GCTAY Siemens Gamesa Renewable Energy (PK)

--Siemens trades more than 4% higher as market welcomes power-and-gas spinoff

--Move away from fossil-fuel generation to boost valuation, sharpen focus on digital core

--Second-quarter profit fell but still beat consensus estimates

 
   By Nathan Allen 
 

Shares in Siemens AG (SIE.XE) traded higher Wednesday morning after the German industrial conglomerate said it plans to spin off its beleaguered power-and-gas unit and posted solid second-quarter earnings.

Under the new plan, Siemens will effectively combine the power-and-gas unit with its majority stake in wind-turbine maker Siemens Gamesa Renewable Energy SA (SGRE.MC) and spin off the new company to shareholders. The move is part of Chief Executive Joe Kaeser's broader pivot away from the group's traditional focus on power generation and toward faster-growing digital technology businesses.

By distancing itself from the division, which posted a 76% decline in profit in fiscal 2018, Siemens hopes to remove some of its conglomerate discount, find around 2.3 billion euros ($2.57 billion) in savings and create over 10,000 jobs.

At 0753 GMT Siemens was trading 4% higher at EUR106.60.

Analysts at JPMorgan said the news was very positive, describing the plan as the biggest corporate change at Siemens since the company exited the telecom market in 2006.

While Siemens's structure will remain fairly complex and will likely still trade at a discount, the focus on digital businesses will provide more visibility to the market and should attract long-term investors, the analysts said.

"Overall we regard this as a major step in the right direction," Jefferies analyst Peter Reilly said.

The company posted second-quarter net profit of EUR1.81 billion on revenue of EUR20.94 billion, comfortably outstripping analysts' expectations, though investors are more focused on the restructuring efforts.

Write to Nathan Allen at nathan.allen@dowjones.com

(END) Dow Jones Newswires

May 08, 2019 04:25 ET (08:25 GMT)

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