UPDATE 1-Siemens industrial profit drops as turbines, wind struggle


* Industrial profit 2.2 bln eur vs Reuters poll avg 2.49 bln

* Power and Gas profit plunges 40 pct

* Shares indicated down 2.5 pct
(Adds details on Digital Factory, outlook, share indication,
analyst comment)

By Georgina Prodhan

MUNICH, Nov 9 (Reuters) – German engineering company Siemens
reported a worse-than-expected 10 percent drop in
industrial profit for its fiscal fourth quarter as its power and
wind turbine businesses struggled and its digital unit booked
higher costs.

Industrial profit came in at 2.2 billion euros ($2.6
billion) for the quarter to the end of September, below the
lowest estimate in a Reuters poll of analysts, in which
forecasts averaged 2.49 billion euros.

Profit from Power and Gas, Siemens’ second-biggest business
line after healthcare, plunged 40 percent to 303 million euros
as it battled overcapacity and falling prices. Siemens is about
to embark on a restructuring of the unit.

“We have to tackle structural issues in some individual
businesses,” Chief Executive Joe Kaeser said in a statement on
Thursday. “There is a lot of work ahead of us in fiscal 2018.”

Industrial profit excludes earnings from its financial and
corporate activities.

Siemens shares were indicated down 2.5 percent ahead of the
Frankfurt market open, while the blue-chip DAX index was
expected to open flat.

Baader Bank analyst Guenther Hollfelder described it as a
“weaker-than-expected year-end finish” but kept his “buy” rating
on the stock.

Siemens faces a year of considerable change as it lists its
40 billion-euro healthcare business, puts its trains business
into a joint venture with Alstom and restructures its
two problem units.

It will now focus more clearly on its industrial automation
division, Digital Factory, where it is market leader. Factory
automation is an increasingly attractive business, with China
targeting rapid growth in domestically manufactured goods.

Siemens competes in the area with European rivals ABB
and Schneider Electric as well as Rockwell
Automation in the United States, which just rebuffed a
takeover offer from Emerson Electric.

Digital Factory posted an unexpected 3 percent slide in
profit to 501 million euros, burdened by expenses for developing
its MindSphere industrial software platform, the $4.5 billion
acquisition of Mentor Graphics and severance charges.

Siemens, the first of its global peers to give a 2018
forecast, said it saw moderate revenue growth, orders above
revenues, higher earnings per share and an industrial profit
margin of 11-12 percent, after 11.2 percent in 2017.

The forecast excludes severance charges, which may be
substantial as it lays off what are expected to be thousands of
people at Power and Gas and wind power venture Siemens Gamesa
Renewable Energy.

Fourth-quarter revenue rose 1 percent on a comparable basis
to 22.3 billion euros, below market expectations, while orders
jumped 16 percent to 23.7 billion euros, beating forecasts.

Earnings per share rose 10 percent to 1.57 euros.

($1 = 0.8621 euros)
(Reporting by Georgina Prodhan; Editing by Maria Sheahan and
Tom Pfeiffer)


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