Siemens misses profit forecast as customers stick to trend of destocking

By John Revill

ZURICH (Reuters) -Siemens reported on Thursday a drop in second-quarter earnings at its industrial business, as China maintained its trend of destocking longer than previously expected.

The maker of items from trains to industrial software said its business was still being hit by uncertain customers preferring to run down supplies rather than buy new equipment.

Although Siemens expects an improvement in coming months, it was likely to come more slowly than previously thought, Chief Executive Roland Busch said.

"A key reason is the muted development in China," he told reporters. "Overcapacities in certain customer industries, such as solar and electric vehicles, are another reason."

He added, "In addition, Europe's key export-driven markets, such as Germany, are recovering only very sluggishly."

Siemens expects the destocking trend in China to run through the rest of 2024, although it expected stock levels in Europe and the United States to return to normal by the end of September.

As a result Siemens cut its full-year outlook for digital industries, traditionally its most profitable business, saying it now expected a sales decline of 4% to 8%.

The fortunes of Siemens are seen as an indicator for the health of the broader global economy, with its products used in transport systems as well as to control factory machinery.

For its second quarter from January to March, Siemens reported a drop of 2% in industrial profit to 2.51 billion euros ($2.73 billion). That missed average analyst forecasts for 2.68 billion euros in a company-gathered consensus.

Sales fell 1% to 19.16 billion euros, below an expected 19.28 billion, while net profit fell to 2.19 billion euros.

The company's stock was down 1.1% in early trade on the Frankfurt market.

In contrast to the struggles at its digital industries division, Siemens's buildings and transport divisions both posted increases in revenues, proving the resilience of the company, Busch added.

Siemens confirmed its outlook for annual sales at group level to increase by 4% to 8%, although Chief Financial Officer Ralf Thomas said the figure was likely to be at the lower end of the range.

It also said it would sell its Innomotics large motors and drives business for 3.5 billion euros to KPS Capital Partners.

($1=0.9188 euros)

(Reporting by John Revill; Editing by Subhranshu Sahu and Clarence Fernandez)