Siemens warns of weakening industrial demand

MUNICH Wed Jan 23, 2013 2:55am EST

The logo of Siemens AG company is pictured atop a factory in Berlin October 9, 2012. REUTERS/Fabrizio Bensch

The logo of Siemens AG company is pictured atop a factory in Berlin October 9, 2012.

Credit: Reuters/Fabrizio Bensch

MUNICH (Reuters) - Germany's Siemens (SIEGn.DE) warned that demand for products such as industrial automation and drive technologies was weakening as it posted a decline in new orders for its fiscal first quarter.

"For the rest of the year, we don't expect any tailwinds from the global economy to help us reach our ambitious goals," Chief Executive Peter Loescher said in a statement on Wednesday.

Siemens, an industrial bellwether that makes products ranging from fast trains and gas turbines to hearing aids, posted a 3 percent decline in new orders in the three months through December, to 19.1 billion euros ($25.4 billion).

At its Industry business, which generates about a quarter of group revenue, new orders were down 8 percent as the market environment grew more challenging, especially in Asia.

"Demand from China as an industrial country will pick up again in the second half of the year at the earliest. We expect a cautious top-line development there in the coming months," finance chief Joe Kaeser said.

Meanwhile, CEO Loescher warned that the euro zone economy would likely deteriorate again this year, while the recovery of the United States could pick up.

Overall, new orders at Siemens were still better than the 18.9 billion euros expected by analysts in a Reuters poll, and Siemens confirmed its full-year outlook.

Quarterly revenues edged up 2 percent to 18.1 billion euros, in line with expectations.

Chief Executive Peter Loescher aims to increase annual sales by about a third to 100 billion euros in a few years, but a faltering economy has pushed prices down and eroded margins with little prospect of a pick-up any time soon.

SAVINGS TARGET

Munich-based Siemens announced a 6 billion euros savings program late last year, having come under pressure to cut costs and focus on its most profitable businesses to close a gap with rivals such as ABB (ABBN.VX) and General Electric (GE.N).

GE - which rivals Siemens on gas and steam turbines, wind power and equipment for MRI scans of the human body - reported this month that its fourth-quarter profit rose and its order backlog hit a record high $210 billion.

Siemens aims to improve its margin on operating profit from its four core businesses - Industry, Energy, Healthcare and Infrastructure & Cities - to at least 12 percent from 9.5 percent last year and 9.3 percent in the first quarter.

To help reach its goal, it is focusing on its most profitable businesses. It is divesting its solar and water businesses and plans to spin off lighting unit Osram this year, while adding a rail business it bought from Invensys ISYS.L as well as industrial software companies.

Its net profit from continuing operations eased by 1 percent to about 1.3 billion euros, beating a consensus of 1.1 billion.

For the full year through September, it sees profit declining to between 4.5 billion euros and 5.0 billion.

That compares with 5.18 billion last year, due to about 1 billion of costs from its savings program and the impact of a change in accounting standards.

($1 = 0.7526 euros)

(Reporting by Maria Sheahan; Editing by Victoria Bryan, Jeremy Laurence and Hans-Juergen Peters)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.