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Siemens sees tough year ahead after Q1 profit slump

By Elena Berton

The German industrial conglomerate, which is revamping its energy business ahead of its planned spinoff this year, backed full-year guidance despite missing analysts’ estimates

Germany’s Siemens posted weaker-than-expected industrial profit during its first quarter, hit by the downturn at its flagship digital industries business and losses at the wind power unit.

Although Europe’s largest industrial manufacturing company backed its fiscal 2020 guidance, it warned of a slow start to the year as orders fell to €24.76bn ($27.34bn, £20.95bn) from €25.17bn.

Siemens’s industrial operating profit dropped 30 per cent to €1.43bn – missing analyst forecasts for €1.88bn – while revenue rose slightly to €20.32bn, below consensus estimates of €20.63bn.

The company backed its guidance for the full fiscal year 2020, expecting moderate growth in comparable revenue and earnings per share from net income to be between €6.30 to €7.00, compared with €6.41 in the previous year.

"After a powerful finish in fiscal 2019, the first quarter started slowly as expected," Siemens CEO Joe Kaeser said. "The weak performance across our energy businesses reinforces our priorities."

The German engineering conglomerate is overhauling its energy business ahead of the planned spinoff of its power and gas division in September.

Once the revamp is complete, the company will focus on rail and power-distribution equipment as well as industrial automation software.

As part of the overhaul, Siemens has bought Iberdrola’s 8.1 per cent stake in wind turbine maker Siemens Gamesa for €1.1bn, increasing its holding to 67 per cent of the voting rights in the joint venture.

The Siemens Gamesa holding will be folded into the energy business that will be floated this year.

FURTHER READING: Energy stocks: how will the worst-performing sector of the S&P500 fare in 2020?

FURTHER READING: German economic growth slowest in six years

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