Siemens AG, Europe's largest engineering company, said second-quarter profit dropped after a review of orders led to charges at the power and transport units.
Net income in the three months through March fell to 384 million euros from 1.2 billion euros a year earlier, Siemens said yesterday. Sales rose 0.5 percent to 18.09 billion euros.
Siemens said on March 17 earnings in the period would be reduced after a review of its order book found inconsistencies, sending the stock 17 percent lower that day. Chief Executive Officer Peter Loescher said at the time the move was a "painful but necessary step". The company said yesterday the costs stemming from the review were 857 million euros in the quarter.
"There are some areas that cause trouble, but Siemens is working on that to resolve the problems," Boris Boehm, who helps manage about 1.1 billion U.S. dollars at Aramea Asset Management in Hamburg, including Siemens stock, said before the report.
Siemens said 559 million euros of the order-review charges came from delays and rising raw material costs at the power division. The remaining costs were booked in the transportation unit and the technology division. The company said yesterday it hasn't so far found any additional risks at the three units.
The report came out before trading started. Before yesterday, Siemens had lost 33 percent this year in Frankfurt trading, compared with a 15 percent slide in the benchmark DAX Index.
Growth outlook
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 and creating regional clusters so national units can share certain functions. The three new divisions are energy, industry and healthcare.
Siemens said margins at the power generation unit will be hurt in coming quarters as a result of the order review. It said the examination of major turnkey projects has been completed.
Siemens said yesterday 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 match the levels of the previous fiscal year.
Before the order-book charges were announced, Siemens had aimed to increase operating profit at least twice as fast as revenue.
Source: China Daily
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