Siemens Cuts Full-Year Profit Forecast on Wind-Power Cost
Siemens AG (SIE) cut its annual profit forecast for the third time in five years as delays in linking off-shore wind parks to Europe’s power grid hinder Chief Executive Officer Peter Loescher’s thrust into renewable energy.
Siemens now expects net income from continuing operations of 5.2 billion euros ($6.9 billion) to 5.4 billion euros in the year through September, down from a 6 billion-euro target, the Munich-based company said. Ingo-Martin Schachel, an analyst at Commerzbank AG, said he expected a reduction to 5 billion euros.
Loescher is suffering setbacks to his goal for Siemens, Europe’s biggest engineering company, to generate 40 billion euros in sales within two years from products related to the environment and energy saving. Siemens’s transmissions unit has booked 481 million euros in extra costs this year from delays in hooking up marine wind farms. Loescher said today that the “majority” of charges have already been booked.
“There were fears that didn’t materialize,” Schachel said by telephone. “It was a positive surprise” that they didn’t cut the goal more. Schachel raised his recommendation on Siemens stock today to buy from hold.
Siemens rose as much as 2.2 percent to 71.33 euros and was trading 1 percent higher as of 12:54 p.m. in Frankfurt, valuing the company at 64.5 billion euros. The increase compares with a 1.3 percent gain in Germany’s benchmark DAX Index.
Orders to Revive
Orders, which fell 13 percent in three months through March, are expected to revive in the second fiscal half compared with the first, Loescher said today on a conference call.
“This year we had quite a hard comparison basis, with some large orders being booked in the second quarter last year,” said Sjoerd Ummels, a Brussels-based analyst at ING Groep NV, who advises investors to hold Siemens stock. “It will be quite a different picture in the second half.”
Second-quarter sales rose 9 percent to 19.3 billion euros, beating an analyst estimate of 18.8 billion euros, according to a Bloomberg survey. Profit from continuing operations fell 67 percent to 1.05 billion euros.
“As expected, the second quarter was not easy,” Loescher said. For the full year “we anticipate that most of our businesses, including the short-cycle businesses of the industry sector, will deliver strong earnings performances.”
Operating profit gained 5.1 percent at Siemens’s industry division and 9.8 percent at the infrastructure and cities unit, Siemens said. Earnings at the health-care and energy businesses fell because of charges.
‘Demanding’ Wind Projects
The German company’s off-shore wind projects in the North Sea are “extremely demanding,” Loescher said today. Compared with coastal U.K. platforms, the projects are five times as far from the mainland, have twice the capacity and weigh five times as much, he said. Regulatory authorities haven’t reached a final decision on whether facilities of this size should be governed by regulations for ships or for oil platforms, he said.
Siemens appointed Karlheinz Springer to replace Udo Niehage as head of the power-transmission unit as it seeks to stem losses from the business. Springer, who was formerly head of power transmissions solutions, take the post on May 1.
The wind power industry is struggling with low margins and investment risks that are being exacerbated by cuts in European subsidies, Felix Ferlemann, the head of Siemens’s wind-power division, said at a conference in Copenhagen on April 16.
ABB (ABBN), the world’s largest maker of power-distribution equipment, expects no delays or one-time charges at its off- shore wind park projects, Financial Times Deutschland said yesterday, citing an interview with Peter Terwiesch, head of the Zurich-based company’s German operations. ABB’s first-quarter earnings before interest and taxes held steady at $1.05 billion, the manufacturer said today.
Siemens’s power-transmission unit reported a loss of 169 million euros in the second quarter. Siemens also incurred a 640 million-euro equity loss at its Nokia Siemens Networks joint venture.
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