Siemens Banks On Automation As Germany's Business Climate Darkens

German industrial manufacturing giant Siemens’ (FRA:SIE) focus on automation and emerging new technologies has helped it weather a recent downturn in national business sentiment.

Worries about the corporate German landscape have been intensifying, as companies have been growing increasingly dissatisfied with their current situation, according to the ifo.

The ifo said its business climate index in manufacturing fell “markedly,” amid business expectations that turned negative for the first time since May 2016.

Clemens Fuest, president of the ifo Institute, noted that manufacturers have scaled back their production plans, and while their assessments of the current business situation remain at a high level, they have deteriorated “slightly.”

The ifo manufacturing component plunged 16.4 year-on-year to a level of 14.8 in December and dipped 3.2 from the prior month. Overall, the ifo Business Climate Index fell to 101 in December from 102 in the previous month.

Siemens focuses on the digital world, while German engines sputter

Against this backdrop, shareholders appear to have grown somewhat nervous about Germany’s industrial sector.

The SPDR MSCI Europe Industrials UCITS ETF (SPYQ), whose top holdings include Siemens and courier service Deutsche Post (FRA:DPW), has seen its price plunge nearly 15.5% since roughly the start of 2018.

Meanwhile, Siemens’ stock has fallen by around 19.7% over about the same period, with its share price Tuesday trading at about €100.68.

Against this backdrop, the behemoth conglomerate said it has been busy reorganizing its operations, which is slated for completion by the end of the second quarter of fiscal 2019. As part of its new structure, its industrial businesses will be comprised of three operating companies, including gas and power, smart infrastructure and digital industries.

Siemens’ digital-related segments appear to be picking up the slack from other underperforming divisions.

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