By Geoffrey Smith
Investing.com -- Siemens (DE:SIEGn), Germany’s biggest - and staidest – conglomerate is enjoying a rare day in the sun on Wednesday, rising 4.3% after announcing an improvement in profit at its core industrial businesses in the three months to March.
But it’s not really the profit numbers that are catching the eye as much as the company’s announcement on Tuesday that it will spin off and sell down its stake in its gas and power operations, a division that has had a bad decade due to a collapse in emerging market demand since the 2008 crisis, and to the shift away from fossil fuel power to renewables in developed markets.
The move is the latest example of how Europe’s conglomerate is unlocking shareholder value by giving its various units more autonomy. It's a strategy that has seen it escape the fate of General Electric (NYSE:GE) over recent years, even if the stock has hardly set the DAX alight with a rise of only 17%, compared to the index's 21%.
The spin-off of Gas and Power follows a path already trodden by Siemens’ lighting division Osram (DE:OSRn), its renewable energy division Siemens Gamesa (MC:SGREN), and most recently its healthcare division Healthineers AG (DE:SHLG), whose clunky name hasn’t stopped it rising 12% in the last year, while the DAX has fallen 6.1%.
Under plans announced on Tuesday, Siemens plans to sell its majority stake in the Gas and Power unit by September 2020.
“The new company won’t have to compete for resources with higher margin business like smart infrastructure and digital industries,” Reuters quoted Siemens Chief Executive Joe Kaeser as telling reporters.
Kaeser was less forthcoming on Wednesday about the fate of Mobility, Siemens other strategically-challenged unit. Having failed to persuade the European Commission that it should be allowed to merge with France’s biggest rail group Alstom (PA:ALSO), it now faces an uncertain future. The company’s direction under Kaeser suggests it too will ultimately be spun off and listed to fend for itself.
Siemens' (DE:SIEGn) performance helped lift the DAX on Wednesday to be the top of the European leaderboard, with a 0.7% rise. It was also helped by a better-than-expected German industrial production number for March.
Elsewhere, the benchmark STOXX 600 index was up 0.2% at 382.46, rebounding after two days of losses caused by fresh concerns over the U.S.-China trade dispute.
The U.K. FTSE 100 was lagging the field, effectively unchanged, while the Italian FTSE MIB was up 0.1%.