(Refiles to remove extraneous text from headline)
* Q3 core profit misses consensus on one-off charges
* CEO says problems may persist well into 2015
* Blames suppliers, service providers for problems
* Says is on the right path to solve problems at energy ops
* Shares up 1.5 percent, outperforming broader market
By Maria Sheahan
FRANKFURT, July 31 Siemens AG will
need more time to shake off problems at its energy business that
have weighed on profits, its chief executive said on Thursday,
indicating investors hoping for a fast improvement will have to
The company reported consensus-missing core profit for its
financial third quarter. "There is no quick fix for this (energy
business) matter," CEO Joe Kaeser told analysts and reporters.
Kaeser unveiled a corporate overhaul for Germany's
second-biggest company by market value in May, dubbed "Vision
2020", that will simplify the group's structure and aims at
making up ground lost to more profitable competitors such as
Switzerland's ABB and U.S.-based General Electric
The former finance chief, who got the top job when his
predecessor was pushed out a year ago, has also sought to
improve the way Siemens handles big risky projects, which led to
average annual project charges of 700 million euros in recent
years, to improve profitability.
In its fiscal third quarter through the end of June, Siemens
booked higher than expected charges again, mostly related to
projects to connect offshore wind farms to mainland power grids.
Group operating profit from Siemens's four main businesses -
industry, energy, healthcare and infrastructure & cities - rose
37 percent to 1.74 billion euros ($2.33 billion) as year-earlier
costs related to a cost-cutting programme were not booked this
time. But the figure missed analyst consensus of 1.83 billion in
a Reuters poll.
The margin on core operating profit widened to 9.5 percent
from 6.8 percent but missed consensus of 9.9 percent.
Kaeser blamed the continued problems at the energy business
- where third-quarter profit slipped by 6 percent - on a lack of
cooperation from suppliers and service providers, such as
construction or soil removal companies, leaving Siemens to foot
the bill for delays the group did not cause.
"The lesson learned, obviously, is that it is better to rely
on yourself than on many others," he said, adding recent
"disappointments" meant Siemens would rethink the way it
approaches projects in which it does not have full control.
Kaeser said the problems at the division were likely to
persist well into 2015 but that Siemens was on the right track
now to solve them.
"We changed the team there, we have a very clear plan on how
to act and will continue to improve the situation," he said.
The energy business, which makes products ranging from gas
and wind turbines to transformers, posted a 54 percent jump in
new orders thanks to a few large contracts, indicating a future
rise in revenues and accounting for more than half of Siemens's
101-billion-euro order backlog.
Analysts said while they did not see Siemens's conservative
guidance for an increase in 2013/14 earnings per share by at
least 15 percent at risk, it was disappointing that the group's
financial results were marred by one-offs again.
Espirito Santo analyst Rob Virdee said the results "should
remind (us) why Siemens trades at a discount to the sector",
sticking to his recommendation to sell the stock.
Siemens trades at 12.7 times estimated 12-month forward
earnings, at a discount to ABB and General Electric, which trade
at multiples of 16.8 and 14.7, respectively, according to
Its share price is up more than 10 percent since Kaeser took
the helm last year, but has declined 5 percent so far this year
on concerns as to whether he will be sufficiently aggressive in
his changes to turn the company around.
They rose 1.5 percent to 94.09 euros by 1025 GMT on
Thursday, outperforming a 1 percent decline by Germany's
blue-chip DAX index.
($1 = 0.7466 euros)
(Reporting by Maria Sheahan; Editing by Jeremy Gaunt)