FRANKFURT (Reuters) – German industrial group Siemens <SIEGn.DE> has raised its synergies target for the benefits of combining Dresser-Rand and Rolls-Royce Energy with its own compressor and turbine business serving the oil and gas industry to about 365 million euros ($406 million) from about 200 million euros originally.
“We’re getting traction on synergies even in a challenging marketplace,” Chris Rossi, chief executive of Dresser-Rand, told analysts in a presentation monitored by Reuters via webcast.
Siemens said Dresser-Rand would now generate an extra 100 million euros in synergies, with Rolls-Royce Energy contributing an extra 65 million by its fiscal year ending September 2019.
Rossi said 60 percent of the Dresser-Rand synergies would come from cutting costs, in particular closing eight sites and increasing low-cost manufacturing in India and China, with the rest coming from revenue synergies including cross-selling.
Siemens bought U.S. firm Dresser-Rand last year for $7.8 billion, adding to its acquisition in 2014 of the Rolls-Royce Energy gas turbine and compressor business for 785 million pounds, despite criticisms from investors over the price being paid just as oil prices began to nosedive, leading oil companies to cut or delay new investments.
Rossi said Dresser-Rand’s service business was resilient to the investment trend, generating around 50 percent of revenues and more profitable than equipment.
(Reporting by Georgina Prodhan; Editing by Greg Mahlich)