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BERLIN–German industrial giant Siemens AG SIE, -5.27% on Thursday said a significantly weaker market environment was hurting its key industrial businesses as the company reported a decline in profit for its third quarter.
The maker of high-speed trains and wind turbines was the latest to warn about the fallout from global-trade tensions on Germany’s highly export-dependent economy. Growth slowed down markedly in the eurozone in the three months to June 30, largely due to manufacturing strains in Germany, the region’s largest economy, and Italy.
Chief Executive Joe Kaeser said “geopolitics and geoeconomics are harming an otherwise positive investment sentiment.” Siemens said it was keeping its full-year targets but warned that reaching its goal of moderate growth in revenue was becoming more challenging.
The group saw its net profit fall to 1.03 billion euros ($1.13 billion) from EUR1.11 billion a year earlier, partly because of high severance charges and as global economic challenges hurt the German group’s industrial units, which sell a wider range of automation and machinery-controlling systems around the world.
Profit from its industrial businesses fell 12% in the quarter to EUR1.94 billion. Siemens said orders and sales in the short-cycle factory automation and motion control businesses were hit by lower demand from clients in the car and machinery-making industries, in particular in Europe and the Americas.
The challenge to Siemens’s industrial business comes as the company is in the midst of a major overhaul that includes shedding its struggling power-and-gas business and reorganizing its existing units to make for a leaner and more profitable organization.
Siemens on Thursday for the first time reported earnings under its new structure–with formerly five industrial business units now combined into three: power turbines and gas, manufacturing software, and automation and infrastructure for a digital world.
At its power-and-gas unit–which Siemens plans to combine with its renewable-energy businesses and then spin off the new company to shareholders–orders fell 14% in the three months ended June 30.
Siemens said its full-year industrial-profit margin, which analysts look at to gauge the performance of the company’s core businesses, would likely only reach the lower end of its targeted 11% to 12% range, excluding severance charges. Heavy severance charges weighed on Siemens’s industrial profit margin in the third quarter, which declined to 9.6%, missing a company-compiled consensus estimate of 10.8%.
Overall though, Siemens saw its orders grow 8% to EUR24.51 billion, driven notably by strong orders at its train-making and signaling business. Revenue rose 4% to EUR21.28 billion.
“A robust mobility sector and stringent project execution will help us make good on our promises for the year,” Mr. Kaeser said.
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