Siemens issues 'surprise' profit warning

Siemens issued a profit warning, saying that weaker-than-expected performance in its major business projects in the current quarter was going to pull earnings down by approximately €900 million (US$1.4 billion), an Associated Press report said. The news caused Siemens shares to plummet, closing down nearly 17.1% at €66.42 (US$102.36) in Frankfurt, making the company by far the worst performer on an already grim day for the DAX index, the report said.

The profit warning was a surprise for the conglomerate, whose diverse products include trams, turbines and telecoms equipment, given that it had said in January that sales were expected to double the pace of the global economy.

It had a first-quarter net profit of nearly €6.5 billion (US$10.1 billion) compared to €788 million in the same period a year earlier.

The Associated Press report also quoted Siemens, whose current quarter ends March 31, as saying that it had launched an extensive review of its major products in the current quarter, with an emphasis on its fossil power generation division in the company's energy sector as well as its mobility division in its industry sector and its IT Solutions and Services.

Specifically, the company said it had experienced delays in its fossil power generation division because 'the large number of turnkey projects that have accumulated since 2004 has had an adverse effect.'

It also said it was hampered by delays in recruiting experienced project engineers. Siemens said its IT unit suffered the loss of a major order in the UK from a customer, which it did not identify, but is the Department of Work and Pensions - see AnalystWire for more information.