Siemens abandoned its full-year earnings forecast and said orders in the second quarter - ended on March 31 - slumped, highlighting Germany’s industrial malaise as lockdowns to fight the coronavirus crushed global growth.
The European giant was able to keep factories running during a time when many manufacturing plants were forced to close doors, but the fallout from government-imposed measures to fight the virus has severely affected Siemens customers.
Profit fell at all divisions and the Munich-based company now sees a “moderate decline” in revenue for the financial year ending on September 30.
“Our organisation is often stretched to its limits,” chief executive Joe Kaeser said on a call with reporters on Friday.
“The big question is how long the bottom will be there. The answer is we unfortunately don’t know and neither do our customers.”
Second quarter profit fell 21 per cent yearly to $634 million (Dh2.3 billion), but this “was better than feared, and also ahead of competitors,” Morgan Stanley analyst Ben Uglow said in a note. “These numbers should be well-received.”
While quarterly revenue held up in part due to the performance of Siemens’ health division, other industrial companies haven’t fared so well.
General Electric announced on Monday it would cut 13,000 jobs from its jet-engine division, adding to reductions the company had announced in March. ABB warned the pandemic could crush a fragile recovery in China, its second-largest market.
The pandemic has sent European economies into a tailspin, with the euro-region forecast to contract 7.7 per cent this year, forcing unemployment and public debt higher.
Industrial production dropped 9.2 per cent in March in Germany, presaging grimmer figures for April when millions of people were mostly confined to their homes.
Siemens has so far avoided large-scale factory shutdowns due to long-term contracts making trains and turbines, but the company is a supplier to many industries that have been directly affected.
The group’s digital-industries division, seen as a bellwether for German industrial demand, is a major supplier to carmakers such as Volkswagen, which have seen operations suspended as dealerships closed across Europe.
Siemens sits at the intersection of Germany’s industrial heartland, supplying factory automation equipment to companies ranging from family-owned businesses to the world’s largest automakers. The company is seeking about €3bn from a new credit line to help the company through the virus crisis.
The collapse in the price of crude has hurt Siemens’ gas and power business, which supplies drives, compressors and other transmission equipment to the sector. The division will be spun off into a new company called Siemens Energy that will also include the firm’s stake in wind-power unit Siemens Gamesa Renewable Energy.
The spinoff is scheduled to take place by September.
Siemens also plans to separate its Flender unit, which makes drives used in wind turbines and other large generators. The company will fold another wind energy business into Flender and spin off the combined entity next year.
Ten tax points to be aware of in 2026
1. Domestic VAT refund amendments: request your refund within five years
If a business does not apply for the refund on time, they lose their credit.
2. E-invoicing in the UAE
Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption.
3. More tax audits
Tax authorities are increasingly using data already available across multiple filings to identify audit risks.
4. More beneficial VAT and excise tax penalty regime
Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.
5. Greater emphasis on statutory audit
There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.
6. Further transfer pricing enforcement
Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes.
7. Limited time periods for audits
Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion.
8. Pillar 2 implementation
Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.
9. Reduced compliance obligations for imported goods and services
Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations.
10. Substance and CbC reporting focus
Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity.
Contributed by Thomas Vanhee and Hend Rashwan, Aurifer
COMPANY PROFILE
Name: Mamo Year it started: 2019 Founders: Imad Gharazeddine, Asim Janjua Based: Dubai, UAE Number of employees: 28 Sector: Financial services Investment: $9.5m Funding stage: Pre-Series A Investors: Global Ventures, GFC, 4DX Ventures, AlRajhi Partners, Olive Tree Capital, and prominent Silicon Valley investors. The specs
- Engine: 3.9-litre twin-turbo V8
- Power: 640hp
- Torque: 760nm
- On sale: 2026
- Price: Not announced yet
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