Introduction

Siemens, a German engineering company, reported that it missed profit forecasts in its latest quarter. The company attributed this to weakening demand in several markets, including China.

Weakening Demand in China

Siemens stated that China, which is a significant driver of global manufacturing and its third largest market, has only experienced a tepid recovery following its zero-Covid shutdown last year. The company mentioned that it is now observing a “normalization of demand” after customers pre-bought products in the previous year to avoid shortages. Orders increased by 10% during the three months ending in June, compared to a 13% increase in the previous three months.

Siemens also highlighted that customers worldwide are depleting their stocks of components, and this trend is expected to continue in the coming quarters.

CEO Roland Busch stated, “In Q3, the normalization of demand was clearly visible in orders at our short-cycle businesses, most notably in China, but also in Europe. Recovery in China’s manufacturing sector has been slower than anticipated. As a result, we expect the trend to stay flat.”

Financial Performance

Siemens’ industrial profit, which covers its mobility, smart infrastructure, and factory automation businesses, fell 4% to 2.75 billion euros ($3.02 billion) for the three months ending in June. This result missed the analysts’ consensus of 2.90 billion euros. Consequently, the company’s shares were down 3.6% in premarket activity.

Siemens maintained its outlook for the year until the end of September but lowered expectations for its digital industries business, which supplies factories with controllers. The division now expects comparable revenue growth of 13% to 15%, lower than its previous outlook of 17% to 20%.

Insight into the Global Economy

The performance of Siemens, whose products automate factories and equip transport networks, provides insight into the overall health of the global economy. Manufacturing activity has been slowing in recent months, as indicated by weakening purchasing manager data in Europe and China.

During the third quarter, Siemens’ orders rose by 10% to 24.24 billion euros, surpassing the forecast of 22.19 billion euros. However, revenue only increased by 6% to 18.89 billion euros, falling short of the forecast of 19.27 billion euros. Furthermore, the net profit of 1.44 billion euros also missed forecasts.

Siemens maintained its guidance at the group level, expecting comparable revenue growth of 9% to 11% for the 12 months ending in September and earnings per share of 9.60 to 9.90 euros.