By Christopher Alessi
MUNICH--German engineering giant Siemens AG announced on
Thursday an additional 4,500 job cuts world-wide, targeting its
embattled power and gas division and a group of underperforming
businesses it hopes to turn around.
The new cuts--roughly 2,200 of which are expected to be in
Germany--come just months after Siemens said it would reduce its
global head count by 7,800, a number it brought down to 7,400
following labor negotiations. The company has also said it would
cut around 1,200 jobs in the energy division.
The announcement came as Siemens turned in a sharp improvement
in net profit in the quarter to the end of March when proceeds from
asset sales and the impact of the weak euro offset shrinking profit
margins at its energy and industrial units.
The total of roughly 13,100 job losses is part of a company-wide
restructuring led by Chief Executive Joe Kaeser, which includes
selling off noncore businesses and focusing more on energy.
"With the initiation of these measures, the company's structural
organization has been completed for the most part," Mr. Kaeser
said.
Siemens said the job cuts in the power and gas business were a
result of a challenging market for power-generation equipment as
regulatory changes, falling prices, stiffer competition and
overcapacity have plagued Europe's electricity utilities. The other
cuts are expected to target a group of unprofitable businesses,
including the compressors, transmission and mechanical-drives
units.
As part of the restructuring, Mr. Kaeser has sought to sell,
partner or turnaround a number of underperforming businesses that
comprise around 18% of sales. That effort has included the sale of
its health care information technology business for $1.3 billion
and a heavy metals joint venture with Mitsubishi Heavy Industries
Ltd.
The surge in net profit came largely from gains from the sale of
Siemens' stake in a household-appliances joint venture with Robert
Bosch GmbH and the disposal of its hearing-aid unit and health care
information technology businesses.
Net profit for the period, Siemens' fiscal second quarter, rose
to EUR3.89 billion ($4.41 billion) from EUR1.12 billion during the
same period last year, beating analysts' expectations. Analysts had
forecast a net profit of EUR2.01 billion, according to a recent
poll by The Wall Street Journal.
Revenue rose by 8% to EUR18.05 billion from EUR16.7 billion last
year, helped by the euro's weakness against major currencies. New
orders climbed by 16% to EUR20.75 billion, boosted by large
domestic contracts at Siemens' train business.
However, low oil prices and volatile economic conditions in some
parts of the world squeezed the group's profitability. The overall
industrial profit margin dropped to 9% from 10.3% during the same
period last year.
Mr. Kaeser has faced pressure from shareholders to justify
Siemens' planned $7.6 billion acquisition of U.S. oil-equipment
maker Dresser Rand Group Inc., announced last September. Many
analysts and investors have judged the deal as expensive as oil
prices have tumbled.
But Mr. Kaeser said on Thursday the deal was still on track to
close by this summer as originally planned. "We are quite
confident," he said.
Siemens reiterated its guidance for the 2015 fiscal year, saying
its expects to attain a profit margin for its industrial businesses
between 10% and 11%, a target that many analysts have said Siemens
may have trouble achieving in light of continuing economic
difficulties.
Write to Christopher Alessi at christopher.alessi@wsj.com
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