January 16, 2018 / 10:15 AM / in 8 months

Siemens' Healthineers in pre-IPO cost-cutting drive

FRANKFURT (Reuters) - Healthineers, Siemens’ (SIEGn.DE) medical imaging and diagnostics division, will launch a cost-cutting drive to address modest earnings growth this year as it prepares for a separate listing expected to value it at around 40 billion euros (35.50 billion pounds).

The headquarters of Siemens AG is seen before the company's annual news conference in Munich, Germany, November 9, 2017. REUTERS/Michael Dalder

The German trains-to-turbines group plans to list a minority of the healthcare business to enable it to fund its own investments and acquisitions as the industry moves towards more personalised care.

Healthineers competes with units of Philips (PHG.AS) and General Electric (GE.N) and increasingly with a host of smaller technology companies.

GE said on Tuesday it was thinking about “separately traded assets” in any of its units, raising again the prospect of breaking up the conglomerate. [nL3N1PB3WQ]

Siemens plans to list its healthcare unit in March, two people close to the matter told Reuters last week. The German industrial conglomerate reiterated on Tuesday the listing was planned for the first half of 2018. [nL8N1P34JT]

Siemens Healthineers said in a statement on Tuesday: “Structural cost savings initiatives are targeting 240 million euros of cost savings per year with a first full impact visible in 2020, and the company aims to achieve continuous productivity improvements going forward.”

The maker of medical gear such as X-ray and MRI machines expects an adjusted operating profit margin of 17-18 percent for 2018 and comparable revenue growth of 3-4 percent, it said ahead of an event for analysts and investors.

That compares with 18.1 percent in the fiscal year to September, while comparable revenue growth was 3 percent.

Over the medium term the business expects organic revenue growth to speed up to 4-6 percent, led by products such as automated lab diagnostic gear or software to help physicians interpret medical images.

Analysts have said they would be looking for clues on how Siemens plans to turn around the underperforming In-Vitro diagnostics business, which provides lab machinery to analyse blood, tissue or urine samples.

The group said that business’s profit margin would improve to 16-19 percent over the medium term, up from 14 percent last year.

Michael Sen, Siemens board member in charge of Healthineers, said the unit would act independently but it would remain part of the parent group in the long term.

“We will actively accompany that development as a long-term shareholder.”

Reporting by Ludwig Burger; Editing by Georgina Prodhan and Adrian Croft

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