Siemens Keeps Outlook, Profit Beats Expectations

German industrial conglomerate Siemens stuck to its profit outlook, focusing on sourcing more components from low-cost countries after fiscal 2009 started well despite the knock-on effects of the credit crisis.

The company, which makes everything from nuclear power plants and train carriages to hearing aids and light bulbs, on Tuesday posted first quarter to December profits ahead of market forecasts, driven by a strong performance in its energy division.

But new orders dropped 8 percent as its bread-and-butter industry division, which saw the sharpest order downturn of 11 percent, felt the backlash of customers holding back as demand for manufactured goods plummets across a range of industries.

The difficult economic environment also hit its HealthCare business, although the company said it fared better than rivals such as General Electric.

Total sectors profit -- covering all three of Siemens' main divisions -- rose 20 percent to 2.005 billion euros ($2.64 billion), beating the average estimate in a Reuters poll of analysts as the company reaffirmed its full-year target of 8.0-8.5 billion.

"Siemens got off to a good start in fiscal 2009, including a better order performance than most of our competitors in the December quarter," Chief Executive Peter Loescher said. He said Siemens was feeling the impact of the recession though it remained "in a robust position."

Siemens shares rose1 4.2 percent to 45.46 euros by 0928 GMT, making it the top gainer among German blue chips "In general the numbers are good, especially when compared to those issued by Philips," said analyst Heino Ruland from Ruland Research.

"The energy division, which had disappointed recently, has developed very well. And the healthCare division also came in above expectations. These both helped to overcompensate for weaknesses in the industrial division," Ruland added.

New orders in the industry division were impacted by a marked slowdown in its Industry Automation, Drive Technologies and Industry Solutions segments, where customers are now taking large-scale inventory reductions.

Loescher said Siemens will focus on shoring up its profit margin by pushing though 1.2 billion euros in cost cuts launched last year, adding that a procurement initiative to be unveiled in April would also play a special role in the efficiency drive.

Analysts said Siemens wants to increase the share of raw materials and components sourced from low-cost countries from around 20 percent now.

Rivals' Woes

Siemens' announcement came on the heels of a string of negative news from rivals.

General Electric unveiled a 44 percent drop in quarterly profit on Friday and Philips Electronics -- the world's biggest lighting maker -- on Monday had a quarterly net loss of 1.5 billion euros, missing even the most pessimistic estimates.

Siemens said its Osram lightning business -- a drag on the industry sector -- will scale back capacity this year at its general and automotive operations.

Siemens is discarding non-core businesses, exiting areas that are either underperforming or in weak market positions or where it has no say in operational matters, such as French nuclear power venture Areva NP.

Siemens said late Monday it is selling its 34 percent stake in Areva NP to main shareholder Areva SA but suggested it intends to be major player in the nuclear power industry.

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