Siemens 3Q Net Profit Fell on Challenging Market Environment -- 2nd Update
August 01 2019 - 3:50AM
Dow Jones News
By Ruth Bender
--Siemens net profit fell 6.7%, hit by severance charges
--CEO Joe Kaeser warned of political and trade tensions harming
investment sentiment
--The company confirmed its FY 2019 guidance
BERLIN--German industrial giant Siemens AG (SIE.XE) on Thursday
said a significantly weaker market environment was hurting its key
industrial businesses as the company reported a decline in profit
for its third quarter.
The maker of high-speed trains and wind turbines was the latest
to warn about the fallout from global-trade tensions on Germany's
highly export-dependent economy. Growth slowed down markedly in the
eurozone in the three months to June 30, largely due to
manufacturing strains in Germany, the region's largest economy, and
Italy.
Chief Executive Joe Kaeser said "geopolitics and geoeconomics
are harming an otherwise positive investment sentiment." Siemens
said it was keeping its full-year targets but warned that reaching
its goal of moderate growth in revenue was becoming more
challenging.
The group saw its net profit fall to 1.03 billion euros ($1.13
billion) from EUR1.11 billion a year earlier, partly because of
high severance charges and as global economic challenges hurt the
German group's industrial units, which sell a wider range of
automation and machinery-controlling systems around the world.
Profit from its industrial businesses fell 12% in the quarter to
EUR1.94 billion. Siemens said orders and sales in the short-cycle
factory automation and motion control businesses were hit by lower
demand from clients in the car and machinery-making industries, in
particular in Europe and the Americas.
The challenge to Siemens's industrial business comes as the
company is in the midst of a major overhaul that includes shedding
its struggling power-and-gas business and reorganizing its existing
units to make for a leaner and more profitable organization.
Siemens on Thursday for the first time reported earnings under
its new structure--with formerly five industrial business units now
combined into three: power turbines and gas, manufacturing
software, and automation and infrastructure for a digital
world.
At its power-and-gas unit--which Siemens plans to combine with
its renewable-energy businesses and then spin off the new company
to shareholders--orders fell 14% in the three months ended June
30.
Siemens said its full-year industrial-profit margin, which
analysts look at to gauge the performance of the company's core
businesses, would likely only reach the lower end of its targeted
11% to 12% range, excluding severance charges. Heavy severance
charges weighed on Siemens's industrial profit margin in the third
quarter, which declined to 9.6%, missing a company-compiled
consensus estimate of 10.8%.
Overall though, Siemens saw its orders grow 8% to EUR24.51
billion, driven notably by strong orders at its train-making and
signaling business. Revenue rose 4% to EUR21.28 billion.
"A robust mobility sector and stringent project execution will
help us make good on our promises for the year," Mr. Kaeser
said.
Nathan Allen contributed to this story
Write to Ruth Bender at ruth.bender@wsj.com
(END) Dow Jones Newswires
August 01, 2019 03:35 ET (07:35 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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