June 21, 2018 / 9:23 AM / 5 months ago

Siemens to merge industrial units in overhaul: sources

MUNICH (Reuters) - German engineering group Siemens (SIEGn.DE) plans to trim the number of its industrial divisions to try to increase profitability, a person familiar with the matter said.

FILE PHOTO: Siemens CEO Joe Kaeser addresses the 12. Swissmem Industrietag 2018 of Swissmem, the association of Swiss engineering, electrical and metal industry in Zurich June 19, 2018. REUTERS/Arnd Wiegmann

The Munich-based conglomerate will reduce the units in its core industrial operations to three from five and its supervisory board has already discussed the changes, the source told Reuters on Thursday.

Details of the long-awaited strategy dubbed “Vision 2020+” are to be disclosed in August, two sources said, declining to be identified because the matter is confidential.

The changes will take effect on Oct. 1, the start of Siemens’ new financial year, one of the sources said.

“This will be an evolution rather than a revolution,” the source said.

Germany’s Manager Magazin reported on the changes earlier on Thursday, saying higher margin targets would be assigned to the new divisions.

The overhaul is part of Chief Executive Joe Kaeser’s attempt to loosen central control to enable subsidiaries to thrive, the magazine said, citing company sources.

Part of the plan is to merge the so-called Digital Factory unit with operations designed to automate process industries, and to combine overland high-voltage networks with the power plant business, Manager Magazin said.

The overhaul, sources said, would also involve energy management, building technologies and power plant engineering.

Siemens shares were trading down 0.7 percent at 115.72 euros as of 1340 GMT.

“Currently, we are developing our corporate strategy further - in a calm and diligent way,” Siemens said by email.

“Wherever adjustments are needed, we will act. When doing so, we will always focus on customer proximity, competitiveness and the ability to innovate.”

Kaeser has indicated the plans to reorganize and simplify Siemens’ business are underway.

When asked at a Bernstein conference in New York last month if there were plans to simplify Siemens’ business structure he replied: “Yes.”

In future, this could mean reorganizing the company so each division performed better so they could survive on their own, he suggested.

He added he believed there would be an industrial Siemens and a healthcare business which bear the same name but are very focused on their separate fields.

Earlier this year, the group floated a minority stake in its healthcare unit Healthineers, which makes X-ray and MRI machines, in one of Germany’s biggest listings in recent years.

Barclays, in a research note published on Thursday, said for CEO Kaeser to aim to have only two Siemens entities - an industrial business centered on factory and building automation and Healthineers - makes sense.

“If these plans prove to be correct it would represent a logical move,” Barclays said.

Reporting by Alexander Huebner and John Revill; Writing by Andreas Cremer; Editing by Elaine Hardcastle, Keith Weir and Alexandra Hudson

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