By Christoph Steitz and John Revill
FRANKFURT/ZURICH (Reuters) -Siemens on Thursday raised mid-term targets for its Smart Infrastructure (SI) business, banking on growing demand for power grid equipment and building automation in a market expected to be worth 313 billion euros ($329 billion) by 2029.
Siemens’ most profitable division, SI provides a large range of products and services, helping to control heating, lighting and access to buildings, as well as equipment and software for power distribution networks.
The division targets profit margin of 16-20% over the next 3-5-year cycle, Siemens said at a capital markets day for the unit held in Switzerland.
“As a global technology leader in this rapidly evolving market, our Smart Infrastructure business is in a sweet spot, strategically positioned to capitalize on growth drivers,” said SI’s CEO and Siemens board member Matthias Rebellius.
Previously, Siemens had targeted a profit margin of 11-16% for the division, which has gained in importance in recent years as companies look to reduce the energy costs and improve the environmental footprint of their offices and factories.
Shares in Siemens were slightly lower, down half a percent, with traders saying that investors had baked in a higher margin forecast for SI and may have hoped for even more.
Sales for SI are expected to grow 6-9%, up from 4-6% in the previous time span, Siemens said, with Rebellius adding that while this forecast may include small deals in the future it would have to be updated if a big target is being acquired.
“SI has been and will continue to be a key pillar of Siemens’ overall success,” Siemens AG’s CFO Ralf Thomas said.
“With the medium-term targets announced today, we are confident that SI will continue to drive strong revenue growth, margin expansion and cash generation – not only for SI, but also for Siemens as a whole.”
In its last fiscal year that ended in September, SI increased its margin to 17.3%, its highest ever level and overtaking the Siemens’ flagship factory automation division, which saw falling sales and profit during 2023 as China and Germany struggled.
Based in Zug, Switzerland, SI – which employs 78,500 staff globally – saw profits rise more than a fifth to 3.7 billion euros last year, driven by higher orders in the electrification business, with several large contracts won with data centres and energy customers.
($1 = 0.9522 euros)
(Reporting by Christoph Steitz and John Revill; Editing by Mark Potter and Keith Weir)
