German engineering conglomerate Siemens slashed its full-year profit forecast on Wednesday after incurring another major charge related to delayed offshore wind power projects in the second quarter.
The cut was slightly less than analysts feared, however, as the charge was offset by a better-than-anticipated performance at the group's core industrial and healthcare businesses.
"We now see a very low probability that Siemens will need to cut guidance again, see lots of bad news priced in and upgrade the stock to 'Add'," WestLB analyst Thomas Langer said.
Shares in Germany's biggest company by market capitalisation were up 1.5 percent at 70.86 euros by 0903 GMT, in line with the German blue-chip index.
Siemens now sees net profit from continuing operations for its 2011/12 year to end-September at 5.2-5.4 billion euros, down from a previous outlook for 6 billion and compared with analysts' consensus forecast of 5.2 billion.
Core net profit dropped by two thirds to 1.05 billion euros in the second quarter, just above analysts' average estimate.
That included a 278-million-euro charge for wind project delays, which surprised analysts after a big hit in the first quarter as well. News of the charge came a day after Siemens named a new chief for the affected Power Transmission division, having ousted the unit's former CEO Udo Niehage.
"We have to admit that there was a lack of competence," finance chief Joe Kaeser said during a conference call.
"At the end of the day, this is a highly complex process, including engineering, shipbuilding and major challenges you have to discuss with regulators."
Quarterly profit was also hit by an expected 640 million euro charge related to Nokia Siemens Networks, the loss-making telecom equipment vendor Siemens owns with Nokia .
The decline was cushioned, however, by robust demand for automation systems and industrial software, and a smaller than expected decline in profits from the sale of healthcare equipment such as MRI scanners and radiation machines.
Siemens, which makes products ranging from trains and turbines to hearing aids and light bulbs, is a bellwether for the euro zone's biggest economy, and the problems with offshore wind farms have come just as a muted global economic environment keeps lid on investment expectations.
Group new orders slumped by 13 percent to 17.88 billion euros in the second quarter, missing a forecast 20.14 billion, as Siemens won fewer big contracts in Germany, India and China.
The group, which does a third of its business in emerging markets, said orders should improve in its fiscal second half.
Chief Executive Peter Loescher told Reuters Insider TV in an interview that the economy of China, which accounts for about 15 percent of Siemens' new orders, appeared to pick up again in March after a slow start to the year.
China was the only area in which Siemens reported a quarterly revenue decline, sliding by 6 percent, while group revenue was up 9 percent and above expectations.
SORTING OUT WIND
Siemens said it expected the Power Transmission business, which posted a quarterly loss of 169 million euros, to continue to weigh on profits in the coming quarter, with 100 million euros earmarked for restructuring of the unit.
The German offshore market is expected to grow rapidly in the coming years as Berlin banks on wind farms to help it shift its energy mix toward renewables and away from nuclear power.
But Siemens, which sees itself at the forefront of Germany's push for greener energy, has struggled to make headway in several projects to connect wind farms off the German North Sea coast with mainland power grids.
It has blamed delays and rising project costs on a complex German regulatory approval process. Its main rival in the business is Switzerland's ABB , which earlier posted slightly weaker than expected quarterly profit.
Several companies, including top German utilities E.ON and RWE , have warned that delays in the connection of wind parks to the grid could lead to the collapse of the country's offshore plans.