German industrial conglomerate Siemens AG (SI: Quote) on Wednesday lowered its annual profit forecast citing challenges in the power transmission sector. The company also reported a sharp decline in its second-quarter profit, reflecting charges and the non-repeat of last year's hefty sale gain. Revenues grew, but orders declined mainly in the energy sector.
President and CEO Peter Löscher said, "As expected, the second quarter was not easy. While we achieved clear growth in revenue, orders came in below the prior year due to lower volume from large orders."
Second-quarter net income attributable to shareholders fell to 981 million euros from last year's 2.79 billion euros. Earnings per share plunged to to 1.11 euros from 3.17 euros a year earlier.
"Profit for the quarter was below our expectation due to charges at power transmission projects in Germany. We are addressing the problems systematically," Löscher said.
Excluding certain losses from discontinued operations, second-quarter income from continuing operations fell 67 percent to 1.05 billion euros.
The results reflected an equity investment loss of 640 million euros resulting from restructuring at Nokia Siemens Networks B.V. and project charges of 278 million euros at the Power Transmission Division.
Meanwhile, the prior year results benefited from a 1.5 billion euro gain in the Energy Sector from the sale of its 34 percent stake in Areva NP to Areva S.A.
Total sectors profit plunged 48 percent to 1.93 billion euros, while adjusted EBITDA, a key earnings metric, dropped 7 percent.
Revenue for the quarter grew 9 percent year-over-year to 19.30 billion euros. Energy sector's revenues grew in double-digit rate supported by its strong order backlog.
On a geographic basis, revenue rose in all three reporting regions led by the Americas. Emerging markets on a global basis grew faster than revenue overall, at 11 percent, and accounted for 32 percent of total revenue.
New orders fell 13 percent to 17.88 billion euros mainly due to the non-repeat of last year's significantly higher volume from large orders, particularly in the energy sector and in Germany and emerging markets.
Backlog, which the company defines as the sum of the order backlogs of the sectors, was 100 billion euros at the end of the quarter.
Looking ahead, for fiscal 2012, Siemens now expects that its initial forecast for income from continuing operations of 6 billion euros will be reduced by an estimated 0.6 billion to 0.8 billion euros due to challenges, mostly in its power transmission business.
However, Löscher added, "we're on course to achieve our goals for revenue and orders."
The company continues to anticipate strong earnings performances in most of its businesses, including its industrial short-cycle businesses. Siemens confirmed its expectations of moderate organic revenue growth.
On Frankfurt's Xetra, Siemens shares closed Tuesday's trading at 69.81 euros, up 0.91 euros or 1.32 percent.
by RTT Staff Writer
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