Siemens is riding a booming global economy that’s lifting orders for its factory, transport and energy equipment and giving the chief executive Joe Kaeser support in his mission to reshape Europe’s largest engineering company.
Orders surged 14 per cent in the fiscal first quarter, driven by demand for rail carriages in the US, wind turbines and automation software used to keep production humming. Sales advanced 3 per cent, the Munich-based company said Wednesday. The stock rose as much as 1.5 per cent.
Mr Kaeser, a Siemens veteran who has been CEO for four years, has championed the company’s engineering prowess while simplifying its byzantine structure, paring back in areas like lighting and healthcare systems, which Siemens is spinning off.
He’s also cut thousands of jobs at its gas-turbine business, once a top performer in the portfolio and now a drag on earnings as utilities cut back orders for huge power-generation equipment.
“The strong order intake in the first quarter is particularly gratifying,” Mr Kaeser said at a press conference in Munich, ahead of today’s annual meeting with shareholders. “A look at the figures our competitors have released so far shows we’re gaining further market share.”
Mr Kaeser burnished his role as the standard bearer of German industry last week, when he sat next to the US President Donald Trump at a dinner at the World Economic Forum in Davos, Switzerland, highlighting the company’s US achievements and plans to invest. His comments about a factory in the US drew the ire of local workers back at home in Germany fretting over the future of their own jobs.
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Siemens stock is up 5.2 per cent this year, giving the company a market cap of €104 billion (Dh75.56bn). Orders up 14 per cent to €22.5bn, while revenue climbed up 3 per cent to €19bn. So-called profit from industrial operations, however, fell down 14 per cent to €2.21bn. While that surpassed estimates, the results included a net benefit of €437 million from revaluing Siemens’s future US tax obligations. Transport orders rose 49 per cent; digital factory was up 31 per cent; and wind turbines up 103 per cent.
The positive momentum at Siemens’s rail, wind-turbine and digital factory units was surprising, said Bankhaus Metzler analyst Jasko Terzic. Strength in those divisions served to offset drops at power-and-gas and at the US-reliant Healthineers business, which was hampered by currency headwinds amid a falling dollar.
Mr Kaeser announced in November that Siemens would cut 6,900 jobs from its power-and-gas and process industries units, half of those in Germany. That’s generated criticism from unions and employees, who are wary of his plan to reduce the industrial conglomerate to a collection of semi-autonomous units. Here, too, he may get some cover from the economy’s momentum, as German joblessness falls to record lows.
Talks with unions on the job cuts are progressing, Mr Kaeser said, and should be finished by the end of the fiscal year, which for Siemens ends on September 30.
In addition to healthcare spin-off, Mr Kaeser is merging Siemens’s rail operation with that of Alstom. It joined its wind power division with Spanish company Gamesa in 2017. Mr Kaeser declined to comment on plans to sell the company’s Flender unit, which makes mechanical drives. He said the business’s turnaround has been impressive, since it was previously considered an underperformer.
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2). Roberto Soldado - Valencia - £25m: Flop
3). Erik Lamela - Roma - £25m: Jury still out
4). Son Heung-min - Bayer Leverkusen - £25m: Success
5). Darren Bent - Charlton Athletic - £21m: Flop
6). Vincent Janssen - AZ Alkmaar - £18m: Flop
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8). Luka Modric - Dynamo Zagreb - £17m: Success
9). Paulinho - Corinthians - £16m: Flop
10). Mousa Dembele - Fulham - £16m: Success
Director: Laxman Utekar
Cast: Vicky Kaushal, Akshaye Khanna, Diana Penty, Vineet Kumar Singh, Rashmika Mandanna
Rating: 1/5
FIGHT CARD
Fights start from 6pm Friday, January 31
Catchweight 82kg
Piotr Kuberski (POL) v Ahmed Saeb (IRQ)
Women’s bantamweight
Cornelia Holm (SWE) v Corinne Laframboise (CAN)
Welterweight
Omar Hussein (JOR) v Vitalii Stoian (UKR)
Welterweight
Josh Togo (LEB) v Ali Dyusenov (UZB)
Flyweight
Isaac Pimentel (BRA) v Delfin Nawen (PHI)
Catchweight 80kg
Seb Eubank (GBR) v Mohamed El Mokadem (EGY)
Lightweight
Mohammad Yahya (UAE) v Ramadan Noaman (EGY)
Lightweight
Alan Omer (GER) v Reydon Romero (PHI)
Welterweight
Ahmed Labban (LEB) v Juho Valamaa (FIN)
Featherweight
Elias Boudegzdame (ALG) v Austin Arnett (USA)
Super heavyweight
Roman Wehbe (LEB) v Maciej Sosnowski (POL)
MATCH INFO
Arsenal 1 (Aubameyang 12’) Liverpool 1 (Minamino 73’)
Arsenal win 5-4 on penalties
Man of the Match: Ainsley Maitland-Niles (Arsenal)
Results
Stage 7:
1. Caleb Ewan (AUS) Lotto Soudal - 3:18:29
2. Sam Bennett (IRL) Deceuninck-QuickStep - same time
3. Phil Bauhaus (GER) Bahrain Victorious
4. Michael Morkov (DEN) Deceuninck-QuickStep
5. Cees Bol (NED) Team DSM
General Classification:
1. Tadej Pogacar (SLO) UAE Team Emirates - 24:00:28
2. Adam Yates (GBR) Ineos Grenadiers - 0:00:35
3. Joao Almeida (POR) Deceuninck-QuickStep - 0:01:02
4. Chris Harper (AUS) Jumbo-Visma - 0:01:42
5. Neilson Powless (USA) EF Education-Nippo - 0:01:45
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Director: Hwang Dong-hyuk
Stars: Lee Jung-jae, Wi Ha-joon and Lee Byung-hun
Rating: 4.5/5
THE LIGHT
Director: Tom Tykwer
Starring: Tala Al Deen, Nicolette Krebitz, Lars Eidinger
Rating: 3/5
RESULT
Copa del Rey, semi-final second leg
Real Madrid 0
Barcelona 3 (Suarez (50', 73' pen), Varane (69' OG)
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”