Siemens insists it can meet €8.5bn profit target

GERMAN INDUSTRIAL conglomerate Siemens remains optimistic it can meet its operating profit forecast of up to €8.5 billion this year, despite a drop in first quarter profits and an 8 per cent drop in orders.

The Munich-based manufacturer of everything from trains to nuclear plants said operating profit in core businesses – industry, energy and healthcare – was up 20 per cent to €2.01 billion.

“We are sticking to our 2009 targets, even though reaching them has become more ambitious,” said chief executive Peter Löscher.

Speaking at the company’s annual shareholder’s meeting in Munich’s Olympic Hall, Mr Löscher said he was confident that, months after ending a corruption investigation with a €1.2 billion payment to US authorities, the 162-year-old German giant was “financially solid” as it faced into less certain economic times.

However, the chief executive admitted the company’s goal could yet be hobbled in 2009 by order cancellations or price competition.

“We will not join in with the chorus of people who, with their grim remarks, drag the mood even further into the cellar,” he said.

The company’s first quarter net profit dropped to €1.2 billion, down 81 per cent on the same time last year, when Siemens earned around €5.4 billion from the sale of Siemens VDO Automotive.

Sales in the first quarter to December rose 7 per cent to €19.63 billion; but orders, a key indicator of future performance, were down 8 per cent to €22.2 billion.

Commerzbank analyst Ingo-Martin Schachel described the figures as “very, very good” considering the economic conditions.

Similar to Dutch rival Philips, Siemens’s market capitalisation has halved in the last year, but company shares are still performing well ahead of US competitor General Electric.

Siemens has confirmed it will be concentrating on developing its nuclear power expertise, ending a joint venture with French nuclear power company Areva at the end of 2012. Mr Löscher said Siemens had begun talks with “quite a range of partners” with nuclear experience.

Explaining the end of the German-French venture, Mr Löscher said the position of nuclear energy had changed since their deal was signed in 2001. “We wanted to have more entrepreneurship in that area and we can’t have that in our partnership with Areva,” he said.