshore and offshore wind power generation. In fiscal 2019, which ended on September 30, 2019, Siemens generated revenue of €86.8 billion and net income of €5.6 billion. At the end of September 2019, the company had around 385,000 employees worldwide. Further information is available on the Internet
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This document contains statements related to our future business and financial performance and future events or developments involving Siemens that may constitute forward-looking statements. These statements may be identified by words such as “expect,” “look forward to,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate,” “will,” “project” or words of similar meaning. We may also make forward-looking statements in other reports, prospectuses, in presentations, in material delivered to shareholders and in press releases. In addition, our representatives may from time to time make oral forward-looking statements. Such statements are based on the current expectations and certain assumptions of Siemens’ management, of which many are beyond Siemens’ control. These are subject to a number of risks, uncertainties and factors, including, but not limited to, those described in disclosures, in particular in the chapter Report on expected developments and associated material opportunities and risks of the Annual Report, and in the Half-year Financial Report, which should be read in conjunction with the Annual Report. Should one or more of these risks or uncertainties materialize, events of force majeure, such as pandemics, occur or should underlying expectations including future events occur at a later date or not at all or assumptions prove incorrect, actual results, performance or achievements of Siemens may (negatively or positively) vary materially from those described explicitly or implicitly in the relevant forward-looking statement. Siemens neither intends, nor assumes any obligation, to update or revise these forward-looking statements in light of developments which differ from those anticipated.

This document includes – in the applicable financial reporting framework not clearly defined – supplemental financial measures that are or may be alternative performance measures (non-GAAP-measures). These supplemental financial measures should not be viewed in isolation or as alternatives to measures of Siemens’ net assets and financial positions or results of operations as presented in accordance with the applicable financial reporting framework in its Consolidated Financial Statements. Other companies that report or describe similarly titled alternative performance measures may calculate them differently.

Due to rounding, numbers presented throughout this and other documents may not add up precisely to the totals provided and percentages may not precisely reflect the absolute figures.

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Florian Martens

Siemens AG

Werner-von-Siemens-Straße 1                       
80333 Munich

+49 (89) 636 22804

Wolfram Trost

Siemens AG

Werner-von-Siemens-Straße 1                       
80333 Munich

+49 (89) 636 34794