Siemens: Q3 profit disappoints, caution on outlook

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By GEIR MOULSON, Associated Press

BERLIN (AP) — Industrial conglomerate Siemens AG cautioned Thursday that the global economic slowdown will make it harder to reach its full-year targets as it reported worse-than-expected second-quarter earnings and a fall in new orders.

The company also said that it has scrapped plans to list its Osram light bulb division on the stock market and will instead spin the division off to its existing shareholders — a move that impacted its earnings figures.

Munich-based Siemens reported net earnings of €823 million ($996 million) for its fiscal third quarter — up from €462 million a year earlier.

Analysts surveyed by FactSet, however, had expected a much more robust increase to €1.29 billion; in the equivalent quarter last year, earnings were hit by a charge related to its withdrawal from pulling out of a nuclear joint venture with Areva and a writedown on new cancer treatment technology.

Siemens, whose wide range of products includes everything from trams to power-station turbines, said revenues rose to €19.54 billion from €17.84 billion, a 10 percent increase, helped by a solid order backlog and by positive currency-translation effects. The euro has declined lately amid worries about the eurozone debt crisis, even as growth in the wider global economy cools.

New orders fell off 23 percent to €17.77 billion from €22.94 billion — depressed by a lower number of large-scale orders like one from Germany's national railway last year for a new fleet of long-distance trains. The company said it had an order backlog totaling €100 billion in the quarter.

"The deceleration of the world economy has increased in the past few months," CEO Peter Loescher said. "We see growing reluctance among our customers regarding capital expenditures and stronger economic headwinds, especially in our industrial short-cycle businesses."

"Given the deteriorating environment, it is becoming more difficult to achieve our guidance for the fiscal year," he added.

Loescher said that the company's main focus is currently on increasing its productivity and efficiency, and it would draw up a new program to address that in the coming months.

Siemens said it still expects "moderate organic revenue growth" for the full fiscal year but cautioned that reaching its target of €5.2 billion to €5.4 billion in income from continuing operations "has become clearly more ambitious" in view of results in the first nine months.

Siemens lowered that target in April from the previous €6 billion because of expected charges at its energy transmission business.

The company said that, "given the difficult capital market environment," it now plans to publicly list light bulb maker Osram via a spinoff to Siemens shareholders. Under accounting rules, the change meant that Osram could no longer be listed as a discontinued operation, putting €443 million in writedowns on Siemens' books.

The chief financial officer, Joe Kaeser, said that the company aims to seek shareholders' approval for the spinoff plan to Siemens' annual general meeting early next year.

Siemens was one of the worst performers on Frankfurt's DAX index of blue chip stocks on Thursday morning. Its shares dropped 3.5 percent to €64.96.

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