Bloomberg News

Siemens Sees Growth Easing as Recovery ‘Tailwind’ Ends

June 28, 2011

(Updates with comments on Osram IPO from fourth paragraph.)

June 28 (Bloomberg) -- Siemens AG said it must increase efforts to grow in the second half because the stimulus from an economic recovery is fading, sending the shares of Europe’s largest engineering company on their biggest drop in 15 weeks.

“The tailwind from the economic recovery is likely over,” Chief Financial Officer Joe Kaeser told analysts in Shanghai today, in comments broadcast on the Internet. “Now, increased efforts are required for continued growth.”

Kaeser predicted sales in the fiscal third quarter won’t increase from the preceding three months, while adjusted net income adjusted will advance “slightly” from 1.4 billion euros ($2 billion) earned a year earlier. Siemens’s health-care business is the most challenging division, and a review may result in “significant” charges, while the renewable-energy unit is also missing company targets, the CFO said.

Siemens fell as much as 4.02 euros, or 4.3 percent, to 88.77 euros in Frankfurt, and traded at 89.57 euros as of 11:33 a.m. The stock has fallen about 3 percent so far this year.

Not Performing

Chief Executive Officer Peter Loescher is accelerating a company overhaul as he sells Munich-based Siemens’s computer- services division, which has been unprofitable for years, and prepares the Osram lighting subsidiary for an initial public offering. Kaeser declined to say today if the company is reviewing its plans for the IPO given the market development, while acknowledging “easing growth dynamics” in the business.

Royal Philips Electronics NV, the world’s biggest lighting company, said on June 22 that growth at its lighting business will slow to a “low single-digit” pace, causing its shares to post their sharpest decline in more than two years.

Kaeser said today that Germany continues to display a “robust” industrial environment. German business confidence unexpectedly improved in June and remained close to a record high posted in February, suggesting Europe’s largest economy is weathering the region’s worsening sovereign-debt crisis and slowing global growth.

Areva Settlement

Siemens’s profit forecast for the quarter ending June excludes 648 million euros that the company will pay Paris-based Areva SA after an arbitration tribunal found the German company failed to meet contractual obligations in a nuclear joint venture that it exited earlier this year. Is also excludes potential charges related to the company’s particle therapy business, which is under review.

Fixing the diagnostics unit may take “a few quarters,” Kaeser said. Sales and profit in health care in the third quarter will fall when compared with both last year and the second quarter, the CFO said.

Loescher and his predecessor, Klaus Kleinfeld, spent 11 billion euros on health-care takeovers in 2006 and 2007, prompting the company to write down the value of its health-care diagnostics unit by 1.4 billion euros last year after it failed to meet growth expectations.

“We need to balance between very pioneering technology and the setbacks on the economic side to get there,” Kaeser said of the particle therapy subsidiary within the health-care unit. “Unfortunately, we are in the area of setbacks.”

To contact the reporter on this story: Richard Weiss in Frankfurt at

To contact the editor responsible for this story: Benedikt Kammel at

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