Withdrawal from Russia and Energy write-off: Siemens with billions in losses

Created: 08/11/2022, 12:08 p.m

The Leipzig Siemens plant for low-voltage switchgear: The write-down on Siemens Energy and the withdrawal from Russia put Siemens deep into the red.

(Archive image) © Jan Woitas/dpa

The traditional Munich group Siemens has made a loss in a quarter for the first time since 2010.

CEO Roland Busch looks positively into the future.

Munich – It's been almost twelve years since Siemens was last in the red – now it's that time again.

The Munich group made a loss of 1.5 billion euros in the third business quarter, as it announced on Thursday.

The reasons for this are a high depreciation on the remaining share in the former energy division Siemens Energy and burdens in connection with Russia, since Siemens is withdrawing from there because of the Ukraine war.

"It was not an easy quarter," says CEO Roland Busch.

Siemens: billions in losses due to energy write-off and Russia

The Energy write-off, which Siemens had already announced at the end of June, weighs on the result with 2.7 billion euros.

It had become necessary because of the low share price of the 35 percent minority stake.

As CEO Roland Busch emphasizes, it is purely accounting.

The withdrawal from Russia hit Siemens in the third quarter with around 600 million euros.

That was too much for the otherwise solid ongoing business of the Munich company to be able to compensate for this.

Sales, on the other hand, grew by a nominal 11 percent to 17.9 billion euros, and earnings in the industrial business by 27 percent to 2.9 billion.

In the case of the latter, however, a profit of 700 million euros from the sale of Yunex Traffic also made itself felt.

Siemens wants to absorb increased costs with price increases

However, Siemens is also struggling with supply chain bottlenecks and rising labor and purchasing costs.

In China, the corona-related lockdowns also weighed on production, but the situation here has eased considerably since June.

Siemens intends to absorb the increased costs through price increases, efficiency gains and spending discipline.

For the current fiscal year, which ends in September, the massive burdens from the third quarter are costing Siemens the earnings forecast.

The group was able to compensate for the withdrawal from Russia, but the Energy write-off was too much.

Accordingly, Siemens reduced the expectation for the after-tax result by the amount of the energy burden.

The exit from Russia, which produced a total of 1.1 billion in charges in the second and third quarters, may not yet be completely over financially.

Further burdens are conceivable, as CFO Ralf P. Thomas said when asked: In the leasing sector, an amount in the mid to three-digit millions is possible, as well as unspecified effects on deconsolidation.

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On the other hand, other signs for the future are good: After an increase in incoming orders of 22 billion euros, the order backlog is now at a record value of 99 billion euros, according to Siemens.

"We have the right offer and the right strategy to be successful even in uncertain times," emphasized CEO Busch.

Siemens sees itself well positioned in the gas crisis

In the medium term, Busch even sees a positive effect of the current developments on Siemens' business.

If production moves closer to the sales markets again or there is a shortage of workers, this will accelerate the need for companies and societies to “change fundamentally”, said Busch.

"More automation, more digitization, resource efficiency and decarbonization" are the most important levers.

That fits "excellently" with Siemens' strategy, because its own portfolio serves precisely these trends.

Siemens also sees itself well positioned for a possible worsening of the gas crisis and a possible gas shortage: "We currently see only minor direct effects on our factories because our production is not energy-intensive," said Busch.

The demand for natural gas is comparatively low - in Germany, for example, it is mainly used for heating.