EUROPE’S BIGGEST engineering conglomerate Siemens has posted an unexpectedly sharp fall in core profits and has seen a six-quarter streak of rising orders come to an end as the euro zone’s debt woes hit corporate spending and investment.

Chief executive Peter Loescher warned that 2012 would be difficult for Germany’s largest company by market capitalisation, but he stuck with a forecast for flat net income from continuing operations. “For us 2012 will not be easy,” he said. “The golden days are gone.”

The maker of trains, turbines, hearing aids and lightbulbs saw new orders shrink for the first time since the January-March quarter of 2010.

Siemens is a bellwether not only for the euro zone’s biggest economy but also for the region, which is expected to fall into recession in the next six months as the festering debt crisis keeps a lid on investment expectations.

Mr Loescher said Siemens would be operating in a more difficult climate but noted the company’s short-cycle businesses – which react swiftly to economic swings – were holding up.

“We expect the economic environment to remain difficult in the second quarter and to gradually improve after that.”

Mr Loescher said the company was holding on to its 2012 guidance because it sold all over the world and to a wide range of markets, so weakness in one area could be offset by strength elsewhere, such as in the United States and emerging countries.

The 2012 outlook is for flat net income from continuing operations at €6 billion. Analysts on average expect €5.8 billion.

“The uncertainties of the ongoing debt crisis have left their mark on the real economy,” Mr Loescher said. “Although a recovery is expected in the second half of the year, we must work hard to achieve our goals.”

Siemens said operating profit at its main businesses – industry, energy, healthcare and infrastructure – declined 23 per cent to €1.6 billion. New orders shrank 5 per cent, although revenue rose 2 per cent.

Operating profit was dragged further by charges of about €344 million for its power transmission and transportation businesses as well as for restructuring costs to realign healthcare. – (Reuters)