Siemens raises earnings outlook following profit increase

Siemens, Europe's biggest engineering company, raised its earnings outlook for the year after posting higher-than-expected third-quarter profit and a jump in large orders for power-generating equipment.

Profit from so-called industrial operations rose 20 per cent to €2.19 billion in the three months through June, the Munich-based company said on Thursday in a statement. Analysts had predicted an average of €2.09 billion, according to a Bloomberg survey.

The profit margin was 10.8 per cent, at the higher end of the 10 per cent to 11 per cent range forecast for the full year.

"The third quarter again achieved convincing results, particularly compared to the market," which is increasingly difficult, chief executive Joe Kaeser said in the statement.

Shift of focus

Kaeser is shifting the company's focus to energy markets, agreeing in June to merge its wind-turbine business with Spain's Gamesa Corp. Tecnologia SA to rival Vestas Wind Systems A/S as the world's largest wind-turbine company by installed capacity.

Siemens has also spent almost $9 billion on buying oil and gas equipment specialist Dresser-Rand Inc and Rolls-Royce Holdings Plc’s energy unit. Following the steep decline in crude oil prices, energy companies and their equipment suppliers have been hit by a decline in new projects.

The Munich-based company, which also makes trains and healthcare equipment, raised its forecast for earnings per share for the full year to between €6.50 and €6.70 compared with the previous range of between €6 and €6.40. It kept the other guidance including for the profit margin range.

Revenue increase

Revenue in the third quarter rose 5 per cent to €19.8 billion euro, lower than the €19.9 billion analysts had expected on average, according to the statement.

Orders rose 6 per cent to €21.1 billion with the help of large power and gas contracts as well as wind-turbine orders for projects like the East Anglia One offshore wind farm off the English east coast.

Like many other European manufacturers, Siemens is facing a challenging global market amid a slowdown in Chinese growth and a slump in commodity-related investments. In response, the engineering giant has announced thousands of job cuts and seeks to reduce costs by €950 million this year. – (Bloomberg)