MUNICH (Reuters) - German engineering company Siemens (SIEGn.DE) reported a worse than expected 10 percent drop in quarterly industrial profit and signalled a tough year ahead as it restructures its turbine and wind power businesses.
Siemens is shedding operations as it seeks to shrug off its conglomerate structure and remodel itself as an industrial software company. It is listing its healthcare unit and putting its wind and rail businesses into joint ventures.
But its results were dragged down by the large gas turbines that are increasingly unloved in a world moving to renewable energy, and setbacks at its Siemens Gamesa (SGREN.MC) wind energy joint venture.
Industrial profit came in at 2.2 billion euros (£1.9 billion) for the quarter to the end of September, below the lowest estimate in a Reuters poll of analysts, in which forecasts averaged 2.49 billion euros.
“We have to tackle structural issues in some individual businesses,” Chief Executive Joe Kaeser said in a statement on Thursday. “There is a lot of work ahead of us in fiscal 2018.”
“We have understood that conglomerates of the old-fashioned kind have no future,” he later told a news conference.
Siemens shares fell to a two-week low and were down 1.9 percent by 0950 GMT. The German blue-chip DAX .GDAXI was flat and remained close to all-time highs.
“The going is getting a bit harder at this stage,” wrote Barclays analyst James Stettler, reiterating his “equal weight” rating on the stock.
Siemens forecast a steady industrial profit margin of 11-12 percent for 2018, excluding severance charges its finance chief said would be “significant”, and a moderate increase in revenue.
Revenue edged up 1 percent in Siemens’ fourth quarter to 22.3 billion euros. Orders jumped 16 percent to 23.7 billion euros.
Profit from Power and Gas, Siemens’ second-biggest business line after healthcare, plunged 40 percent to 303 million euros as it battled overcapacity and falling prices.
About 50 Siemens employees and trade unionists protested outside the company’s headquarters in the centre of Munich against possible job cuts in the group they said they had learned of only through the media.
“Of course something has to happen, we don’t dispute it, but we do accuse Siemens of waiting until the problem is so big that there will have to be compulsory redundancies. We won’t take it,” said an IG Metall spokesman.
Siemens plans to inform labour representatives about its plans in an initial meeting on Nov. 16.
The group now wants to focus more clearly on its industrial automation division, Digital Factory, where it is market leader. Factory automation is an increasingly attractive business, with China targeting rapid growth in domestically manufactured goods.
Digital Factory posted an unexpected 3 percent slide in profit to 501 million euros, burdened by expenses for developing its MindSphere industrial software platform, the $4.5 billion acquisition of Mentor Graphics and severance charges.
Siemens competes with European rivals ABB (ABBN.S) and Schneider Electric (SCHN.PA) as well as Rockwell Automation (ROK.N) in the United States, which just rebuffed a takeover offer from Emerson Electric (EMR.N).
Emerson said this week it saw the automation industry ahead of two-year upswing, while Rockwell forecast organic sales growth of 3.5 to 6.5 percent for the year ahead, saying it saw “attractive opportunities in the industrial automation and information market”.
Reporting by Georgina Prodhan; Editing by Tom Pfeiffer and Keith Weir