Siemens posts weaker-than-expected first-quarter industrial profit

MUNICH (Reuters) – Germany’s Siemens (SIEGn.DE) on Wednesday reported weaker-than-expected industrial profit during its first quarter as a downturn in the manufacturing sector hit its flagship digital industries business and its wind power unit suffered losses.

Chief Executive Joe Kaeser described a slow start to the year as Siemens’s industrial operating profit fell 30% to 1.43 billion euros ($1.58 billion), missing analyst forecasts for 1.88 billion euros in a consensus gathered by the company.

Revenue rose slightly to 20.32 billion euros, missing estimates for 20.63 billion euros.

The trains to factory software maker said its industrial operating margin, excluding severance payments, fell to 8.3% from 10.5% a year earlier. The company confirmed its guidance of full year earnings per share in the range of 6.30 to 7.00 euros after posting 1.33 euros during the first quarter.

Kaeser said the weak performance across the company’s energy businesses “reinforces our priorities,” referring to plans to separate Siemens’s struggling power and gas business and merge it with its Gamesa wind power operations.

Gas and Power saw its operating profit plunge 63% during the first quarter, while Gamesa posted a 165 million euro loss due to project delays caused by the early onset of wintry weather in northern Europe.

Siemens plans to list the combined business by the end of September, with the remaining business concentrating on factory automation and smart infrastructure.

As part of the overhaul, Siemens on Tuesday said it would pay 1.1 billion euros to buy the 8.1% stake Spanish utility Iberdrola’s (IBE.MC) holds in Siemens Gamesa (SGREN.MC), with the share being transferred to the future Siemens Energy.

During the first quarter, Siemens’s digital industries business also suffered a downturn, with operating profit falling nearly a third as customers in the automotive industry and machinery makers continued to struggle.

Germany’s manufacturing sector, which accounts for about a fifth of the country’s economy, has been contracting for 13 straight months, IHS Markit said on Monday.

The country’s manufacturers hurting from the U.S.-Sino trade conflict are bound to see their exports weaken in the coming months due to the coronavirus outbreak in China, it said.