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ECONOMY

Siemens third quarter profits dip

German industrial giant Siemens unveiled on Thursday charges that drove its third quarter net profit 65 percent lower than in the same period last year, a sharper decline than analysts had expected.

Published: 28 July 2011 11:23 CEST
Siemens third quarter profits dip
Photo: DPA

Shares in the company rapidly posted a steep drop in early trading on the Frankfurt stock exchange.

Siemens booked several heavy charges that resulted in the sharp decline in net profit to €501 million ($719 million).

The drop was due in large part to the “re-evaluation of the commercial feasibility of particle therapy,” a subject of research by the group’s medical equipment unit, and the result of an arbitration decision on a joint venture with the French group Areva, a Siemens statement said.

Analysts polled by Dow Jones Newswires had expected a much smaller decline in net profit to €949 million.

Siemens shares showed a loss of 1.91 percent to €89.41 euros in early Frankfurt trading, while the DAX index on which they are listed was down by 0.97 percent overall.

An arbitration panel has ordered Siemens to pay Areva €648 million plus interest following Siemens’ withdrawal from a joint venture with the French company, and analysts had included that charge in their calculations.

What they did not expect was another charge of €381 million owing to Siemens’ re-evaluation of the feasibility of particle therapy, a new treatment for cancer.

The German group also booked a loss of €305 million in its information technology division which is being sold to the French firm Atos.

Siemens chief executive Peter Löscher gave a cautious outlook for the group’s full fiscal year, which runs from October 1 to September 30, saying: “Our markets are still robust, although the risks are increasing somewhat in the global economic environment.”

Those risks included the possible overheating of some emerging economies and fluctuating raw material prices, he added.

Löscher’s contract has been renewed for five years until 2017.

The company also reaffirmed its forecast for continuing operations to make a profit of at least €7.5 billion, excluding payment to Areva.

They had generated a profit of €4.3 billion in the previous exercise.

Siemens also expects new orders to rise significantly, and sales growth of around five percent.

Sales at its core industry, energy and medical technology divisions edged up by 2.0 percent from the third quarter of its previous fiscal year meanwhile, to €17.84 billion.

New orders surged by 20 percent to almost €23 billion, thanks to a huge new German railway order.

Siemens makes a broad range of products, from hearing aids to wind turbines and high-speed trains.

AFP/mdm

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ECONOMY

How is Denmark’s economy handling inflation and rate rises?

Denmark's economy is now expected to avoid a recession in the coming years, with fewer people losing their jobs than expected, despite high levels of inflation and rising interest rates, The Danish Economic Council has said in a new report.

Published: 30 May 2023 15:46 CEST
How is Denmark's economy handling inflation and rate rises?

The council, led by four university economics professors commonly referred to as “the wise men” or vismænd in Denmark, gave a much rosier picture of Denmark’s economy in its spring report, published on Tuesday, than it did in its autumn report last year. 

“We, like many others, are surprised by how employment continues to rise despite inflation and higher interest rates,” the chair or ‘chief wise man’,  Carl-Johan Dalgaard, said in a press release.

“A significant drop in energy prices and a very positive development in exports mean that things have gone better than feared, and as it looks now, the slowdown will therefore be more subdued than we estimated in the autumn.”

In the English summary of its report, the council noted that in the autumn, market expectations were that energy prices would remain at a high level, with “a real concern for energy supply shortages in the winter of 2022/23”.

That the slowdown has been more subdued, it continued was largely due to a significant drop in energy prices compared to the levels seen in late summer 2022, and compared to the market expectations for 2023.  

The council now expects Denmark’s GDP growth to slow to 1 percent in 2023 rather than for the economy to shrink by 0.2 percent, as it predicted in the autumn. 

In 2024, it expects the growth rate to remain the same as in 2003, with another year of 1 percent GDP growth. In its autumn report it expected weaker growth of 0.6 percent in 2024.

What is the outlook for employment? 

In the autumn, the expert group estimated that employment in Denmark would decrease by 100,000 people towards the end of the 2023, with employment in 2024  about 1 percent below the estimated structural level. 

Now, instead, it expects employment will fall by just 50,000 people by 2025.

What does the expert group’s outlook mean for interest rates and government spending? 

Denmark’s finance minister Nikolai Wammen came in for some gentle criticism, with the experts judging that “the 2023 Finance Act, which was adopted in May, should have been tighter”.  The current government’s fiscal policy, it concludes “has not contributed to countering domestic inflationary pressures”. 

The experts expect inflation to stay above 2 percent in 2023 and 2024 and not to fall below 2 percent until 2025. 

If the government decides to follow the council’s advice, the budget in 2024 will have to be at least as tight, if not tighter than that of 2023. 

“Fiscal policy in 2024 should not contribute to increasing demand pressure, rather the opposite,” they write. 

The council also questioned the evidence justifying abolishing the Great Prayer Day holiday, which Denmark’s government has claimed will permanently increase the labour supply by 8,500 full time workers. 

“The council assumes that the abolition of Great Prayer Day will have a short-term positive effect on the labour supply, while there is no evidence of a long-term effect.” 

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