Siemens Reports Strong Growth in Digital Factory Business

By David Humphrey

Industry Trends

Q3 financial results released in August for Siemens show a healthy surge in overall revenue of 8 percent with net income trailing closely at 7 percent versus Q3 2016. The company’s Digital Factory division has shown impressive growth for several quarters now, including an 18 percent revenue jump in Q3 and a huge 23 percent jump in profits. However, part of the boost comes from new revenue from the recent Mentor Graphics acquisition. Digital Factory is home to Siemens’ industrial software business that includes product lifecycle management (PLM) software. The company sees favorable market for such software, especially in the automotive and machine building industries. By region, Siemens reports a strong surge in China, accompanied by substantial growth in the US.

According to ARC analyst David Humphrey, “Despite the continued drag on investments in oil & gas, industrial markets are strong and Siemens is taking advantage of growth opportunities in China and the US with its strong portfolio of automation hardware and software. After an uncertain 2016, Chinese markets surged in early 2017 as investor confidence returned. After three quarters of strong growth this year, the blips of Q1 have turned into a clear trend for FY2017.

Siemens Process Industries and Drives (PD) division delivers automation solutions to the process industries, including the now long-suffering oil & gas industry. In Q3, PD reported 7 percent jump in orders, but a 3 percent decline in revenue, while profitability was up by a modest 2 percent. Considering the difficult market conditions that all suppliers have been facing, this is good news for PD. According to the company, several large orders from the solutions business in China and Australia are primarily to thank for the order growth. While process automation sales grew, that boost was more than offset by declines elsewhere. In particular, the large drives business is burdening profitability in the PD division.

In general, Siemens sees itself as being on track for another strong year overall. Q4 ends on September 30 and results are expected in early November.

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