After underperforming for years, engineering giant Siemens appears to have turned the corner, posting record results that will likely cement Chief Executive Joe Kaeser’s position at the company’s helm.
The industrial behemoth generated a record €8.74 billion in operating profits during the last fiscal year and has raised its earnings expectations for 2017.
Bouyed by record results, Siemens led the DAX on Wednesday as its share price rose five percent to a 17-year high that came close to beating the company’s all-time record of €123 set in 2000.
Siemens has beaten out the software giant SAP to become Germany’s most valuable company with a market capitalization of €104.8 billion, according to Bloomberg.
We are well advised to remain grounded and humble. Joe Kaeser, CEO, Siemens
The engineering giant kept the ball rolling during the first quarter of the fiscal year with revenue up three percent at €19.1 billion and net earings up a whopping 25 percent to €1.9 billion. Results for Siemens' industrial business, a key indicator, rose 26 percent to €2.5 billion.
“We left the competition behind in virtually all the important parameters,” Mr. Kaeser said.
Shareholders were effusive in their praise for Mr. Kaeser, crediting his restructuring program with the record results. Back in May, Mr. Kaeser implemented a new srategy, “Vision 2020,” that streamlined the company’s coroprate hierarchy and sped up digitalization.
“The path that you’ve set out has led to clear improvements and results,” Marcus Poppe, a fund manager at Deutsche Bank, said in praise of Mr. Kaeser.
Mr. Kaeser, for his part, sought to temper shareholder optimism, pointing at that Siemens still had problem areas despite a good year.
“We are well advised to remain grounded and humble,” Mr. Kaeser said. Revenue stagnated at Siemens’ medical technology unit and declined in its train unit.
Investors are already pushing for Mr. Kaeser to renew his term as chief executive. Though he’s remained mum in public, Mr. Kaeser has signalled to the non-executive supervisory board that he’s prepared to remain at Siemens' Helm, according to Handelsblatt sources.
The supervisory board, which has the power to hire and fire executives in Germany, is more than happy to keep Mr. Kaeser onboard. The decision lies with Mr. Kaeser, one board member said. A contract renewal would come this summer at the earliest, a year before Mr. Kaeser’s current contract is up.
Ingo Speich, a fund manager with Union Investment, supports another term for Mr. Kaeser as chief executive, but also cautioned that Siemens shouldn’t place all its hopes and expectations on one man.
Mr. Speich expressed concern that the new board could “mutate into a club of yes men.”
Jim Hagemann Snabe, a the former chief executive of software giant SAP, will have the task of holding Mr. Kaeser accountable in the future. Mr. Snabe is set to take over as supervisory board chairman from Gerhard Cromme, who will step down in 2018.