Siemens to cut 4500 jobs to help turnround power and gas arm

Siemens plans to cut a further 4500 jobs to help turnaround its power and gas division and other underperforming businesses which contributed to a mixed start to 2015 for the German engineering conglomerate.

The job cuts are equivalent to slightly more than 1 per cent of its global workforce and come on top of some 7800 administrative job cuts announced in February. 

The operating profit of Siemens' industrial businesses - a measure closely watched by analysts - declined 5 per cent to €1.7bn in its fiscal second quarter that concluded in March, slightly below a consensus forecast of €1.78bn compiled by Reuters.

The profit of its core power and gas division declined 34 per cent year-on year. However, the weak euro helped drive an increase in group sales and revenues.

"For business volume, we performed well in our markets. The profitability of our industrial business shows that we must still improve some businesses," Joe Kaeser, chief executive, said. 

Since taking over in 2013 Mr Kaeser has overhauled Siemens' organisational structure and culture but the company's revenues are stagnating, in part due to weak demand in power and gas. 

In Germany, the switch to renewables has caused utilities to delay orders for new gas-fired power stations and Siemens has been caught out by the trend for decentralised power generation, which requires much smaller turbines.  

In addition, Siemens is obliged to invest heavily in research because the efficiency of its turbines is falling behind rival General Electric, which affects the price it can charge customers. 

Siemens has sought to fill holes in its energy portfolio via acquisitions but is still awaiting European Union approval for a proposed $7.6bndeal to buy US oilfield equipment provider Dresser-Rand. 

Analysts have criticised Siemens for overpaying for the US compressor maker and its timing was poor - the oil price slumped after the deal was announced in September. Dresser-Rand said it would cut 8 per cent of its workforce in February in response to falling demand.

Siemens' revenues rose 8 per cent to €18bn in the latest quarter but adjusted for currency effects related to the weak euro and portfolio effects, revenues were flat compared with a year ago. Orders jumped 16 per cent to €20.8bn, helped by large orders in rail; the increase was 7 per cent on a comparable basis.  

Net income more than trebled to €3.9bn compared with a year ago but the result was flattered by three asset sales: the disposal of its hearing aid business, its stake in BSH household goods and a hospital IT unit together added €3.2bn to the quarterly total. 

Siemens confirmed its full-year outlook for a gain of at least 15 per cent in earnings per share. The goal is made much easier by those asset sales and by the weaker euro, which is expected to boost earnings in the second half of the fiscal year as currency-hedges that lock in previous exchange rates expire.

 The deficit in Siemens pension plans surged to €11bn from €9.6bn at the end of December, due to the low-interest rate environment.

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