Siemens curbs outlook on weak industry demand

By Maria Sheahan

FRANKFURT (Reuters) - German industrial bellwether Siemens AG took a more pessimistic stance on the rest of the year as industry demand remained weak and project charges weighed on quarterly earnings.

Siemens, which makes products ranging from fast trains and gas turbines to hearing aids, is heavily exposed to world industrial demand and has been hit by a downturn in investment due to the global economic slowdown.

Manufacturing studies published last month had already fanned concern that the global economy is losing steam, as growth in Chinese factories slowed to a crawl, reflecting weak demand from a fragile U.S. economy and a euro zone mired in recession.

The engineering group said on Thursday it now expected net profit from continuing operations to reach the lower end of its outlook range of between 4.5 billion euros ($5.9 billion) and 5 billion in the current year.

Analysts in a Reuters poll had on average seen profit for the group's financial year through September declining to 4.84 billion euros from 5.18 billion last year, partly because of a 1 billion hit from its cost-cutting program.

Siemens Chief Executive Peter Loescher has been criticized for being too slow to react to a downturn in the global economy and is now struggling to get the company back on track to compete with rivals such as General Electric Co.

He put on the back burner a plan to increase annual sales by about a third to 100 billion euros and late last year launched a push to save 6 billion euros over two years.

Siemens aims to push up the margin on its core operating profit to at least 12 percent from 9.5 percent last year by cutting costs and focusing on its most profitable businesses.

By comparison, GE posted an operating margin of 15.1 percent last year and aims to further boost profitability this year. Switzerland's ABB Ltd, a major competitor to Siemens in power systems and industry automation, had a margin of 15.0 percent in its fiscal first quarter.

In its second quarter through March, Siemens saw its margin shrink to 7.5 percent from 9.9 percent as demand faded for higher-margin industry automation and drive-technology products.

Quarterly revenue slipped 7 percent, more than expected, on weak industry sales, and net profit stagnated.

And even though industrial orders from Germany and China were particularly weak in the second quarter, group orders - an indicator for future sales - returned to growth following six quarters of declines. They jumped 20 percent to 21.45 billion euros, beating a consensus for 18.92 billion, thanks to major orders from Europe and the Americas.

In its full year, Siemens sees orders growing moderately but now expects revenue to decline from last year. Its shares traded down 1.2 percent at 78.39 euros by 0712 GMT (3.12 a.m. ET).

($1 = 0.7580 euros)

(Editing by Christoph Steitz and David Holmes)

Source: http://news.yahoo.com/siemens-curbs-outlook-weak-industry-demand-071950413.html

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