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Price pressure will cost billions of Siemens


MUNICH. The Siemens company has missed expectations for a swift economic recovery dampened. In the energy sector and was in business with industrial services and solutions currently no bottoming in sight, "said Siemens CFO Joe Kaeser at an investor conference in New York. Although there were at early-cycle as the sun subsidiary Osram light at the end of the tunnel. Especially in the industrial sector but it could "take years to put the record levels of 2007 and 2008 back into sight.

Similar signals have been yesterday by the electric industry association ZVEI. It could take up to seven years, until the German electrical engineering industry once again reach the record level of sales from 2008, when revenues amounted to 182 billion euros, with the ZVEI. For 2010, the association expects only a slight increase in sales from 145 to 150 billion euros.

Siemens looks to the long dry spell relatively well equipped. "The measures already introduced have a stabilizing effect on the cost side," Kaeser said. Siemens had already started before the crisis began a massive austerity program in sales and management with a reduction of more than 17 000 jobs. It can now search the price and demand declines partially offset.

For the first quarter of fiscal year 2009/10, which is just ended, thanks to the Siemens expects savings despite sales declines in operating profit with a "strong quarterly results for sectors in comparison to the previous quarter.

The forecasts for the full year, the company confirmed. Accordingly, revenues will decline from just under 77 billion euros in the last mid-single digit percentage range to around 73 billion euros. The negative operating results will vary even more in percentage terms. Here, Siemens continues to expect a profit decline of 7.5 to 6.0 to 6.5 billion euros.

The technology group is economically pressured on several fronts. In the past quarter, there were loud Kaeser, even in long-booming business of renewable energy a "temporary sales and margins, as a corollary weakness." Also in the segment of power transmission and distribution, the market had deteriorated further. In the industrial automation, standing strong under pressure, provides Kaeser, at least reaching the ground. At the next traffic Siemens benefited from the good order backlog.

The global economic crisis leads to massive price pressure on the company. The Siemens Group expects the current fiscal year only because of the slump with a load of the operating result of two billion euros. This decrease can only partly be offset by spending cuts in personnel and procurement.

In the June quarter, orders were at about the level of the previous quarter of 17.9 billion euros. The downturn in new orders would have stopped it. However, the orders were still well below the figure for the comparable prior-year period of more than 21 billion euros.

In the short-cycle businesses – such as the lighting subsidiary Osram – Siemens expects in the second half with a pick. In other industries such as energy, however, the descent is not over yet.

Stagnation in the industrial business of GE

With the cautious outlook, Siemens is not alone. Even when arch-rival General Electric, although one assumes that the worst is over. GE’s industrial business CEO Jeff Immelt in 2010 but expects only a stagnation in sales and earnings. A similar situation arises at Philips. The group getting the economic crisis, "always a better grip," said CEO Gerard Kleisterlee recently. He also pointed to savings and thereby Group restructuring – whether in this way in the crisis year 2009, a profit has been made. Significant revenue growth in its core business areas of lighting, lifestyle and medical electronics, but Philips reckons only in the aftermath of the crisis.

But the companies still see no sign of a secure rapid and sustainable growth. Siemens expect that sales will fall in the current fiscal year by a mid single-digit percentage, reiterated Kaeser. 2008/09, the revenues have already been decreased slightly to 76.7 billion euros. To the operating profit of the sectors, the Group continues to expect a more pronounced decline of 7.5 to 6.0 up to 6.5 billion euros. It costs the weaker volume demand for the company 800 million euros profit. In addition, the pressures come from the price decline. Mitigate the earnings will decline due to productivity gains and less expenditure on purchase.

Of these, Siemens has already benefited in recent months. "The measures already introduced on the cost side have a stabilizing effect and a strong quarterly earnings in the sector to enable comparison with the previous quarter," Kaeser said. The net profit of 2.5 billion euros last will grow at Siemens in the current fiscal year 2009/10 (September 30) by 20 percent – while playing various special factors. For example, Siemens had recently written off his strong participation at Nokia Siemens Networks (NSN).

When net income Unicredit analyst Gunther Holfelder provides for even the greatest potential for Siemens. In the three sectors of industry, health and energy, the Group is well positioned operationally total. Here we must now wait until resumed in the business cyclical. Siemens, meanwhile, could improve the outcome in particular through further restructuring and the sale of problem sectors, such as the loss-making electronics subsidiary SEAS.

Siemens CEO Peter Löscher had warned in recent months repeatedly faced economic euphoria. Admittedly, the Group – partly because of growing environmental portfolio and has already begun pre-crisis program to cut costs – relatively well prepared for a long dry spell. The level of pre-crisis will see some industries has been estimated at Siemens, but again only in a few years.

In the workers’ camp, therefore, a further job cuts feared. The Vice-Chairman General Works Birgit Steinborn considers the deletion of another 10 000 jobs this year was possible. According to the quencher is no central program job cuts planned.

The stock market reacted skeptically to cheese-looking statements. The Siemens share his comments had to give their profits back the previous day and was almost unchanged from the late afternoon at 67 euros. In recent months, the stock had risen significantly, a year ago was the price below 50 euros. In order that Siemens has since extended to this area a better beat than General Electric: GE’s stock is roughly at the level of a year ago.