Siemens Shares Drop on Gloomy Outlook -- 2nd Update
August 01 2019 - 4:47AM
Dow Jones News
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)
Copyright (c) 2019 Dow Jones & Company, Inc.
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