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Like its peers before it, Siemens AG (SI) paid its toll to the economic downturn Thursday with third-quarter net profit down 8% and order intake slumping by 28%.
Net profit for the quarter ended June 30 fell to EUR1.26 billion, from EUR1.37 billion a year earlier. Siemens' bottom line, however, was boosted by one-time gains totaling EUR530 million from disposals.
However, the German industrial conglomerate, reiterated its April outlook for operating profit in its core sectors energy, industry and healthcare exceeding the EUR6.6 billion it made in the previous fiscal year. "We particularly felt the weakening of demand in the short-cycle businesses in our industry sector," Siemens Chief Executive Peter Loescher said in a conference call with journalists.
For example Siemens' lighting unit Osram's margin slumped by 9.1 percentage points to 0.9%. Also other industry sector's divisions producing short-cycle products showed significant margin declines.
The weaker demand in the wake of the economic downturn left not only Siemens' margins melting but weighed on the order intake in the third quarter.
New orders were down to EUR17.16 billion from EUR23.68 billion in the corresponding quarter the year earlier.
It was the first time since 2005 that Siemens posted fewer new orders than sales in a quarter, Siemens Chief Financial Officer Joe Kaeser said in an analyst call.
Siemens sales for the quarter declined by 4% to EUR18.35 billion.
As with margins, the industry sector was also hit with a 42% decline in new orders. Siemens' energy sector, which was granted some major contracts among others for offshore wind turbines, posted a 15% decline in the third-quarter order intake and the healthcare sector a 1% decline mostly of low investments in the U.S.
Earlier this month, Koninklijke Philips Electronics N.V.'s (PHG) healthcare unit posted a 9% order decline on year in its April to June quarter on a weak performance in North America partly offset by solid growth in emerging markets.
And in the energy sector and healthcare sector in which Siemens competes among others with General Electric Co. (GE), the U.S. peer posted earlier this month a 62% new orders decline for equipment in its energy segment while new orders for equipment in GE's healthcare unit declined by 15%. To be fair, GE also booked new orders for services in energy and healthcare with a better performance.
The order intake trend in Siemens' core sectors shown in its third quarter is expected to continue in coming quarters, Kaeser said.
Siemens generated in its core sectors an operating profit of EUR1.67 billion in the April to June quarter, down 21% on year.
"Siemens will be hit hard by the economic crisis in its next fiscal 2010 due to the late-cyclical nature of its business. BHF Bank analysts, who rate Siemens 'reduce' with a EUR44 price target "miss decisive actions by management to counteract the declining top-line."
At 1058 GMT Siemens traded down 1.5% at EUR56.18 in a higher overall Frankfurt market.
Company Web site: http://www.siemens.com
-By Archibald Preuschat, Dow Jones Newswires, +49 211 138 7218, archibald.preuschat@dowjones.com
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