UPDATE 1-Siemens no longer expects to meet 2014 profit target
* Siemens had targeted at least 12 pct margin in 2014
* Cites lower market expectations
* Says cost-cutting is largely on track
* Shares drop 5.5 percent
FRANKFURT, July 25 (Reuters) - German engineering group Siemens AG said on Thursday it no longer expected to reach its 2014 profit margin target, citing lower market expectations.
The company, Germany's second-biggest by market value after Volkswagen, had aimed to push up the margin on its core operating profit to at least 12 percent from 9.5 percent by cutting costs and focusing on its most profitable businesses.
It said that its cost-cutting efforts were largely on track.
Siemens Chief Executive Peter Loescher has been trying to boost the company's margins following criticism for being too slow to react to a downturn in the global economy.
He put on the back-burner a plan to increase annual sales by about a third to 100 billion euros ($132.36 billion) and late last year launched a push to save 6 billion euros over two years to compete with rivals such as General Electric Co.
Shares in the company dropped 5.5 percent to 79.06 euros by 1248 GMT, making it the biggest faller among companies in Germany's blue-chip DAX index, which was down 1.1 percent.
Less than three months ago, the company had curbed its outlook for this year as industry demand remained weak and project charges weighed on its earnings.
Sources told Reuters on Thursday that Siemens would be hit by further project charges, after two instances of wind turbine rotor blades breaking earlier this year.
Swiss industrial group ABB, a major competitor to Siemens in power systems and industry automation, earlier on Thursday reported quarterly net profit that missed expectations and a decline in orders.
Siemens is due to publish financial results for its fiscal third quarter on Aug. 1.