Siemens, the German industrial conglomerate, slashed its full-year earnings target after booking a second large charge related to problems with connecting domestic offshore wind projects to the grid.
Net income in its fiscal second quarter fell more than 60 per cent compared with a year ago after the company was also forced to book a €640 million loss on its investment in Nokia Siemens Networks, its troubled telecoms equipment joint venture.
“As expected, the second quarter was not easy . . . We are addressing the problems [in power transmission] systematically,” said chief executive Peter Löscher.
Analysts were expecting a tough quarter as the previous year had been boosted by several large orders and a €1.5 billion gain on the sale of its stake in France’s Areva.
The market was aware a cut in earnings guidance was likely and the stock rose yesterday amid relief the earnings target was not scaled back further. Still, investors were reminded the transition to more ecological and efficient forms of energy generation and transmission may not be without difficulties.
Siemens’ earnings report also reinforced its reputation for continually unearthing problems in its portfolio, which stretches from industrial automation technology to trains and turbines.
The company expects full-year income from continuing operations to be between €5.2 billion and €5.4 billion, compared with an original forecast of €6 billion.
Siemens booked a €278 million charge on its power transmission business because of revised estimates of the regulatory hurdles, resources and employees required to complete offshore wind projects in the North Sea.
Management acknowledged the company had “completely underestimated the complexity of these projects”.
It has so far booked a total of €481 million in charges arising from delayed grid connections in the 2012 fiscal year.
Second-quarter revenues rose 9 per cent to €19.3 billion but orders, an indicator of future revenue growth, fell 13 per cent to €17.9 billion in part because of a shortfall in big projects. – (Copyright The Financial Times Limited 2012)