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Siemens and VW Surge on Roaring Demand From China
By JACK EWING
Published: July 29, 2010
FRANKFURT — Germany continued to show surprising strength Thursday as a drop in unemployment, coupled with better-than-expected profit at two of the country’s biggest manufacturers, underscored how the largest European economy was benefiting from a weaker euro and surging exports to emerging markets.
German unemployment fell by 21,000 people on a seasonably adjusted basis to 3.2 million people, the Federal Labor Office reported Thursday. At 7.7 percent, joblessness is nearly as low as it was before the financial crisis. Germany also helped push key indicators of European confidence and retail sales higher.
Siemens, an electronics and engineering giant that is a bellwether for the global and German economies, said Thursday that quarterly profit rose 9 percent to €1.44 billion, or $1.9 billion, in part because of soaring sales in countries like China and India.
Volkswagen, the largest carmaker in Europe, said net profit rose more than fivefold to €1.35 billion, fueled by a 45 percent surge in sales to Asia.
“Germany is profiting from its manufacturing strength and innovation strength,” the Siemens chief executive, Peter Löscher, said during a conference call with journalists. “German companies are very successful around the world, and Siemens is just one example.”
Sustained growth in Germany would help Europe recover more quickly from the recent recession and cushion the effects of the Continent’s sovereign debt crisis. At the same time, Germany’s performance has raised tensions with its European Union partners who are suffering trade deficits and want Germany to buy more from abroad, not just sell.
The strong financial results and good economic news helped push up the euro Thursday. European stocks rose in early trading, but closed lower after U.S. stock markets fell.
The European Commission’s Economic Sentiment Indicator, which measures business as well as consumer confidence, rose by 2.3 points to 101.3, with the biggest jump coming in Germany. Retail sales in the euro area as measured by Markit, a research firm, rose at their fastest clip since May 2008, also because of big gains in Germany as well as France.
Much of the German demand is coming from outside Europe.
Volkswagen saw huge gains in China, where unit sales rose 46 percent to 951,000 vehicles in the first six months of 2010. China now far surpasses Germany, where sales fell 16 percent to 533,000 vehicles, as VW’s largest market. A year ago, sales in the two countries were almost even. “China is developing unbelievably fast,” Hans Dieter Pötsch, Volkswagen’s chief financial officer, said during a conference call.
VW and Siemens executives expressed some reservations about whether the growth in exports could continue at its current pace. Mr. Löscher conceded that some of the sales gains at Siemens had been driven by government stimulus programs as well as customers restocking inventories depleted during the financial crisis.
Analysts at Credit Suisse said that German automakers were facing increased pressure on prices in China, with BMW and Mercedes offering 20 percent discounts on some locally produced models. Considering how important Chinese sales are becoming for the German carmakers, “we need to constantly monitor the health of their Chinese operations,” Credit Suisse said in a note Thursday.
Mr. Pötsch pointed out that car sales were still far below peaks reached in 2007. “It’s going to take quite a bit of time before we are back to former activity levels,” Mr. Pötsch said.
Siemens, whose products include wind generators, high-speed trains and X-ray scanners, said sales in the three months through June rose 4 percent, to €19.2 billion, compared with the same period a year earlier. New orders rose 22 percent, to €20.9 billion, compared with the same period in 2009. Operating profit rose 40 percent, to €2.3 billion.
All the figures were better than analysts’ expectation. Analysts polled by Reuters had expected operating profit of €2.1 billion.
Siemens said sales grew more than 14 percent in China, 23 percent in India and 4 percent in the United States, without adjusting for currency fluctuations. Sales also rose 9 percent in Germany, despite an overall decline in Europe.
Siemens said all of its main business areas recorded higher sales and earnings. The industry business, which makes equipment used to automate factories, increased new orders 33 percent as manufacturers around the world ramped up production. Siemens’s energy unit recorded big gains in supplying equipment for offshore wind farms.
Siemens’s profit from equipment like CT scanners and other health-care products soared 87 percent, to €506 million, led by higher sales in Asia, where rising living standards are increasing demand for modern medical equipment.
Volkswagen group sales rose 22 percent, to €33.2 billion, compared with the same period a year ago.
Audi was again the most profitable Volkswagen nameplate, with operating profit of €1.3 billion in the first six months of 2010 even though the unit sold a third as many cars as the VW brand. Volkswagen’s SEAT brand cars, made in Spain, continued to lose money as did the company’s Bentley luxury cars.
Volkswagen sales in the United States, where it has long struggled, rose 29 percent to 175,000 vehicles in the first six months of the year in part because of the weaker euro, which made it easier for the company to compete on price.
Mr. Pötsch said signs of weaker U.S. growth “should not be overestimated. The investment cycle is quite positive.”
By JACK EWING
Published: July 29, 2010
FRANKFURT — Germany continued to show surprising strength Thursday as a drop in unemployment, coupled with better-than-expected profit at two of the country’s biggest manufacturers, underscored how the largest European economy was benefiting from a weaker euro and surging exports to emerging markets.
German unemployment fell by 21,000 people on a seasonably adjusted basis to 3.2 million people, the Federal Labor Office reported Thursday. At 7.7 percent, joblessness is nearly as low as it was before the financial crisis. Germany also helped push key indicators of European confidence and retail sales higher.
Siemens, an electronics and engineering giant that is a bellwether for the global and German economies, said Thursday that quarterly profit rose 9 percent to €1.44 billion, or $1.9 billion, in part because of soaring sales in countries like China and India.
Volkswagen, the largest carmaker in Europe, said net profit rose more than fivefold to €1.35 billion, fueled by a 45 percent surge in sales to Asia.
“Germany is profiting from its manufacturing strength and innovation strength,” the Siemens chief executive, Peter Löscher, said during a conference call with journalists. “German companies are very successful around the world, and Siemens is just one example.”
Sustained growth in Germany would help Europe recover more quickly from the recent recession and cushion the effects of the Continent’s sovereign debt crisis. At the same time, Germany’s performance has raised tensions with its European Union partners who are suffering trade deficits and want Germany to buy more from abroad, not just sell.
The strong financial results and good economic news helped push up the euro Thursday. European stocks rose in early trading, but closed lower after U.S. stock markets fell.
The European Commission’s Economic Sentiment Indicator, which measures business as well as consumer confidence, rose by 2.3 points to 101.3, with the biggest jump coming in Germany. Retail sales in the euro area as measured by Markit, a research firm, rose at their fastest clip since May 2008, also because of big gains in Germany as well as France.
Much of the German demand is coming from outside Europe.
Volkswagen saw huge gains in China, where unit sales rose 46 percent to 951,000 vehicles in the first six months of 2010. China now far surpasses Germany, where sales fell 16 percent to 533,000 vehicles, as VW’s largest market. A year ago, sales in the two countries were almost even. “China is developing unbelievably fast,” Hans Dieter Pötsch, Volkswagen’s chief financial officer, said during a conference call.
VW and Siemens executives expressed some reservations about whether the growth in exports could continue at its current pace. Mr. Löscher conceded that some of the sales gains at Siemens had been driven by government stimulus programs as well as customers restocking inventories depleted during the financial crisis.
Analysts at Credit Suisse said that German automakers were facing increased pressure on prices in China, with BMW and Mercedes offering 20 percent discounts on some locally produced models. Considering how important Chinese sales are becoming for the German carmakers, “we need to constantly monitor the health of their Chinese operations,” Credit Suisse said in a note Thursday.
Mr. Pötsch pointed out that car sales were still far below peaks reached in 2007. “It’s going to take quite a bit of time before we are back to former activity levels,” Mr. Pötsch said.
Siemens, whose products include wind generators, high-speed trains and X-ray scanners, said sales in the three months through June rose 4 percent, to €19.2 billion, compared with the same period a year earlier. New orders rose 22 percent, to €20.9 billion, compared with the same period in 2009. Operating profit rose 40 percent, to €2.3 billion.
All the figures were better than analysts’ expectation. Analysts polled by Reuters had expected operating profit of €2.1 billion.
Siemens said sales grew more than 14 percent in China, 23 percent in India and 4 percent in the United States, without adjusting for currency fluctuations. Sales also rose 9 percent in Germany, despite an overall decline in Europe.
Siemens said all of its main business areas recorded higher sales and earnings. The industry business, which makes equipment used to automate factories, increased new orders 33 percent as manufacturers around the world ramped up production. Siemens’s energy unit recorded big gains in supplying equipment for offshore wind farms.
Siemens’s profit from equipment like CT scanners and other health-care products soared 87 percent, to €506 million, led by higher sales in Asia, where rising living standards are increasing demand for modern medical equipment.
Volkswagen group sales rose 22 percent, to €33.2 billion, compared with the same period a year ago.
Audi was again the most profitable Volkswagen nameplate, with operating profit of €1.3 billion in the first six months of 2010 even though the unit sold a third as many cars as the VW brand. Volkswagen’s SEAT brand cars, made in Spain, continued to lose money as did the company’s Bentley luxury cars.
Volkswagen sales in the United States, where it has long struggled, rose 29 percent to 175,000 vehicles in the first six months of the year in part because of the weaker euro, which made it easier for the company to compete on price.
Mr. Pötsch said signs of weaker U.S. growth “should not be overestimated. The investment cycle is quite positive.”
