Yesterday I listened to the analyst discussion between Ralf Thomas, the CFO of Siemens ($SIE (+1,04 %)), and an analyst from Bank of America at the Bank of America Global Industrials Conference 2025.
The discussion covered a wide range of topics, from the current economic situation in Germany and the US to the dynamics in China and strategic portfolio decisions, in particular the investment in Siemens Healthineers.
The analysts' first question was directed at the situation in Germany. They were asked about the potential impact of the expected government stimulus and its significance for Siemens and the wider European economy. Mr. Thomas emphasized that Siemens, as a globally operating company, has a well-balanced global value chain, which which enables the company to serve different markets simultaneously. Although Siemens welcomes the efforts of Europe, and Germany in particular, to find new impetus, it is proud of its global footprint, which is supported by investments in twin factory concepts and local product development in growth markets.
Another point on the German situation concerned the announced job cuts and their complexity in the context of possible government funding and the profitability of Siemens in Germany. Mr. Thomas pointed out that the announcement had already been communicated in the same dimension in November last year and that yesterday's "excitement" was surprising. Only a small proportion of the job cuts affect Germany, as Siemens growth opportunities and not geographical or fit-related aspects. must be prioritized. In view of around 2,000 vacancies in Germany, Siemens plans to investments in retraining and further training measures. Mr. Thomas does not believe that this measure should hinder government contract awards and assumes that the impact of this announcement will be digested anyway before political impulses turn into concrete orders and sales.
The discussion then shifted to the USAwhere analysts asked about the impact of political uncertainties, in particular tariffson customer activity and decision making. Mr. Thomas confirmed that political uncertainties typically lead to a paralysis among decision makers paralysis. This can currently be observed not only in the USA, but also in other regions due to geopolitical tensions. However, he emphasized that Siemens as a B2B company has rational decision-makers as customers and has a high order backlog of 118 billion euros which should not affect the short-term sales trend.
While there is caution in some areas, particularly with ambitious business models in relation to ESG, the long-term commitments to carbon neutrality remain in place. If the uncertainty persists for longer (one to two quarters), this could become problematic, but Mr. Thomas does not see this coming at the moment. He also pointed out a possible positive downside: If tariffs lead to smaller production facilities, this could automation could become even more important due to labor shortages and benefit Siemens.
With regard to the order momentum in the second quarter in the USA and the comparatively easy figures from the previous year, Mr. Thomas no significant impact on the current on the current guidance. The expectation of a normalization in the industrial sector, particularly in automation, by the end of the second quarter remains unchanged. The estimates for demand in China and inventories at distributors also remain valid, although the trend may even be slightly better than expected. The aforementioned uncertainties would not affect the guidance for the second quarter and the 2025 financial year.
The following was also discussed in detail situation in China was also examined in detail. The normalization of business activity is progressing as expected, possibly even better. Inventories at distributors are in the normal range, and inventories at OEMs and end customers are also continuing to fall. The automotive sector in China is developing significantly better than in Europe and the USA, particularly in the area of electromobility. The Chinese government seems to be focusing on high-value industries, which should benefit Siemens. Mr. Thomas also mentioned that the Chinese government appears to be positioning itself to respond to potential tariffs. In the long term, the trend towards a stagnant or shrinking skilled labor force remains, which encourages local investment in high-value technologies.
With regard to competition local Chinese suppliers have improved in recent years and gained market share in the lower price segment, both in terms of cost and quality. However, Siemens remains strong in the high-end market segments. In order to be more successful in the mid-range market segment, Siemens has launched a local program "in China for China" in which products with local development and local supply chains are developed for the domestic market and neighboring regions. Initial reactions from customers have been positive and further products are to be presented at the upcoming Hanover Fair.
Another set of questions concerned the profitability of the Digital Industries Division (DI) compared to competitors. Mr. Thomas suggested that the two divisions within DI - Automation automation and software - separately. In the area of Software Siemens is in the SaaS transitionwhose progress and objectives are reported transparently. This strategy aims to grow in the small and medium-sized enterprise market, where over 80% of new customers have already been acquired. The planned acquisition of Altair will further strengthen this area. Mr. Thomas indicated that in future cash flow-oriented KPIs could provide more clarity about performance. In the area of automation a direct comparison with competitors is difficult, which is why Siemens is currently sticking to the existing reporting structure with sales growth and profitability at divisional level. Further details are to be announced in December of this year as part of a new financial framework.
The analysts were also interested in the the strong margin improvement in the Smart Infrastructure (SI) in recent years and the sustainability of these margins in view of increasing capacities in the market, particularly in the field of electrification. SI has achieved higher profitability than in the same quarter of the previous year for 17 consecutive quarters, which can be attributed to cost savings and growth impulses growth impetus. In addition, the portfolio is being continuously optimizedwhereby non-core business areas are being divested (e.g. wireless accessories). This development is based on innovations, technological leadership and investments in research and development and a consistent focus on growth segments. Mr. Thomas was optimistic that SI could not only reach the upper end of the previous margin corridor, but also expand it with the target range of 16% to 20% for the next cycle. The guidance for the current financial year (17% to 18% margin) remains unchanged and additional profits from the sale of Wireless Accessories are expected in the second quarter.
A short part of the discussion was devoted to the acquisition of Altair. Analysts noted that the deal could close sooner than expected and asked about the impact on the timing of the sale of investments in listed companies for financing. Thomas confirmed that the deal was originally expected to close in the second half of the year, but that it currently looks like it will happen sooner. The financing of the transaction has been secured and will be provided by various sources as announced last year: Proceeds from the sale of Innomotics, Reduction of the stake in Siemens Energy (already reduced from 17% to around 12%, with proceeds of €2.2 billion) and Siemens Healthineers (successful sale of shares for EUR 1.5 billion) as well as the strong free cash flow of Siemens.
A central point of the discussion was the strategic strategic review of the investment in Siemens Healthineers. The analysts asked about the reasons for the change in communication over the last three months and the advantages and disadvantages of different shareholding levels. Mr. Thomas recapitulated that Siemens had emphasized from the outset when Healthineers was listed on the stock exchange in 2018 that it would not necessarily hold on to the majority stake. The successful acquisition and integration of Varian and the development in the in-vitro diagnostics area had shown that Healthineers was meeting expectations. Mr. Thomas emphasized that Siemens had always said that the healthcare market encompasses more than just medical technology. Many industrial companies would recognize the potential of this broader healthcare market, in which Siemens AG is active with its products and solutions in areas such as energy efficiency in buildings, asset tracking and digital tools is also strongly positioned. The review is taking so long because the healthcare market the healthcare market (not just medical technology) is highly fragmented geographically with different regulatory frameworks and reimbursement systems in almost 200 jurisdictions. Therefore, a careful assessment in each market is necessary to determine how to best leverage access to decision makers in large hospital chains.
Mr. Thomas clarified that Siemens would not invest €45 billion to gain this market access if it had a smaller or no stake in Healthineers. However, as Siemens currently holds a significant stake, it has a duty to its shareholders to carefully examine this situation carefully and make the best use of it. He asked for patience until December, when the results of the review and the resulting conclusions will be transparently presented, and expressed his conviction that shareholders will understand the reasons for this. There is no single determining factor for a particular shareholding level, but a complex system that requires thorough analysis.
The discussion with Ralf Thomas conveyed a picture of Siemens as a globally resilient company that sees itself well positioned despite geopolitical uncertainties. The focus remains on high-margin growth, particularly in the software sector through the SaaS transformation and the planned Altair acquisition. The operating performance in the DI and SI divisions is rated positively, with SI achieving impressive margin improvements through consistent cost control and strategic initiatives. The strategic review of the investment in Siemens Healthineers is being conducted with great care in order to maximize value for shareholders and take full advantage of opportunities in the broader healthcare market.