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UPDATE 1-Siemens Q1 profit dips on Power and Gas business declines

* Q1 industrial profit 2.21 bln euros vs poll avg 2.19 bln

Q1 industrial profit margin 11 pct vs yr-earlier 13.2 pct

* New orders 22.48 bln euros vs poll avg 20.81 bln

* Slump in fossil power market not temporary - CEO (Adds CEO comment, details on impact on U.S. tax reform, background)

MUNICH, Jan 31 (Reuters) - German engineering group Siemens posted a 14 percent decline in quarterly industrial profit as it struggled with continued weak demand from the power and gas sector and ramped up investments in its flagship factory software.

"The declining market for fossil power generation is not a temporary slump. Instead it reveals the expected dramatic development that we'll only be able to address and we must address by taking strategic measures," Chief Executive Joe Kaeser said as the group published results on Wednesday.

The group is in talks with labour representative about implementing job cuts, it said.

Industrial profit at the trains-to-turbines group came to 2.21 billion euros ($2.75 billion) in the fiscal first quarter to end-December, taking a hit from a near halving of profits at the Power and Gas division.

That compares with consensus for 2.19 billion in a Reuters poll of analysts.

The profit margin from industrial business shrank to 11 percent from 13.2 percent in the year-earlier period.

Arch-rival General Electric, which is struggling to reverse steep declines in some of its units and looking to sell $20 billion of assets, reported an industrial margin of 11.2 percent for the December quarter.

Both conglomerates are slimming down - GE faster than Siemens. The German group under Kaeser in the last year alone has hived off its wind-power unit into a joint venture and agreed to do the same with its trains and signalling unit.

Siemens's quarterly sales rose 3 percent to 19.82 billion euros, broadly in line with consensus, while new orders jumped 14 percent to 22.48 billion euros, compared with the average analyst forecast for 20.81 billion euros.

Separately, Siemens said U.S. tax reforms resulting in a lowering of the corporate tax rate led to a net positive effect of 437 million euros in the fiscal first quarter.

It said it assumes a tax rate at the lower end of the forecast range of 27 to 33 percent for fiscal 2018. ($1 = 0.8048 euros) (Reporting by Georgina Prodhan and Edward Taylor; Editing by Maria Sheahan)