SIE Siemens AG

By Ruth Bender 

BERLIN -- German industrial giant Siemens AG on Thursday said a weakening global economic environment was hurting its key industrial businesses as it reported a decline in quarterly profit, sending its shares more than 5% lower.

The company was the latest to warn about the fallout from global trade tensions on Germany's highly export-dependent economy. Economic growth slowed down markedly in the eurozone during the second quarter, 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 maker of high-speed trains, automation technologies and wind turbines is in the midst of a major overhaul, 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 three industrial business units instead of five. Net profit for the third quarter fell to EUR1.03 billion ($1.13 billion) from EUR1.11 billion a year earlier, partly because of high severance charges and as global economic challenges hurt its 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.

Chief Financial Officer Ralf Thomas said Siemens expected lackluster demand in the car and machinery-making industries to last another three or four quarters as companies are holding back on large investments. To limit the drag on profit, Siemens is being particularly vigilant on costs, Mr. Thomas said.

At its gas-and-power 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, Siemens's orders increased 8% to EUR24.51 billion, driven notably by strong orders at its train-making and signaling business. Revenue rose 4% to EUR21.28 billion.

--Nathan Allen contributed to this article.

Write to Ruth Bender at Ruth.Bender@wsj.com

(END) Dow Jones Newswires

August 01, 2019 04:32 ET (08:32 GMT)

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