Siemens Ag Spons Adr

Good morning, ladies and gentlemen, and welcome to the Siemens 2022 First Quarter Conference Call. As a reminder, this call is being recorded. Before we begin, I would like to draw your attention to the Safe Harbor Statement on page 2 of the Siemens presentation. This conference call may include forward-looking statements. These statements are based on the company's current expectations and certain assumptions and therefore subject to certain risks and uncertainties. At this time, I would like to turn the call over to your host today, Mrs. Eva Riesenhuber, Head of Investor Relations. Please go ahead, madam.

Thank you very much. Good morning, ladies and gentlemen, and welcome to our Q1 conference call. All Q1 documents were released this morning and can be found also on our IR website. I'm here today with our CEO, Roland Busch, and CFO, Ralph Thomas, who will review the Q1 results and recent portfolio actions. After the presentation, we will then have time for Q&A. Please be aware that the virtual Siemens AGM starts right after this call, and we must limit the time of the call to 45 minutes. With that, I hand over to Roland.

Thank you, Eva. Good morning, everyone, and thank you for joining us to discuss our first quarter results ahead of our virtual AGM. It was an eventful quarter indeed, so let's start right away. I'm pleased with our very successful start of the fiscal year 2022. We continued to deliver on our ambition to accelerate high-value growth and made significant progress to further shape and focus our portfolio. All our businesses seized market opportunities arising from transformation trends of decarbonization, automation, and digitalization. Transformation for our customers means substantial greenfield investments in areas such as automotive, batteries or semiconductors and related machinery. In addition, we see resilient, strong demand for upgrading, manufacturing buildings, grids and mobility infrastructure along the lifecycle. Investments with a clear goal to become more automated, more intelligent, more sustainable and more efficient. This led to unprecedented order momentum in the first quarter. However, the macroeconomic environment was and remains challenging. Persistent pandemic impact, cost inflation and global supply chain related constraints and shortages prevail. Crucial area is electronic components where this situation is very dynamic. Tight markets for some parts are now expected to continue to fiscal 2023. Longer delivery times than usual in parts of our portfolio led to an exceptional stream of pre-ordering by our customers in the automation and electric product businesses. Consequently, a considerable backlog has built up, which will take several quarters to process through the system and normalize. While we are optimizing manufacturing in our own digitally IoT-enabled factories, leveraging our geographical footprint and benefiting from our broad supplier base and global partners. We are currently not meeting our high standards for delivery times to customers for some of our products. Therefore, we work relentlessly to optimize deliveries and master these challenges together with our customers. Despite these constraints, and the Omicron wave building up, we avoided major disruptions in our operations and maintained factory loads on high level. Yet, not always with a product mix we would like to produce. Finally, increased cost inflation overall is an opportunity for us to gain market share. Why? Customers are looking for market leaders that deliver the highest value to improve their productivity, are resilient, and, of course, financially strong. As a leader, a technology leader, we are confident to balance cost inflation with pricing actions over time. All in all, this led to another excellent performance across all financial metrics. We are well underway to deliver on our full year guidance. As indicated, orders reached an impressive level of more than 24 billion euros, up organically by 42%. We achieved record levels in all businesses while Healthineers was just shy of a new all-time high for a single quarter. Our book-to-bill of 1.47 is exceptional, and a record backlog of 93 billion euros secures a high-value growth ambition for fiscal year 2022 and beyond. Revenue grew by 9% to 16.5 billion euros, led by digital industries with 11% and with clear growth, in smart infrastructure, mobility, and health care. All major regions contributed, with Germany up 18 percent, U.S. increasing by 6 percent, and China on high comps still growing by 5 percent. Profitability in industrial businesses came in at a strong level of 15.7 percent. Operational success consequently translates into improving net income and EPS, pre-PPA, which were both up 20%. And a consistent free cash flow of 1.1 billion euros above prior year's level is again clear evidence for our high quality business profile. As a focused technology company, we are continuously shaping our portfolio. We took an important step in the mobility business with the announced divestment of Unix, the leading provider of intelligent road traffic solutions. Mobility and Unix have clearly demonstrated that Siemens is able to develop businesses very successfully and increase their value. Now, we found the best owner with a long-term oriented Italian Atlantia Group well positioned to develop the business further. Siemens Mobility will concentrate on its leading rail and mobility software portfolio. Closing is expected by September 22, depending on regulatory approvals. and we expect to record a pre-tax gain between 600 and 800 million euros in mobility. I'm also pleased to announce two further important milestones in our strategy to find best options for our portfolio companies. After a swift process, we decided to divest the Siemens partial business to German Körber AG, for an attractive purchase price of 1.15 billion euros. Here, we expect a post-tax gain in the range of 800 million to 1 billion euros. The Siemens parcel business will be an excellent strategic and cultural fit to Kerber's supply chain business with benefits for all stakeholders. Since the separation of Siemens logistics business into parcel and airport is still ongoing, we expect the transaction to close during calendar year 2022. Also, yesterday, we signed the agreement to sell our 50% stake in the joint venture, Valio Siemens E-Automotive, to Valio. The net profit impact of around 300 million euros will be recorded in the second quarter within portfolio companies, while closing is expected in July with corresponding positive net cash impact. Finally, I want to briefly touch upon our stake in Siemens Energy. We are clearly not satisfied with the operational performance at Siemens Gamesa, which led to high share price volatility in Siemens Energy. Appointing Jochen Eichholz, an experienced turnaround manager, as the new CEO is an important step in the right direction. We remain committed to reducing our shares in Siemens Energy. However, in the interest of our shareholders, we will take a prudent decision on the timing, which depends on market conditions, as we have explained in the past. Here you can see some recent examples out of many on how customers build on our technology in hardware and software, on our digital enabled services and deep domain know-how. to transform their businesses and drive sustainability at the same time. No matter what it is, smarter battery manufacturing, faster aircraft development, optimized energy consumption, or greater passenger use of public transport, Siemens has the right solutions for our customers' challenges. Coming back to our DI software business and its crucial strategic transition to both software as a service, mainly for PLM business. In the first quarter of our transition, we made good progress and the numbers look promising. An annual recurring revenue grew by 11% year over year to 3 billion euros, fully in line with our midterm target of 10% annual growth. Therein, the key indicator cloud ARR is share of total ARR grew by one percentage point in this quarter alone to 6% overall. After the first quarter of actively selling our cloud-based offerings, customer feedback is positive. We see a solid initial FIP rate of around 40% of PLM renewals, which is in line with our plans for the first quarter. Our plan is to increase the speed of the SaaS transition further in the upcoming quarters. Around 500 customers have signed on to the new as-a-service business model seeing the distinct value of this enhanced offering. The first quarter is an initial indication, and we have an even clearer view on the shape of the transition with our second quarter disclosure. As I showed before, the dynamic change towards decarbonization and more sustainability in all aspects creates a lot of business momentum for us. In addition, we made also good progress in executing on our degree ambitions, our own degree ambitions, which we launched at our capital market day. For example, we reduced our scope one and two carbon footprints already by 36% compared to the base year 2019 and plan to be net zero by 2030. This is also recognized externally. Siemens is ranked number one in the Dow Jones Sustainability Index among 45 companies included in the industry group. I want to finally point out a key topic becoming even more important during the pandemic. How to successfully strengthen bonds with our employees. First, we are implementing a flexible way of working, wherever feasible. And second, we are fostering resilience as well as relevance and employability of our workforce globally. This is a strategic priority with dedicated programs and broad offering of learning opportunities to keep Siemens as the workplace of choice now and for the future. Our teams are also focused on hiring sufficient talent and keeping voluntary attrition at a healthy level to succeed in tight labor markets. With that, over to you, Ralph. Let's take a closer look at operational performance and further financial details.