Siemens, Philips Declines After Zumtobel Forecasts Fading Margin

Siemens AG (SIE) and Royal Philips Electronics NV (PHIA), the world’s two-largest lighting makers, declined in German and Dutch trading after rival Zumtobel AG (ZAG) reported a surprise loss.

Zumtobel Chief Executive Officer Harald Sommerer plans “major restructuring” of a components unit after a “very disappointing” quarter, he said in a telephone interview today. Shares of the Dornbirn, Austria-based company slumped a record 15 percent. Philips and Siemens declined as much as 4.3 percent and 2.1 percent, respectively.

Margins at Zumtobel will narrow this year as an overhaul gets underway, Sommerer said. The outlook adds to worries about profitability levels in the lighting industry that are already being hurt by Asian competition and a consumer-spending slowdown in mature markets.

“This is a sentiment effect,” William Mackie, a London- based analyst at Berenberg Bank, said by phone. “Zumtobel gives us insight into the lighting industry and it’s a disappointing profit warning.”

Philips, rated “hold” at Berenberg, was down 4.2 percent at 14.92 euros in Amsterdam as of 11:16 a.m., the biggest drop in almost two months, while Siemens was 1.9 percent lower at 72.86 euros in Frankfurt. Zumtobel traded 1.91 euros lower at 10.95 euros in Vienna.

Zumtobel’s strategy mirrors cutbacks at its larger rivals, which have suffered from spiraling costs for rare earths. Philips aims to save 325 million euros ($427 million) in its lighting business by reducing overhead costs, cutting staff and shifting production to lower-wage countries. Osram AG, Siemens lighting unit, is cutting 1,050 jobs in Germany, and indicated job cuts abroad may follow.

Unexpected Loss

Zumtobel today reported a net loss of 15.2 million euros in the quarter ended Jan. 31, versus a 13 million-euro profit a year earlier, on a deteriorating performance at its components business.

“We think that management needs to take more radical action,” said Sven Weier, an analyst at UBS in Frankfurt, with a “neutral” rating on Zumtobel. “The third-quarter results were even worse than we thought. That alone would not be an issue if a major restocking event or decisive cost action were taken. Both do not appear to be evident to us going by management comments.”

Philips which derives about one-third of total sales from lighting, said profit margins in lighting collapsed to 2 percent from 10 percent in the fourth quarter. Revenue at Osram rose 8 percent in the fiscal year though Sept. 30, while net income fell 2.8 percent to 309 million euros.

Siemens, which last year postponed Osram’s planned initial public offering, is looking to proceed with the sale this year.

To contact the reporters on this story: Richard Weiss in Frankfurt at rweiss5@bloomberg.net; Maaike Noordhuis in Amsterdam at mnoordhuis@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net

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