Wednesday April 30, 11:16 AM
Scandal-hit Siemens' quarterly profit down 67 pct
FRANKFURT (AFP) - German engineering and electronics group Siemens (Xetra: 723610 - news) , gripped by an unprecedented corporate scandal, said Wednesday its second quarter net profit plunged by two-thirds following a review of its industrial projects.
Profit in the second quarter to March of Siemens' 2007/2008 fiscal year fell to 412 million euros (640 million dollars), a company statement said, while sales edged up 1.0 percent to 18.09 billion euros.
Shares in the company nonetheless gained 1.66 percent to 74.61 euros in morning trades here as the market welcomed a strong rise in new orders.
The DAX index of leading shares was up 0.16 percent overall.
Siemens expects full-year earnings to stagnate, however, whereas it had initially forecast an increase in operating profit for the fiscal year to September.
At the same time, it maintained its outlook for internal growth at twice the rate of the global economy.
Chief executive Peter Loescher said: "We have now concluded our project reviews in the fossil power business and, in total, we have a clear picture of the relevant risks.
"We have also demonstrated our commitment to increasing transparency and accountability at Siemens."
Last month, Siemens, which has been rocked by a scandal over how it obtained foreign contracts, announced it would take a charge of 900 million euros due to problems with a range of major projects.
The group, whose operations span lightbulbs, computers, power turbines and trains, said it had been unable to keep up with the contracts it signed in the past few years.
It (Frankfurt: A0MLX5 - news) could face further headwinds this year as well since the planned sale of its telecommunications unit SEN was expected to result in a substantial capital loss, the company said.
Loescher told a press conference that talks to sell the loss-making unit were "difficult."
Siemens could also be hit by heavy costs related to the corporate scandal which has unfolded relentlessly since late 2006.
It faces possible heavy fines in the United States and an internal probe released on Tuesday found that that almost all sectors of activity had been subject to corrupt practices.
Loescher acknowledged that he "did not expect an affair of this size" when he agreed to become the Siemens boss in 2007.
The group has recognized the existence of special funds worth 1.3 billion euros used to illicitly obtain foreign contracts and agreed in October to pay a fine of 201 million euros to put an end to some German legal proceedings.
Loescher said Siemens planned to slash administrative costs by 1.2 billion euros in the next two years and warned that the global economic slowdown had led to increased caution on the part of clients.
"We expect the consequences of the crisis in the finance sector to be felt in other sectors in the course of the next fiscal year," Loescher said
"We already see the first signs of greater cautiousness on the part of customers in our standard products business here in Germany," he added.
Regarding plans to reduce administrative costs, Loescher said: "It is clear that there will be administrative job cuts."
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