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Earnings: some pain, some gains for Siemens and Commerzbank

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Earnings: some pain, some gains for Siemens and Commerzbank

Earnings: some pain, some gains for Siemens and Commerzbank

Siemens was a top DAX gainer on Wednesday on better-than-expected industrial profits and a plan to spin off its struggling power business.

But, as David Pollard reports, shares in another German giant, Commerzbank, stumbled after it posted a 54 percent drop in quarterly net profit.


Earnings: some pain, some gains for Siemens and Commerzbank

German heavyweight Siemens did some big lifting on Frankfurt's DAX on Wednesday .... Its shares - rising over four per cent - briefly led the index higher before global trade concerns weighed it down again.

The engineering firm beat forecasts with a seven per cent Q1 increase in industrial profits.

And says by September next year it aims to spin off its 34 billion dollar Gas and Power business .... A unit whose prospects have been crippled by the swing to cheaper renewables.

Boss Joe Kaeser floated Siemens's Healthineers business last year and its wind power business in 2017.

The latest streamlining, he says, is about strengthening the remainder of the group.

SOUNDBITE (English) JOE KAESER, CEO, SIEMENS, SAYING: "We took the time to bring the company in a structural order.

We have done that now." Commerzbank's recent story was about merging to form a bigger business ... Until talks with Deutsche Bank collapsed weeks ago.

After rising on slightly better than expected Q1 net profit, its shares slipped back over a per cent later .... The lender - still struggling to recover since the financial crisis - blamed a higher tax burden for a 54 per cent drop in the total figure.

CEO Martin Zielke is working on a new strategy to present later this year - which will, he said, address "the right issues." As for other suitors after the failed Deutsche talks: Italy's UniCredit and Dutch group ING have expressed interest.

But finance chief Stephan Engels told journalists he didn't hear anyone - quote - "knocking at the door".

============================================ Siemens wins over investors with spin-off plan, industrial profit MOST READ The logo of German industrial group Siemens is seen in Zurich, Switzerland, January 30, 2019.

Arnd Wiegmann Siemens beats second-quarter industrial profit forecasts Aims to spin off Gas and Power business by September 2020 Profitability targets raised for industrial business Shares gain nearly 4 percent after results, spin off Rewrites, adding CEO comments, background, share price MUNICH, May 8 (Reuters) - Siemens SIEGn.DE cheered investors on Wednesday by saying it would spin off its faltering 30 billion euro ($34 billion) gas-turbines business and posting better-than-expected quarterly earnings.

The German engineering company said it would hand over to existing investors shares in the Gas and Power unit that has suffered from collapsing demand and cut-throat price competition as customers abandon fossil fuels and switch to renewable energy.

That announcement and a 7 percent rise in industrial profit for January to March helped Siemens shares rise nearly 4 percent in early trading.

The separation is the latest overhaul by Siemens Chief Executive Joe Kaeser who floated Siemens's Healthineers business last year and its wind power business in 2017.

Siemens has been divesting its businesses one by one, avoiding the attention of activist investors who have sought the break up of other conglomerates, particularly in German-speaking nations where employees and customers traditionally receive equal consideration to shareholders.

"The spin-off of the Gas and Power division announced for 2020 and the savings and return targets announced in the run-up to today's capital markets day are the measures we have long been asking for to make Siemens more competitive," Union Investment fund manager Christoph Niesel said.

Kaeser, who has led Siemens since 2013, has also spun off its healthcare business, merged its wind-power operations with Spain's Gamesa and sold the group's remaining home-appliance business to joint-venture partner Bosch ROBG.UL.

"It is about further developing a company which is changing fundamentally," Kaeser said.

"Our maximum priority is to stabilise a company which is sound and strong in its core.

"Many companies dream of being in the situation Siemens is in," he told a news conference in Munich.

The move comes as activist investors have been stepping up their efforts to break up conglomerates, whose shares often suffer from a discount because they span many different sectors and are more complex to run than single-industry companies.

Submarines-to-elevators group Thyssenkrupp TKAG.DE bowed to shareholder pressure this year and said it would scrap its multi-layered structure, which has long been criticised by investors for adding costs and slowing down decision-making.

Swiss industrial robot maker ABB ABBN.S has also agreed to sell its power grids decision which was seen as a drag on the rest of its operations.

Kaeser said the decision to separate Gas and Power was not taken easily, but he was convinced it was right.

"We know we cannot stand still," Kaeser said.

"This is simply the best solution from a Siemens investor viewpoint." "If you take a business which earns underproportionally and retains an overproportional amount of capital, and you take that out of the capital equation, then the numbers will be very different," he said.

The company also reported on Wednesday that its industrial profit rose 7 percent to 2.4 billion euros in the three months that ended on March 31, beating estimates of 2.24 billion euros in an Infront data poll.

(Full Story) Revenue rose 4 percent to 20.9 billion euros, matching estimates, while orders rose 6 percent to 23.6 billion euros.

The listing of Gas and Power in Germany, which is due to be completed by September 2020, will create a company with sales of 30 billion euros and more than 80,000 workers.

Following the overhaul Siemens's industrial core would be its Digital Industries unit, which offers industrial software and automation solutions for factories, and Smart Infrastructure, which makes fire safety and security products, grid control or energy storage systems for buildings.

By ditching the lower-margin Gas and Power operations and focussing on these areas, Siemens would be able to raise the target for its industrial business to 14 to 18 percent from the current goal of 11 to 15 percent, the company said.

"Synergies do not create growth, focus does," Kaeser said.

================== Commerzbank sees no immediate alternative deal after Deutsche A file photo of the headquarters of the Commerzbank pictured before the bank's annual news conference in Frankfurt, Germany, February 8, 2018.

RALPH ORLOWSKI CFO says he hears no one knocking at the door Standalone strategy remains an alternative - CFO Q1 net profit falls sharply Recasts with statements from CFO MUNICH, May 8 (Reuters) - Germany's Commerzbank CBKG.DE on Wednesday played down the prospects of an immediate takeover approach by a foreign bank following failed merger talks with Deutsche Bank DBKGn.DE.

Commerzbank's finance chief Stephan Engels, speaking to journalists after a sharp fall in first-quarter profit, said he didn't hear anyone knocking at the door, as he put it.

Both Italy's UniCredit CRDI.MI and Dutch ING Groep INGA.AS have expressed interest in Commerzbank, which is Germany's second largest lender and 15 percent owned by the government, sources have said.

(Full Story) (Full Story) Unicredit and ING have declined to comment.

A strategy of continuing as a standalone bank remains an alternative, Engels said.

"It was before and it is now.

I can't say if it always will be." Talks with larger rival Deutsche Bank ended last month after six weeks of negotiations.

The banks attributed the failure to the risks of doing a deal, restructuring costs and capital demands.

(Full Story) German government officials, led by Finance Minister Olaf Scholz, had pushed for a tie-up to create a national banking champion and end questions over the future of both banks, which have struggled to recover since the financial crisis.

Chief Executive Martin Zielke told staff during the merger talks with Deutsche that Commerzbank does not have the market share for costly investments, fuelling speculation of an alternative tie-up if talks fell through.

Doing nothing is "not an option", Zielke has told his staff, 82 percent of whom were against a merger in an internal survey.

Commerzbank is working on a new strategic plan that it will present later this year.

"We are addressing the right issues with our strategy," Zielke said in a statement on Wednesday.

The bank has been focusing on shifting its processes to a digital model.

Commerzbank posted a 54 percent drop in net profit in the first quarter, blaming a higher tax burden for the decline.

Net profit of 120 million euros ($134.4 million) was slightly above the 115 million euros expected by analysts in a Reuters poll.

(Full Story) It fell from 262 million euros a year earlier.

Commerzbank shares slipped 1.3 percent to 7.64 euros by 1040 GMT.

Revenues also declined to 2.156 billion euros in the first quarter, from 2.217 billion a year earlier.

But the bank forecast that underlying revenues would be higher in 2019 than in 2018.

Engels said business remains on a positive track.

"The challenge now is to build on this progress," he said.

($1 = 0.8926 euros)

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