Siemens Ag Spons Adr

Good morning, ladies and gentlemen, and welcome to Siemens 2025 Second Quarter Conference Call. As a reminder, this call has been 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 are therefore subject to certain risks and uncertainties. At this time, I would like to turn the conference over to your host today, Mr. Tobias Hartzler, Head of Investor Relations. Please go ahead.

Thank you. Good morning, ladies and gentlemen, and welcome to our Q2 conference call. All documents were released this morning and can be found also on our IR website. I'm here today with our CEO, Roland Busch, and our CFO, Rolf Thomas, who will review the Q2 results. After the presentation, we will have time for Q&As. With that, I hand it over to you, Roland.

Thank you, Tobias, and good morning, everyone. And thank you for joining us to discuss our second quarter performance and our perspective on the reminder of BISCIC 2025. The last few months demonstrated to all of us how fundamentally and how fast the world is transforming. This has a huge impact on our societies and how companies are operating. You know all these challenges very well and we will talk about the impact of cheap political shifts, tariffs and trade restrictions and about the resulting effects on supply chains in a minute. However, it's worth noting that this phase of change comes with significant opportunities too. In an environment of accelerating technological progress driven by data and AI, we have to fundamentally rebuild our products, processes and the way we operate. It is crucial that we fully embrace new technologies as companies, but also as societies. And it is a trigger for reinvention. Fewer silos, less bureaucracy, much higher speed when it comes to innovation and time to market. Through our leadership in industrial AI, we enable our customers to combine the real and the digital worlds to improve competitiveness, resilience and sustainability, and to achieve real impact. Our markets are attractive, aligned with secular growth drivers based on well-established long-term trends. Our localized footprint makes us a strong partner across the globe to support upgrades in infrastructure, transportation, and industry. And we are ready to leverage public investment plans and to contribute toward high-quality, secure and sustainable growth. Now, let me outline the key highlights of our successful second quarter. Our very robust top-line performance underpins the relevance of our offerings. Book-to-bill reached a strong 1.1 with all businesses at or above 1. Our high-quality order backlog stands at a healthy €117 billion supporting future profitable growth. Group orders reached €21.6 billion, up 9% over the prior year. Key drivers were mobility and healthineers, both up double-digit. Smart infrastructure again delivered orders on a high level. As expected, orders at digital industries were up sequentially and on level with prior year, driven by our automation business. The recovery was fueled by short-cycle product business in China, where destocking of elevated stock levels at customers approached completion by the end of the second quarter as anticipated. Looking ahead, further recovery of economic activity will depend heavily on clarity about the future tariff environment and on timely resolution of trade conflicts. This is clearly noticeable in our conversations with customers who point at a higher level of uncertainty. Investment sentiment in core industries such as automotive and machine building remains soft. particularly in Europe's core export-driven markets like Germany. Overall, revenue growth reached 6% with strong double-digit contributions from mobility and smart infrastructure. The latter was again driven by an outstanding 18% growth in the electrification business on stringent execution of data center projects. The automation business at Digital Industries delivered slightly ahead of expectations down with single-digit over prior year, but with sequential improvement from the trough levels we saw in QBON. Software was modestly lower due to fewer large orders in EDA business on TOF comparables. All regions contributed to the group's revenue growth reflecting stringent backlog execution. The Americas were up 11% fueled by strong momentum in the United States, while EMEA grew 5%. Asia-Australia was up 2% on strengths in India, up by 8% and on a stable development in China. Robust revenue growth converted into strong results for profitability and free cash flow. An excellent profit of 3.2 billion euros in the industrial business clearly topped market expectations, even without the divestment gained for the wiring accessories business. I'm very pleased with the operational profit margin of 15.3% excluding the wiring accessories gain. Earnings share per share pre PPA as reported reached three euros and stringent cash conversion led to strong 2.1 billion euros of free cash flow in the industrial business. With rising macroeconomic and geopolitical uncertainty, future developments are becoming increasingly difficult to predict. Although significant uncertainties persist, we confirm our group outlook for fiscal year 2025, and Ralph will give you further details. We have defined our long-term direction for Siemens as one tech company. This program helps us to strive for stronger customer focus, fast innovations, and higher profitable growth. Executing on the programs foundational tracks is delivering great value for our customers. The benefits were clearly visible at the Hannover Fair where we showed a broad range of AI-driven innovations that we will scale. When I was in China a few weeks ago to attend the China Development Forum, we noted some encouraging signals for more cooperation and openness to drive high-tech and high-quality growth in China. And we are there at the right time to foster growth in the Chinese market with our recent strategic smart manufacturing product launch. 16 new locally developed automation and digitalization products focused on value for money were introduced. 18 new products in total. Customer feedback has been excellent and we are exploring many new business opportunities. As a second pillar, we are stringently executing on the program's investment track to shape our portfolio, such as closing the Altair acquisition at the end of Q2 earlier than expected, expanding our software offerings to the life science industry by acquiring Dotmatics, pursuing smaller bolt-on acquisitions in the software field, and driving divestments such as the wiring accessories business. and more than doubling our production capacity in the United States for electric equipment to power critical infrastructure. As part of the program's productivity initiatives, we continuously work on optimizing our footprint and value chains, a key success factor for managing tariff turmoil effectively. And we are making good progress in strengthening competitiveness in the DI automation business. The plan is to adjust capacities, realign sales activities, and intensify collaboration and product development globally. Well, those of you who visited our packed booth in Hannover experienced firsthand how our teams drive innovations together with customers and partners. And the winning formula is data plus AI plus domain know-how. And let me highlight just a few examples. First, software-defined automation. Together with Audi, we introduced and successfully went live with a virtual PLC on one of Audi's production lines. The benefits are higher speed and flexibility. In addition, Audi is taking the opportunity to analyze data centrally, build AI applications and improve decision making. Second, we announced a series of new AI-driven Siemens accelerator applications and innovations built together with some of our powerful ecosystem partners such as Microsoft, NVIDIA, and AWS. Our longstanding partnership with Accenture is progressing to the next level. A dedicated business practice of up to 7,000 Accenture professionals is now being formed. The goal is to combine Siemens technology access to data and deep domain knowledge in software automation and industrial AI with AI, with Accenture's power to apply data and AI in engineering and manufacturing for customer solutions at scale. And I'm very proud that our Siemens Industrial Co-Pilot received the prestigious Halmers Award for this year Business Impact. It is a clear business impact, the first for our company. After a very stringent regulatory approval process, we closed the Altair acquisition at the end of Q2, which was earlier than planned. We immediately started to bring the teams together, beginning at the Hannover Fair. Customer feedback for the most complete AI-powered design and simulation portfolio has been excellent. The teams have started integration activities and have begun implementing comprehensive measures to ensure cost savings of more than $150 million. Our joint organization will drive revenue synergies from cross-selling our highly complementary portfolios and from providing the Altair offering full access to Siemens direct and indirect sales footprint. We will upgrade you on a regular basis about the integration process. A few weeks ago, we announced another strategic milestone, the acquisition of DotMedix, a very successful, fast-growing and highly profitable US-based leader in R&D software for the life sciences sector. DotMedix has built a market-leading SaaS platform featuring a best-in-class portfolio of scientific applications and a unique AI-enabled multimodal data platform. You probably analyzed our comprehensive presentation explaining the investment highlights in detail. Let me briefly summarize our rationale. We will accelerate the process from drug discovery to manufacturing so that new therapies can reach people faster and more affordably. Today, bringing a single drug from idea to the market can take over a decade and cost billions. Yet, speed and effective processes drive economic success. This challenge keeps pharma CEOs up at night. The trend in life science is moving away from wet labs in the real world to dry labs in the digital world. And many customers would agree that one of the biggest hurdles inside is siloed data, which limits insights across the entire lifecycle and slows decision making. Our leading automation technology and AI power digital twins as well as intelligent infrastructure offerings already support hundreds of pharma customers. They can produce medicine faster in smaller lot sizes and more agile with the required standards of high quality and resource efficiency. Many of you could experience hands-on our comprehensive offerings by visiting the Pharma Showcase at Hannover Fair. We are combining DotMatic's portfolio with Siemens' leading technology and deep expertise in manufacturing and industrial AI. Combination will create a unique end-to-end digital threat from early research and development to full-scale production. Our customers will be able to innovate faster and accelerate the time to market for new medicines. This move increases our total addressable market by 11 billion US dollars in the area of software for life sciences with resilient double digit market growth. We will apply our proven value creation playbook from discrete PLM and EDA to life sciences, driving growth and synergies by expanding from pharma also into chemicals, biofuels and customer packaged goods. Our goal is clear, we will further strengthen our number one position in industrial software. Our digital business is on a robust growth trajectory and stands at 4.1 billion euros after the first half year, up 9%. Besides targeted acquisitions, we are expanding and scaling our Siemens accelerator offerings across all businesses to foster further growth. Innovation is at the heart of our organization. This is fully reflected in Siemens taking the lead among European companies in patent rankings driven by machine learning and AI. A major contributor to digital business is the continuing progress in transforming main parts of our DI software business towards software as a service. ARR growth again reached a very healthy level of 12% over the previous year. The cloud portion stands at 2 billion euros, equalling 45% of ARR and the team is on track and we confirm the target of 50% by the end of fiscal year 2025. All customer focused performance indicators continue to head in the right direction as well. As we have discussed on various occasions, Siemens DNA has been global from the very beginning. This is reflected in a strong local for local footprint legacy, which we have continuously expanded over time. We have analyzed our value flows thoroughly and have estimated the tariff impacts based on the current tariff regime, which is obviously highly volatile. Based on our assessment and including mitigation actions, we see for our DISI and mobility businesses a limited net profit impact in fiscal year 2025. Around 80% of their U.S. cost base stems from North America with a vast majority from within the United States. Where needed, we are taking a comprehensive set of actions such as applying contractual terms and executing price adjustments. We are also diversifying as well as rebalancing sourcing and production capacities. The current situation is complex and volatile and is closely monitored by our teams. As Siemens Healthineers disclosed last week, they face significant headwinds on profits of around 200 to 300 million euros. And as I said in the beginning, the knock-on effects of uncertainty will have on customers' behavior on global demand and on the overall economy are very difficult to predict. And with these perspectives, over to you, Ralf.