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Siemens withdraws completely from Russia

Munich Siemens almost completely withdraws from Russia after about 170 years. “We condemn the war in Ukraine and have decided to end our industrial activities in Russia in an orderly process,” said CEO Roland Busch in Munich on Thursday.

The tech group had already announced in early March that it no longer wanted to do new business with Russia. However, long-term SLAs should initially continue to be fulfilled. But now it was rumored that the business would be shut down, including the service and maintenance business. “This decision was not an easy one for us, as we have a duty of care to our employees and longstanding customer relationships in a market that we have been in for nearly 170 years,” said Busch.

The Siemens boss placed a restriction: “Siemens Healthineers’ health care activities are not taken into account.”

Busch justified the radical cut with sanctions. The tightening of sanctions has recently also affected lubricants, for example. A service is no longer possible. “The pipeline is running out.” Customers had received a few weeks’ notice and are now gradually implementing the decision.

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Already in the last quarter, the sanctions imposed on Russia had a significant impact on Siemens’ results. Writedowns and other charges – mainly in the railway sector – impacted profit after tax already in the second quarter of the 2021/22 financial year, which ends on September 30, for 600 million euros. Now another low to medium three-digit million figure could be added.

Mainly due to the Russia effect, Siemens’ profits halved from January to March to 1.2 billion euros. The operating result of industrial activity fell by 13 percent to just under 1.8 billion euros. After the figures were presented and the announcement of the decision on Russia, the share price fell more than five percent to less than 110 euros.

Operationally, things continue to go well despite external burdens. Demand at Siemens is currently higher than expected, particularly in the Digital Industries unit with industrial automation and software. In the second quarter, the group’s sales increased by 7% comparable to € 17 billion and incoming orders even increased by 22% to almost € 21 billion.

Withdrawal from Russia difficult for Siemens

Busch has raised growth targets for digital industries and smart infrastructure, while rail technology will now stagnate. Across the whole group, Siemens expects comparable growth of 6-8% in 2021/22.

The decision to completely withdraw from Russia is much more difficult for companies like Siemens than for companies that sell consumer goods in Russia. Siemens train maintenance contracts often run for decades.

Furthermore, the links are historically close, only a few other German companies have such a long tradition in Russia. In 1851, the Munich company delivered 75 pointer telegraphs for the St. Petersburg-Moscow connection. In the mid-1850s, what was then Siemens & Halske generated about 80% of its total sales in Russia. Carl von Siemens, Werner’s brother, even settled in Moscow for a while.

Siemens later supplied light bulbs for the Winter Palace, trams and turbines. Even under former boss Peter Loescher, the group received many government contracts, for example for trains. In recent years, however, its importance to the overall business has declined.

According to industry circles, concern for workers has also complicated the withdrawal. There is always a risk that employees will be prosecuted under Russian law if the group does not fulfill infrastructure orders. Siemens employs around 3,000 people there. According to the company, business in Russia accounts for less than one percent of Siemens’ sales. Last year Siemens achieved a turnover of 62.3 billion euros in the group.

Busch also highlighted the concern for employees in Ukraine. “I am thinking, for example, of Andrei, our head of security in Ukraine, who is still hanging around in his basement in Kiev.” and to organize convoys on the western border.

14 million euros in donations

In total, the Group and its employees have so far made available € 14 million in donations and non-monetary benefits. A Siemens building in Warsaw has been converted into housing for 150 refugees.

The conflict in Ukraine has long been a difficult issue for Siemens. After the annexation of Crimea, Russia shipped two of Munich’s gas turbines to Crimea against the purchase agreement and the will of Siemens, despite EU sanctions.

At the time, Russian President Vladimir Putin told him the lie, former Siemens boss Joe Kaeser explained in an interview with Handelsblatt. The current chairman of Siemens Energy’s supervisory board visited Putin at the start of the Crimean crisis in 2014 and spoke of “short-term turbulence”. “It was a mistake I learned from,” said Kaeser.

>> Read the full interview here: Joe Kaeser on his dealings with Putin

His successor Roland Busch is now completely severing ties with Russia. Siemens is following the lead of many other Western companies. After an initial hesitation, SAP also decided to end the business relationship with existing customers.

However, there are also financial burdens for companies that remain at least partially active in Russia. The wholesaler Metro had to write off more than 200 million euros on activities in Russia and Ukraine.

Moreover: Siemens Energy falls red

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