Siemens suffers first loss in six years

Siemens AG, Europe's largest engineering company, reported its first loss in six years because of costs to sell its automotive division and a penalty tied to a bribery investigation that has engulfed Siemens for a year.

The net loss in the quarter ended September 30 was 74 million euros, compared with a profit of 148 million euros a year earlier, Munich-based Siemens said in a statement yesterday. Siemens booked a 1 billion-euro tax charge to sell its VDO automotive unit, and a 201 million-euro fine by a German court. Sales rose 9 percent to 20.2 billion euros.

The quarter was the first for Siemens under Peter Loescher, who became chief executive officer in July to succeed Klaus Kleinfeld. Loescher, the first-ever Siemens chief to come from outside the company, forecast more "quality growth" for next year as Siemens aims to outpace global economic expansion.

On July 25, Siemens announced the purchase of US medical-scanners maker Dade Behring Holdings Inc for $7 billion and the sale of the VDO automotive unit for 11.4 billion euros to Germany's Continental AG.

Siemens said yesterday it will book additional integration costs for Dade in coming quarters.

Siemens's focus now is "clearly" on expanding without acquisitions, Chief Financial Officer Joe Kaeser said in an interview on October 24. The company said late on Wednesday that it will buy back stock valued at about 10 billion euros by 2010 to improve its capital structure.

Lagging stock

Shares of Siemens have declined 11 percent since Loescher took over. The stock has lagged behind some competitors in recent years. ABB Ltd, which competes with Siemens in the market for power transmission equipment, has gained more than fivefold since the start of 2005. Schneider Electric SA is up 82 percent since then. Siemens is up 53 percent since the beginning of 2005.

Earnings in the quarter were driven by the main factory automation unit, where profit surged 42 percent to 607 million euros. Profit at the power generation unit, which makes energy turbines, almost tripled to 358 million euros.

Siemens intends to pay shareholders a dividend of 1.6 euros for 2007, up from 1.45 euros a year ago.

Loescher wants the supervisory board to approve his plan for a new structure, which he unveiled last month, at a November 28 meeting.

The new setup would do away with layers in regional and division management and tie three new unit heads closer to the board, which has 11 members. Siemens has almost 450,000 employees globally and makes products from power turbines to light bulbs and airfield lighting systems.

Kleinfeld, who ran Siemens from January 2005, stepped down while the bribery investigation was still ongoing. Kleinfeld's predecessor, Heinrich von Pierer, also resigned as chairman.

The new CEO has identified units that require his attention, saying he's "absolutely not satisfied" with the performance of the Nokia Siemens Networks venture. Siemens lost 371 million euros from the venture in the fiscal third quarter.

Nokia Siemens plans to eliminate 9,000 jobs, and Siemens booked 646 million euros in costs tied to job cuts at the unit this fiscal year.

Siemens's attention in the past year has been focused on the bribery scandal that started in November 2006. Allegations first surfaced that Siemens employees used slush funds to bribe clients for orders.

The inquiry spread to at least six countries and prompted the resignations of Kleinfeld and his predecessor, Heinrich von Pierer.

The company said yesterday that it found additional "questionable payments" totalling 857 million euros at its divisions. In the quarter, Siemens booked 339 million euros in tax expenses tied to compliance, and an additional 159 million euros for legal advice.

Siemens was fined by a Munich court last month and declined to contest the penalty. Loescher said the fine is part of the company's "coming to terms with the misconduct which occurred in the past".

Bloomberg News

(China Daily 11/09/2007 page16)