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Siemens Expects Moderate Growth Next Year

Siemens Expects Moderate Growth Next Year
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Joe Kaeser, chief executive of Siemens, described the German engineering company’s guidance as “courageous.”CreditCreditMichael Dalder/Reuters

Siemens, the German conglomerate, bucked the trend of boardroom caution when it said on Thursday that it expected to shrug off global geopolitical tensions and notch “moderate” sales growth next year.

Joe Kaeser, chief executive of Siemens, described the company’s guidance as “courageous,” saying it saw only limited risks and expected to increase sales 3 to 5 percent during its 2019 fiscal year, which began on Oct. 1.

Shares of the industrial manufacturer rose 1.1 percent in early trading, bolstered by a new share buyback of 3 billion euros, or $3.43 billion.

“If everybody is concerned, there has to be somebody who brings hope and shows people the way,” Mr. Kaeser said.

Many companies have voiced worries about slowing growth as trade tension between the United States and China mounts and economies in many countries ebb.

Siemens’s chief financial officer, Ralf P. Thomas, told analysts on an earnings call that Siemens had good visibility for the first six months of its business year, adding that it had not seen any negative indicators stemming from geopolitical tensions hitting its smaller and shorter-term projects.

Despite the upbeat comments, the investment research firm CFRA cut its rating on the shares to “hold” from “strong buy.”

“We think its outlook statement points to a tougher operating environment in FY19, on the back of rising macroeconomic uncertainties and geopolitical tension,” Firdaus Ibrahim, a CFRA equity analyst, said in a note.

Siemens’s confidence contrasts with the troubles at its American rival General Electric, which last month slashed its dividend, said it faced a deepening federal accounting inquiry and vowed to overhaul its power unit.

Shares in a Swiss rival, ABB, hit a nearly two-year low last month after the group reported third-quarter results. ABB turned more cautious on its European outlook, citing concerns about Italy and Britain.

And Caterpillar tried to ease mounting concerns about China and global demand last month after it affirmed its 2018 profit estimate, a move that investors feared signaled a cap in earnings growth and incited a sell-off in its shares.

Mr. Kaeser, who is reorganizing Siemens to simplify its structure and speed up growth, said he was particularly buoyed by the strength in Siemens’s short-cycle businesses like its Digital Factory automation unit. In the three months that ended Sept. 30, the division raised revenue by 10 percent and profit by 28 percent.

Mr. Kaeser said he thought the business could continue to grow even in uncertain times and take market share.

But the power and gas division remained a sore spot, swinging to a loss of €139 million in the quarter as the collapse in demand for large gas-powered turbines persisted and it was hit by charges from cutting jobs.

The division, which competes with General Electric and Mitsubishi Heavy Industries, has also seen falling prices because of overcapacity in the sector.

In September, Siemens said it would cut around 2,900 jobs in Germany to achieve €500 million in cost savings to improve the competitiveness of its power and gas division and its process industries and drives division.

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