Siemens has posted a 14 % decline in Q1 2017 industrial profit, dragged down by continued weak demand from the power and gas sector while it ramps up investments in factory automation software. The company’s overall profit reached $2.75 billion, down 14 % on Q1 2016, with profits from the power and gas division half of what they were year-on-year.
“The declining market for fossil power generation is not a temporary slump. Instead it reveals the expected dramatic development that … we must address by taking strategic measures,” chief executive Joe Kaeser said as the group published its results on 31 January. The company expects to reduce costs, including severances, through the fiscal year, though officials did not specify how many jobs or which sector would be impacted.
The effect on Siemens is symptomatic of radical changes in the power industry. Its main business rival GE, which is struggling to reverse steep declines in some of its units and is looking to sell $20 billion of assets, reported an industrial margin of 11.2 % for the December quarter.
Both conglomerates are slimming down. In the last year Siemens has hived off its wind-power unit into a joint venture and expects to do the same with its trains and signalling unit. It also plans to list its medical imaging and diagnostics division on the stock exchange during H1 2018.
Industrial profit at Siemens trains-to-turbines group came to €2.21 billion ($2.75 billion) in the fiscal first quarter to end-December, taking a hit from a near halving of profits in the Power and Gas division.
Large gas turbines are increasingly difficult to sell in a world moving to renewable energy and Siemens has turned more of its focus to industrial automation, where it is market leader.
The group is in talks with labour representatives about where to cut 6900 jobs as part of a restructuring programme announced last year.