Siemens AG (SIE) Chief Financial Officer Joe Kaeser indicated it will be more difficult to meet financial targets set for 2012 as demand tapers off at some industrial automation units and Chinese growth fails to pick up.
“Unfortunately, what we have been seeing in the last eight weeks was that short-cycle businesses are being considerably weaker than we have been originally thinking,” Kaeser said today in an interview in Washington. “It’s going to be quite a rocky road to meet the targets for 2012.”
Kaeser said China will remain weak this year, depressing sales to one of the biggest customers of Siemens’s high-speed trains, factory gear and turbines. Chinese growth has slowed, prompting the central bank to cut borrowing costs for the first time since 2008 this month and risking an open flank for German exporters that are the backbone of Europe’s largest economy.
Siemens fell as much as 1.94 euros, or 3 percent, to 62.13 euros after Kaeser’s comments, the most in 25 days, and traded at 62.59 euros as of 2:35 p.m. in Frankfurt. The stock has lost 15 percent this year, valuing Siemens at 57.2 billion euros.
Siemens cut its full-year profit goal in April, citing costs to build out windmill parks. Siemens now predicts net income from continuing operations of 5.2 billion euros ($6.48 billion) to 5.4 billion euros in the year through September, down from a 6 billion-euro target.
“It makes sense -- leading indicators in Europe are trending down and there’s no recovery in China,” said Gael de Bray, a Paris-based analyst at Societe Generale (GLE) who recommends buying Siemens shares. “They are implicitly saying they will aim for the lower end of the target.”
Kaeser said today the Munich-based engineering company, Europe’s biggest, wants to “caution the market” and doesn’t plan to change its outlook. His comments follow a revised outlook this month by SKF AB (SKFB), the world’s largest maker of ball bearings and a barometer for industrial demand, which said demand in China has failed to improve.
Siemens has pushed back its predictions that economic growth will resume in China in the latter half of 2012, due in part to the country’s tightening of its monetary controls.
“We expect a very weak China for the remainder of fiscal 2012 and a resumption of growth in order to make good on their five-year plan in 2013,” the CFO said.
Down the Drain
Kaeser predicted that a rescue package for Greece will “go away down the drain” because the country lacks competitiveness or “orderly governance.” Siemens is largely unaffected by the economic decline in southern Europe, where the company gets only 6 percent of revenue, though Siemens does have contingency plans to react to a breakup of the single currency, he said.
“As far as Siemens is concerned, one should not over- estimate a local exposure of a globally active company,” he said. Siemens could re-allocate its resources “within weeks” should a break-up of the single currency occur.
The CFO, a Siemens veteran of three decades, said Europe continues to be a “basket case” and Siemens is watching developments in China.
Kaeser also said that Siemens still plans an initial public offering for its Osram lighting subsidiary, after putting off the plan last year because of adverse market conditions. If market conditions don’t warrant the offering, Siemens would consider a “dividend in-kind spinoff” in the first half of 2013, he said.