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Apr-30-20083rd UPDATE: Siemens 2Q Net Profit Falls 67% But Orders Rise(topic overview)
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Sales at Munich-based Siemens may have gained 7.2 percent to 19.3 billion euros, based on 16 estimates. Siemens, battered by a bribery scandal, fell 17 percent in Frankfurt on March 17 when it said earnings would be cut by 900 million euros in the quarter following a review of its order book. Increased costs were found on orders at the power, transport and technology divisions, prompting Chief Executive Officer Peter Loescher to scrap a forecast of boosting operating profit at least twice as fast as sales this fiscal year. "That was a clear setback,'' said Christoph Berger, who helps oversee almost $100 billion at Cominvest Asset Management in Frankfurt, including Siemens stock. [1] The company said it now sees full-year group profit from operations to match the 2007 level. It forecast operating profit growing at least twice as fast as revenues. The company said the project review at its power division resulted in the 857 million euros drag on profits in the second quarter. It said the review would make a further negative impact on profits 'of a near triple-digit million euro amount over the next three quarters'. In March, the company issued a profit warning, saying weaker-than-expected performance in its major business projects in the current quarter to March 31 will reduce earnings by about 900 million euros. Siemens reviewed major projects, focusing on fossil power generation in its energy division as well as on the mobility division in the industry sector and its unit Siemens IT Solutions and Services.[2]
Charges in the range of almost "three-digit'' million euros will hurt profit at the power generation unit in coming quarters as a result of the order review, Siemens said. It said the examination of major turnkey projects has been completed. Chief Executive Officer Peter Loescher joined in July and is the first outsider to lead Siemens in its 160-year history. He's overhauling its structure to cut management layers and costs by pooling nine operating units into three divisions and creating regional clusters so national units can share certain functions.[3] The group said sales edged up by a marginal 0.5 per cent to 18.09 billion euros. The review of its order books, which followed the discovery of inconsistencies, resulted in additional costs during the quarter of 857 million euros, Siemens said. This concerned large projects in its rail, IT and power divisions.[4]
Profit in the second quarter to March of Siemens' 2007/2008 fiscal year fell to 412 million euros (640 million dollars), a company statement said, while sales edged up 1.0 percent to 18.09 billion euros.[5] The company also said it expects fiscal 2008 income from continuing operations in the prior-year level. The company maintained its fiscal 2008 revenue growth outlook, and its targets for 2010. Munich, Germany-based Siemens stated that its net income for the second quarter plunged to 412 million euros from 1.26 billion euros a year ago.[6] Revenue was almost unchanged at EUR18.09 billion. Siemens reiterated its revenue forecast for the current fiscal year to September, but lowered its earnings guidance. It said it expects revenue to rise at twice the rate of global gross domestic product growth. It forecast operating group profit and income from continuing operations to match fiscal 2007, when it was EUR6.56 billion and income from continuing operations was EUR3.91 billion.[7] While announcing the first quarter results, the company had said that it expects growing revenues at least twice as fast as global GDP. The company revised its operations forecast, and said it expects full-year Group profit from Operations and income from continuing operations will match the prior-year levels.[6]
Group operating profit decreased to 1.203 billion euros in the second quarter, down from last year's 1.781 billion, but above the 928 million consensus. The company only partly reaffirmed its outlook for 2008, still seeing revenue growing at least twice as fast as global GDP.[2]
The Munich-based company said net profit in its fiscal second quarter to March dropped to 412 million euros (642.4 million dollars) from 1.3 billion euros a year earlier.[4] MUNICH (Thomson Financial) - Siemens AG (nyse: SI - news - people ). said its second-quarter net profit fell to 412 million euros from last year's 1.259 billion, mainly impacted by an 857 million euros profit warning it issued in March.[2]
Net income in the three months through March fell to 384 million euros ($598 million) from 1.2 billion euros a year earlier, Siemens said in a statement today.[3] Net income may have slumped to 395 million euros ($618 million) from 1.196 billion euros a year earlier, according to the median estimate of 14 analysts surveyed by Bloomberg News.[1]
Siemens's figures were more than expected, as analysts polled by Dow Jones Newswires forecasted around 351 million euros (546.5 million dollars). The Munich based company blamed its weak performances in its business projects that have accumulated since 2004 for the fall in net income. The decrease was not a surprise, since Siemens warned of low performance a month ago in its major projects, which would lower its earnings by almost 900 million euros (1.4 billion dollars). The company said in February that it plans to cut as many as 3.800 jobs and transfer 3.000 more to partners or other units from its corporate telecom unit, in an attempt to reorganize this particular unit while preparing to renounce at it.[8] The slip was no surprise. Last month Siemens warned that weaker-than-expected performance in its major business projects would trim its earnings by about 900 million euros ($1.4 billion). In February, Siemens said it would reorganize its corporate telecom unit as it prepares to get out of the business, eliminating 3,800 jobs while transferring another 3,000 to partners or other units — its biggest cuts in years.[9]
The company has said it planned to eliminate about 3,800 jobs directly, while about 3,000 would be cut by selling factories or setting up partnerships. Siemens said it's ahead of schedule in its plan to exit what it calls "other operations,'' which include 187 businesses with revenue of about 2.3 billion euros. Measured in sales, Siemens will transfer 12 percent of those operations to other units within the company, and is evaluating the possible sale of a further 85 percent.[3]
Siemens' income from continuing operations was 1.08 billion euros or 1.14 euros per share, on revenues of 18.4 billion euros.[6] On a continuing operations basis, income for the second quarter fell to 565 million euros or 0.59 euro per share from 1.29 billion euros or 1.33 euros per share last year.[6] The company's net income for the period attributable to shareholders of Siemens grew to 6.82 billion euros or 7.46 euros per share from 1.94 billion euros or 2.09 euros per share last year.[6] In the sequential first quarter, Siemens' net income was 6.48 billion euros or 7.04 euros per share, helped by the 5.4 billion euros sale of Siemens VDO Automotive division.[6]
By 2010, the Division expects to achieve a margin target of 11-15%. Among competitors, General Electric Co. (GE) in early April reported a 6% decline in its net earnings for the first quarter to $4.30 billion or $0.43 per share from $4.57 billion or $0.44 per share, in 2007, reflecting the impact of difficult capital markets and weak U.S. economy on the company's financial services business.[6]
The company's first-quarter net income was 219 million euros or 0.21 euros per share, lower than 875 million euros or $0.79 euros per share last year.[6] In the second quarter, loss from discontinued operations was 153 million euros or 0.17 euro per share, wider than loss of 27 million euros or 0.05 euro per share a year earlier.[6]
The company pointed out that it recorded a total charge of 857 million euros in the quarter, related to the earlier announced review of projects in Operations at Power Generation, Transportation Systems, and Siemens IT Solutions and Services.[6] The company noted that the revised estimates of project completion, mainly at Power Generation, reduced revenue for Siemens by about 250 million euros in the quarter.[6]
Transportation Systems, or TS, also recorded lower revenues in the quarter of 982 million euros, compared to last year's 1.16 billion euros.[6] The German industrial conglomerate said that it generated around 412 million euros (641.5 million dollars) between January and March, while in the same quarter a year before it was earning as much as 1.26 billion euros.[8] The Munich-based company earned 412 million euros ($641.5 million) in the January to March period, compared with 1.26 billion euros ($1.96 billion), a year earlier.[10] The Munich-based company earned 412 million euros ($641.5 million) in the January-March period, compared with 1.26 billion euros a year earlier. That was better than the 351 million euros ($546.5 million) that analysts polled by Dow Jones Newswires had forecast.[9]
Sales rose 1 percent to 18.09 billion euros ($28.2 billion) in the quarter, compared with 18 billion euros a year earlier, as new orders rose 12 percent to 23.3 billion euros ($36.3 billion) from 20.8 billion euros in the same period last year.[9] Despite low earnings, the company's sales rose by 1 percent, reaching 18.09 billion euros (28.2 billion dollars), in comparison to the 18 billion euros sales a year before. The new orders jumped by 12 percent, up to 23.3 billion euros (36.3 billion dollars), while in the same period last year they were 20.8 billion euros.[8]
GE's first-quarter revenues from continuing operations totaled $42.24 billion, up 8% from $39.20 billion last year. Koninklijke Philips Electronics NV (PHG) reported a sharp fall in its first-quarter earnings, hurt by lower gains from the sale of stakes.[6] Earnings from continuing operations declined to $4.36 billion or $0.44 per share from $4.93 billion or $0.48 per share a year ago.[6]
Siemens said today it anticipates sales will grow twice as fast as global gross domestic product in the year ending Sept. 30, while profit from operations and income from continuing operations will be little changed from the previous fiscal year.[3] Siemens expects full-year earnings to stagnate, however, whereas it had initially forecast an increase in operating profit for the fiscal year to September. It maintained its outlook for internal growth at twice the rate of the global economy.[5] In January, Siemens forecast revenue to grow at least twice as fast as the global economy, but said operating profit would expand at least twice as fast as revenue growth.[7]
Earlier, the company had said that it expects Group profit from operations to rise at least twice the rate of revenue growth. The company said it remains fully committed to its targets for 2010. Siemens previously anticipated to reduce its selling, general and administrative expenses 10% to 20% by 2010.[6]
Going ahead, the company said it expects organic revenue to grow at twice the rate of GDP growth in fiscal 2008.[6]
The Medical Solutions unit posted a profit margin of 12.5% in the second quarter compared with 13.4% on tighter health spending in the U.S. that also hurt rival General Electric Co. (GE). Loescher said he expects that situation to improve from 2009 onwards. Siemens said it aims to reduce its selling, general and administrative costs by 10%, or EUR1.2 billion, to less than EUR11 billion by fiscal 2010. [7] Loescher said Siemens planned to slash administrative costs by 1.2 billion euros in the next two years and warned that the global economic slowdown had led to increased caution on the part of clients. "We already see the first signs of greater cautiousness on the part of customers in our standard products business here in Germany," he added. Regarding plans to reduce administrative costs, Loescher said: "It is clear that there will be administrative job cuts."[5] Health-care-division head Erich Reinhardt, who was also a member of Siemens's executive board, stepped down last week following new findings of an independent probe conducted by law firm Debevoise & Plimpton LLC. Reinhardt wasn't personally involved in compliance violations, according to Siemens. Loescher became CEO in July and is the first outsider to lead Siemens in its 160-year history. He's overhauling its structure to cut management layers and costs by pooling nine operating units into three divisions -- energy, industry and health care -- and by creating regional clusters so national units can share functions. He replaced Klaus Kleinfeld, who left in the wake of a bribery probe. Before today, Siemens had lost 31 percent this year in Frankfurt trading, compared with a 14 percent slide in the benchmark DAX Index. Siemens has said it plans to cut selling, general and administrative costs by between 10 percent and 20 percent by 2010 and that it will announce more details on how to reach this target at the end of this month.[1]
Citigroup analysts said the market would be relieved that no new negatives had emerged and that orders remained strong. Siemens isued a profit warning in March on problems with some major projects that sent its shares sharply lower at the time. It said it would book charges on some turnkey projects, such as major power plants, that it invoiced on a fixed- price basis but where labor shortages led to delays and higher raw materials costs squeezed margins.[7] April 30 (Bloomberg) -- Siemens AG, Europe's largest engineering company, reported a drop in second-quarter profit because of charges at the power and transport units and said orders increased 12 percent, more than analysts anticipated.[3] Munich - German electronics giant Siemens AG said Wednesday that its quarterly profit fell 67 per cent in the wake of extra charges resulting from a review of its order books.[4] MUNICH -- Siemens AG said Wednesday second-quarter net profit fell 67% on charges arising from problems in turnkey projects, but that it has concluded a review that identified no significant further project risks.[11] Siemens AG announced on Wednesday that its second quarter net profit has declined by 67 percent due to project delays and cancellations in several divisions.[8] BERLIN (AP) — German conglomerate Siemens AG said Wednesday that its second-quarter net profit slid 67 percent, weighed down by weaker performance in its major business projects, including a large number of turnkey projects that had accumulated since 2004.[9] MUNICH - Siemens AG said its second-quarter net profit fell 67% as a result of weaker performance in some key business projects, but said orders were up.[12]
Siemens said net profit for the period ending March 31 was €412 million ($641.32 million), compared with €1.26 billion in the same quarter a year earlier.[11] Operating group profit, which reflects the operating performance in Siemens' core business, came it at EUR1.2 billion, down 32% from the second quarter a year prior.[7] By operating unit, Automation and Drives performed strongly in the second quarter. A&D; group profit was up 35% to EUR712 million, while its profit margin rose to 16.7% compared with 14.2% a year prior and above its 12% and 15% target range.[7]
The results are not unsurprising. They had already issued a profit warning last month. As they continue revising their projects, they will announce even more delays." Revuelta said this could take another 200 million euros ($311 million) bite out of Siemens's operating profit over the year.[10]
On the upside, Siemens reported a 1.0%, increase in sales to 18.09 billion euros ($28.2 billion), in the quarter, compared with 18 billion euros ($28 billion), a year earlier.[10] Siemens' total orders in the quarter rose 12% to 23.37 billion euros from 20.85 billion euros in the previous year.[6]
Year-to-date revenues increased to 36.49 billion euros from 34.73 billion euros in the previous year. Siemens also said it completed the first tranche of its previously announced share buyback program, with purchases totaling about 2 billion euros.[6] Siemens Building Technologies, or SBT, revenues declined to 1.20 billion euros from 1.34 billion euros last year, while revenues in Osram dropped slightly to 1.188 billion euros from 1.189 billion euros in 2007.[6]
For the first six months of fiscal 2008, Siemens' net income surged to 6.89 billion euros from 2.05 billion euros last year.[6]
Gross profit declined to 4.92 billion euros from 5.26 billion euros last year, reflecting rise in cost of goods sold and services rendered to 13.18 billion euros from 12.74 billion euros last year.[6] Siemens said it plans to cut selling, general and administrative costs by 1.2 billion euros, or 10 percent, to less than 11 billion euros by 2010.[3] The company plans to cut administrative costs by 10.0%, to less than 11 billion euros ($17 billion), by 2010. Reuters contributed to this article.[10]
Including the charge, group profit from operations came in at 1.203 billion euros, down from 1.781 billion euros in the prior-year period. [6] Revenue from Operations increased to 17.89 billion euros from last year's revenues of 17.78 billion euros.[6] Among Operations, Automation and Drives, or A&D;, generated revenues of 4.27 billion euros, higher than 3.71 billion euros a year ago.[6]
Power Generation, or PG, revenues were 2.93 billion, down from 3.07 billion euros in the previous year.[6] Power Transmission and Distribution, or PTD, revenues increased to 1.90 billion euros from 1.76 billion euros a year ago, and Medical Solutions, or Med, revenues rose to 2.72 billion from 2.47 billion euros in 2007.[6]
Industrial Solutions and Services, or I&S;, recorded quarterly revenues of 2.13 billion euros, lower than 2.17 billion euros in the previous year.[6]
Group sales totaled 5.97 billion euros, up 1% from 5.93 billion euros last year.[6] Second-quarter sales totaled 18.094 billion euros, up slightly from 18.001 billion in the previous year, but below the 19.189 billion euros estimate.[2]
Sales rose by 2 pct to 18.1 billion euros and new orders grew by 15 pct to 23.4 billion euros.[13]
Siemens rose 3 percent in Frankfurt trading as orders reached 23.37 billion euros, led by power plants and automation equipment, topping the 21.83 billion-euro analyst estimate.[3] Regarding the project reviews, Siemens said it substantially completed reviews primarily in fossil power plant solutions and rail transportation, aimed at identifying risks and taking corresponding measures. Siemens completed its review of major projects in the PG and made substantial progress in its review of projects at TS. The company also analyzed a number of critical projects on the order books of the Siemens IT Solutions and Services Group in the UK. The company noted that it did not identify any additional risks in the three divisions that would significantly increase the expected charges.[6] Siemens said Wednesday it expects no significant additional risks after concluding a project review and said it booked related second-quarter charges of EUR857 million. Chief Executive Officer Peter Loescher said Siemens will book additional charges on these projects in coming quarters, but they barely total a three- digit-million-euro sum.[7] 'We have now concluded our project reviews in the fossil power business and, in total, we have a clear picture of the relevant risks,' chief executive Peter Loescher said in a company statement. Six of the company's 10 divisions met or exceeded their margin targets in the second quarter, while the power generation, the transport systems, medical solutions and the IT solutions and services segment did not meet their margin target ranges.[2]
Siemens said Wednesday that profit in the second quarter slid 67.0% as it struggled to catch up with orders for power generation projects.[10] FRANKFURT (AFP) — German engineering and electronics group Siemens, gripped by an unprecedented corporate scandal, said Wednesday its second quarter net profit plunged by two-thirds following a review of its industrial projects.[5]
Costs stemming from the order review were 857 million euros in the quarter, Siemens said today.[3] Siemens said about 600 million euros of the 900 million-euro charge would be in the power division, citing delays and rising raw material costs.[1] Of the charges, 559 million euros came from delays and rising raw material costs at the power generation unit.[3]
The company said today it hasn't so far found any additional risks at the three units that would significantly increase the 900 million euros earmarked for project-related charges in the divisions announced in March. Siemens's products range from light bulbs to medical scanners and wind turbines, and it competes with companies such as ABB Ltd., General Electric Co. and Schneider Electric SA. Its customers include German carmaker Daimler AG and E.ON AG, Germany's largest utility.[3] Earlier in March, Siemens had noted that it would take a charge of some 900 million euros due to problems with a range of major projects.[6] Last month, Siemens, which has been rocked by a scandal over how it obtained foreign contracts, announced it would take a charge of 900 million euros due to problems with a range of major projects.[5]
Siemens booked 109 million euros of severance charges at the unit in the quarter.[3] At Transportation Systems, the company booked charges of 209 million euros in the second quarter, not significantly different from original projections.[6]
In the quarter, the company's revenues from financing and Real Estate were 599 million euros, higher than 587 million euros a year ago.[6] The company noted that the resulting margin impairment from the projects identified will have a negative impact on earnings of a near triple digit million euro amount over the next three quarters.[6] Going ahead, Siemens said that the resulting margin impairment from the projects will have a negative impact on earnings of a near triple digit million euro amount over the next three quarters.[6]
A law firm hired by Siemens to look into the corruption claims had unearthed violations. Announcing the latest results Wednesday, Siemens said it expects a solid growth in sales this year and for earnings to remain flat.[4] 'Our order growth in the first half has been excellent on a global basis, and our industry and health care sectors combined strong growth with higher earnings,' Siemens chief Peter Loescher said.[4]
Munich-based Siemens, already dogged by a bribery scandal, said on March 17 earnings would be reduced after a review uncovered order delays and cancellations.[3]
Siemens probably recorded higher earnings from units including automation and drives as well as power distribution and transmission, according to the analyst survey. Siemens's products range from light bulbs to medical scanners and wind turbines, and it competes with companies such as ABB Ltd., General Electric Co. and Schneider Electric SA. Its customers include German carmaker Daimler AG and E.ON AG, Germany's largest utility.[1]
The Power Generation unit was hurt by the project review, and it posted a loss of EUR221 million compared with a profit of EUR330 million a year earlier.[7] The group, whose operations span lightbulbs, computers, power turbines and trains, said it had been unable to keep up with the contracts it signed in the past few years. It could face further headwinds this year as well since the planned sale of its telecommunications unit SEN was expected to result in a substantial capital loss, the company said.[5] The company said Feb. 26 it would cut as many as 6,800 jobs at the unit after failing to find a buyer for the division for almost two years.[3] Loescher said the plan includes jobs cuts, reiterating earlier comments. The company also plans to start a restructuring program at its mobility division.[3]
Loescher said the company expects the impact of the credit crunch to be felt outside the financial sector in the next fiscal year. Its outlook excludes any impact from legal and regulatory matters and from restructuring measures.[7] "We expect the consequences of the crisis in the finance sector to be felt in other sectors in the course of next fiscal year,'' Loescher said.[3]
In March, Loescher said Siemens would provide a new forecast for the year when it reports second-quarter results.[1] Siemens climbed 2.18 euros to 75.57 euros. The stock has lost 31 percent this year, including a 17 percent slide on March 17 when the order-review outcome was announced. Germany's benchmark DAX index has lost 14 percent this year.[3]
Income from continuing operations declined to 232 million euros from 852 million euros in the previous year.[6] The group has recognized the existence of special funds worth 1.3 billion euros used to illicitly obtain foreign contracts and agreed in October to pay a fine of 201 million euros to put an end to some German legal proceedings.[5] Siemens has identified about 1.3 billion euros of what it called "questionable payments'' from fiscal 2000 to fiscal 2006.[3]
Siemens IT Solutions and Services reported revenues of 1.27 billion in the quarter, lower than 1.35 billion in the prior year.[6] Before the order-book charges were announced, Siemens had aimed to increase operating profit at least twice as fast as revenue.[3] Siemens also said that it expects that operating profit would be flat in 2008 compared to 2007 and it still has to restructure costs while it could be fined from the ongoing corruption probe.[8] Siemens could also be hit by heavy costs related to the corporate scandal which has unfolded relentlessly since late 2006. It faces possible heavy fines in the United States and an internal probe released on Tuesday found that that almost all sectors of activity had been subject to corrupt practices. Loescher acknowledged that he "did not expect an affair of this size" when he agreed to become the Siemens boss in 2007.[5]
About 200 million euros of costs will come from the transport unit, while the technology division will have costs of about 100 million euros. [1] The company said it expects the 900 million euros impact to be 'the largest piece of any additional financial burdens for 2008'.[2] The result came in below the 439 million euros forecast of analysts polled by Thomson Financial News.[2]
Shares in the company nonetheless gained 1.66 percent to 74.61 euros in morning trades here as the market welcomed a strong rise in new orders.[5] April 29 (Bloomberg) -- Siemens AG, Europe's largest engineering company, will probably report lower second-quarter profit because of delayed and canceled orders.[1] Siemens said order intake in the second quarter was EUR23.37 billion, up 12% from the year-ago period.[7] In the second quarter, Europe outside Germany, Siemens' largest region, recorded a 2% rise in revenue, while revenue in the Asia-Pacific and Americas regions grew 6% and 3%, respectively.[6]
Siemens reported net income that surpassed analysts' estimates in three out of the past four quarters.[1]
In March, Siemens said it expected to book project- related charges of around EUR900 million.[7] The Munich-based conglomerate said it had revenue of €18.09 billion in the months January to March, almost unchanged from the same period last year.[11] Operating group profit, which reflects the operating performance in Siemens's core business, came in at €1.2 billion,.[11] The group, which is going through a difficult time due to the corruption case, announced that expected income, excluding acquisitions, would double the rate of the global economic growth in the current operating strategy.[13]
Loescher added that the ratio of new orders to sales "indicates we have good growth opportunities in the future".[10]
The company will host a press conference in Munich at 9 a.m. Siemens spokesman Wolfram Trost declined to comment on the company's earnings before the report. [1]
SOURCES
1. Bloomberg.com: Worldwide
2. Siemens Q2 net drops to 412 mln euros on 857 mln euro profit warning UPDATE - Forbes.com
3. Bloomberg.com: Worldwide
4. Siemens posts slump in quarterly earnings - Business
5. AFP: Scandal-hit Siemens' quarterly profit down 67 pct
6. RTTNews - Global Business News, Business Newswires, Business Articles, News Analysis.
7. 3rd UPDATE: Siemens 2Q Net Profit Falls 67% But Orders Rise
8. Siemens Profit Falls 67%
9. The Associated Press: Siemens' 2Q profit slides, major business projects slump
10. Project Problems Hit Siemens - Forbes.com
11. Free Preview - WSJ.com
12. Circuits Assembly - Siemens' Q2 Profit Drops 67% YoY
13. AGI News On - SIEMENS: NET REVENUE DROPS 67 PCT IN FIRST TRIMESTER
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