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Siemens sees downturn in energy markets continuing

[MUNICH] Siemens AG signalled a slump in demand for energy-generating equipment is set to continue in the coming fiscal year after weaker orders led to a sharp drop in fourth-quarter profit at its power-and-gas division.

Industrial business profit slid 10 per cent to 2.2 billion euros (S$3.5 billion), the Munich-based company said on Thursday, missing an average estimate of analysts surveyed by Siemens of 2.45 billion euros. Profit at the power-and-gas division declined by 40 per cent while orders for new equipment dropped.

"We have to tackle structural issues in some individual businesses," chief executive officer Joe Kaeser said. "There is a lot of work ahead of us in fiscal 2018."

As the chief executive pushes ahead with dismantling Siemens's sprawling conglomerate structure to one resembling more of a holding company, he has faced a slump in demand for turbines used in large-scale power plants. The company is expected to announce significant job cuts at its power and gas division as soon as next week, a move that will follow an announcement on Monday that the Siemens Gamesa wind-power division will shed almost a quarter of its staff.

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Siemens said that it's expecting a "mixed picture" in the coming financial year, ranging from strong markets in the short-cycle businesses to "unfavourable dynamics" for energy generation.

The company set the same forecasts for the 2018 fiscal year as it had for the one just ended, projecting an industrial business profit margin of 11 to 12 per cent, and basic earnings per share of 7.20 euros to 7.70 euros. The company is also expecting modest revenue growth and a book-to-bill ratio above one.

For the fourth quarter, sales climbed 2 per cent to 22.3 billion euros. The Siemens Gamesa Renewable Energy unit, which combined with a Spanish rival earlier this year, posted a quarterly loss due to inventory write-downs.

Siemens said that preparations for an initial public offering of its healthcare division, called Healthineers, are on schedule and named Jochen Schmitz as chief financial officer of the unit. The company is also planning to merge its rail business with French rival Alstom SA.