Siemens said today that it plans to cut an additional 4,500 jobs, or roughly 1% of its global workforce, as it struggles with low demand and price erosion in its core gas turbines business while grappling with a host of other underperforming operations. Half the job cuts will come in Germany.
But he’s fighting on many fronts as slowing economic growth in major markets dampens appetite for infrastructure spending, while structural change and weak demand challenge the energy businesses that account for about 40% of Siemens’ sales.
Profit from Siemens’ industrial businesses in the quarter ended March 31 was €1.7 billion ($1.9 billion) after €98 million in restructuring costs for job cuts. That was below a Reuters poll average of €1.78 billion .
The trains-to-turbines group confirmed its full-year targets including an industrial profit margin of 10% to 11%, after making 9.0% in its fiscal 2nd quarter, down from 10.3% a year ago.
"While the company has maintained full-year guidance, we struggle to see how the company will reach a 10%-11% industrial margin," analysts at Barclays said.
Group orders rose 7% on a comparable basis to a better-than-expected €20.8 billion, helped by large rail orders, while sales were flat at €18 billion. Siemens had guided to a slight organic sales decline.
Siemens said it would restructure its chronically underperforming businesses, which it identified last year as accounting for 18% of revenues and zero profit.
"Siemens will concentrate on putting the businesses back on a sustainably profitable basis primarily through its own efforts," the company said, confirming a Reuters story from last week.
Profit from Siemens’ digital factory unit, where it hopes to gain an edge by combining its expertise in factory automation and industrial software, fell 13% to €355 million , missing the Reuters poll average of €429 million.
Power and gas profit fell 34%, less than expected, while healthcare – its most profitable unit, which it is splitting off from the group – had a 2% decline.
Siemens is likely to reach only the lower end of its industrial profit margin guidance this fiscal year amid pressure on its energy and other underperforming businesses, Kaeser said.
"It’s clear that it is more about the lower end of the level than the mid-point," he told an analyst conference.
($1 = €0.8818 )