Siemens to Slash a Further 4,500 Jobs--3rd Update

By Christopher Alessi 

MUNICH--German engineering giant Siemens AG announced on Thursday an additional 4,500 job cuts world-wide, targeting its embattled power and gas division and a group of underperforming businesses it hopes to turn around.

The new cuts--roughly 2,200 of which are expected to be in Germany--come just months after Siemens said it would reduce its global head count by 7,800, a number it brought down to 7,400 following labor negotiations. The company has also said it would cut around 1,200 jobs in the energy division.

The announcement came as Siemens turned in a sharp improvement in net profit in the quarter to end-March when proceeds from asset sales and the impact of the weak euro offset shrinking profit margins at its energy and industrial units.

The total of nearly 12,000 job losses is part of a company-wide restructuring led by Chief Executive Joe Kaeser, which includes selling off noncore businesses and focusing more on energy.

"With the initiation of these measures, the company's structural organization has been completed for the most part," Mr. Kaeser said.

Siemens said the job cuts in the power and gas business were a result of a challenging market for power-generation equipment as regulatory changes, falling prices, stiffer competition and overcapacity have plagued Europe's electricity utilities. The other cuts are expected to target the company's remaining underperforming businesses, including the compressors, transmission and mechanical-drives units.

The surge in net profit in the three months to end March derived largely from gains from the sale of Siemens's stake in a household-appliances joint venture with Robert Bosch GmbH and the disposal of its hearing-aid unit and hospital-information business.

Net profit for the period, Siemens's fiscal second quarter, rose to EUR3.89 billion ($4.41 billion) from EUR1.12 billion during the same period last year, beating analysts' expectations. Analysts had forecast a net profit of EUR2.01 billion, according to a recent poll by The Wall Street Journal.

Revenue rose by 8% to EUR18.05 billion from EUR16.7 billion last year, helped by the euro's weakness against major currencies. New orders climbed by 16% to EUR20.75 billion, boosted by large domestic contracts at Siemens' train business.

However, low oil prices and volatile economic conditions in some parts of the world squeezed the group's profitability. The overall industrial profit margin dropped to 9% from 10.3% during the same period last year.

Mr. Kaeser has faced pressure from investors to justify Siemens's planned $7.6 billion acquisition of U.S. oil-equipment maker Dresser Rand Group Inc., announced last September. Many analysts and investors have judged the deal as expensive as oil prices have tumbled.

Siemens reiterated its guidance for the 2015 fiscal year, saying its expects to attain a profit margin for its industrial businesses between 10% and 11%.

Write to Christopher Alessi at [e-mail]

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