Siemens AG said it must increase efforts to grow in the second half of the year because the stimulus from an economic recovery is fading, sending the shares of Europe’s largest engineering company on their biggest drop in 15 weeks.
“The tailwind from the economic recovery is likely over,” chief financial officer Joe Kaeser told analysts in Shanghai yesterday, in comments broadcast on the Internet. “Now, increased efforts are required for continued growth.”
Kaeser predicted sales in the fiscal third quarter would not increase from the preceding three months, while adjusted net income would advance “slightly” from 1.4 billion euros (US$2 billion) earned a year earlier.
Siemens’ healthcare business is the most challenging division and a review may result in “significant” charges, while the renewable-energy unit is also missing company targets, Kaeser said.
Siemens fell as much as 4.02 euros, or 4.3 percent, to 88.77 euros in Frankfurt, and traded at 89.57 euros as of 11:33am. The stock has fallen about 3 percent so far this year.
CEO Peter Loescher is accelerating a company overhaul as he sells Munich-based Siemens’s computer-services division, which has been unprofitable for years, and prepares the Osram lighting subsidiary for an initial public offering (IPO). Kaeser declined to say if the company is reviewing its plans for the IPO given the market development, while acknowledging “easing growth dynamics” in the business.
Royal Philips Electronics NV, the world’s biggest lighting company, said on Wednesday last week that growth at its lighting business would slow to a “low single-digit” pace, causing its shares to post their sharpest decline in more than two years.
Kaeser said Germany continued to display a “robust” industrial environment. German business confidence unexpectedly improved this month and remained close to a record-high posted in February, suggesting Europe’s largest economy is weathering the region’s worsening sovereign-debt crisis and slowing global growth.
Siemens’s profit forecast for the quarter ending June excludes 648 million euros that the company will pay Paris-based Areva SA after an arbitration tribunal found the German company failed to meet contractual obligations in a nuclear joint venture that it exited earlier this year. It also excludes potential charges related to the company’s particle therapy business, which is under review.
Fixing the diagnostics unit may take “a few quarters,” Kaeser said.
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