Siemens plans to spin off healthcare as separate business

2016 05 05 10 59 37 500 Siemens Healthineers Thumb 200

German industrial giant Siemens is planning to spin off its Siemens Healthineers business as an independent publicly traded company, according to an announcement made by the company on November 10.

Siemens Healthineers logo

The spinoff "will give Healthineers even more focus and flexibility in pursuing its growth strategy," said Siemens President and CEO Joe Kaeser. He said the move was part of the company's Vision 2020 plan, a restructuring initiative launched in May 2014 to streamline the company and make it more efficient. As part of the plan, Siemens jettisoned a number of businesses, such as hearing aids and lighting.

With respect to healthcare, the Vision 2020 plan moved the business into a separately managed unit, while the core of Siemens retained its focus on the "electrification, automation, and digitalization" fields, the company said at the time. The moves led to widespread speculation that the healthcare business would eventually be spun off into its own entity.

Under the November 10 plan, Siemens will list Siemens Healthineers as a publicly traded company. The timing of the listing will depend on various factors such as the stock market environment, the company said.

Executives at Siemens Healthineers are portraying the move as a major step forward in the business' growth strategy.

"The public listing is a key lever for reaching our strategic goal of being the pioneer for healthcare providers worldwide," said Bernd Montag, CEO of Siemens Healthineers. "Greater entrepreneurial freedom and agility will allow us to help shape the development of the global healthcare market and the growth strategies of successful healthcare providers. We'll enable our customers to participate successfully in the trends toward consolidation, industrialization, and holistic health management with a high degree of clinical relevance, efficient workflows, and financial value added."

Even as an independent entity, Siemens Healthineers will be a massive company. Concurrent with the healthcare spinoff announcement, Siemens reported financial results for its fourth fiscal quarter (end-September 30) in which the healthcare division had revenue of $4.02 billion (3.698 billion euros), up 2% both on an actual basis and after currency adjustments, compared with revenue of $3.94 billion (3.622 billion euros) in the fourth fiscal quarter of 2015. Operating profit for the business was essentially flat, at $757 million (696 million euros) for the most recent period, no change from the previous year.

The company said that revenue growth came from its diagnostic imaging business, with Asia and Australia as the regions showing the most growth. Orders for the company were basically flat on a year-to-year basis, despite growth in Asia and Australia. The diagnostic imaging business showed strong earnings performance during the fourth quarter, with high overall profitability offset by expenses for the development of new product platforms.

For the full year, Siemens Healthineers reported revenues of $14.72 billion (13.535 billion euros), up 5% on both an actual and adjusted basis from revenues of $14.06 billion (12.930 billion euros) in 2015. Operating profit for the healthcare business was $2.53 billion (2.325 billion euros), compared with operating profit of $2.38 billion (2.184 billion euros) for 2015.

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