‘The golden days are gone’ as eurozone woes rock Siemens

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Europe’s biggest engineering conglomerate Siemens suffered an unexpectedly sharp fall in core profit as the European debt crisis squeezed margins, especially in the renewable energy business.

Chief executive Peter Loescher warned yesterday that 2012 would be a difficult year for Germany’s largest company by market capitalisation, but stuck with a forecast for flat net income from continuing operations.

“For us 2012 will not be easy,” he said. “The golden days are gone.”

Siemens – which makes trains, turbines, hearing aids and lightbulbs – is a bellwether for the eurozone’s biggest economy as well as the region as a whole, where a festering debt crisis is keeping a lid on investment expectations.

With the eurozone teetering on the brink of recession, manufacturers such as Siemens are clamouring for factory orders and rushing for a shrinking number of energy projects, which is putting pressure on prices and profits.

Siemens said operating profit at its main businesses declined 23 per cent to 1.60 billion euros in its first quarter.

New orders shrank for the first time since the January-March quarter of 2010, declining 5 per cent mainly due to a slump at its energy business.

“The uncertainties of the ongoing debt crisis have left their mark on the real economy,” Mr Loescher said. “Although a recovery is expected in the second half of the year, we must work hard to achieve our goals.”

Siemens’s energy sector – which generates more than a third of group revenues – posted a profit margin slump to 7.8 per cent from 13.1 per cent as pricing pressure in wind power pushed the renewable energy business to a loss and approval for projects to connect offshore wind turbines to power grids was delayed.

Siemens declined to provide details on the delays, which forced it to book 203 million euros in one-time charges.

A spokeswoman told the Yorkshire Post that “Siemens continues its growth plans and investment in wind power in the UK.

“In December we submitted our planning applications for Green Port Hull and have just completed our public consultations for the development.

“Our plans have been positively received and we look forward to progressing to the next stage.

“Siemens is also investing significantly in UK wind power research and development, skills and the supply chain to support market growth.”

Juergen Maier leads the UK industry sector.