×

Siemens Issues Profit Warning, Shares Tumble

Engineering group Siemens issued a profit warning after a review of major projects at three operations, sending its shares down as much as 7 percent in pre-market trading on Monday.

siemens1.jpg

"Siemens expects the negative impact on earnings to amount to approximately 900 million euros ($1.2 billion) in the current quarter," the German conglomerate said in a statement.

"The expectation is that this amount represents the largest piece of any additional financial burdens for 2008," it added.

The warning followed a review of projects at its power generation and mobility divisions in the industry sector and IT Solutions and Services.

"In the Fossil Power Generation Division, the large number of turnkey projects that have accumulated since 2004 has had an adverse effect. New exposure can be attributed to structural challenges in the supplier markets and to delays recruiting experienced project engineers," the statement said.

At its Mobility Division, it cited delays in the awarding of major projects as well as "product rehabilitation" programs at its Combino business.

At Siemens IT Solutions and Services, risks arose in British projects. It said in a conference call that the British government had cancelled an 85 million euro contract because Siemens could not maintain the promised timetable.

Siemens confirmed its targets for 2010, when the various units are expected to reach certain operating margin goals.

The company had aimed to publish first results from the audit of turnkey projects at its power generation unit by April this year and audit other turnkey projects as well. It has said the entire backlog would be examined.

The trains-to-lightbulbs conglomerate is in the midst of its biggest restructuring in nearly two decades.

Chief Executive Peter Loescher, who took the helm at Siemens in May, is set to slim down the company to catch up with more profitable rivals such as General Electric (GE is CNBC's parent company).

Loescher has so far scaled down the management board and regrouped the company's 10 units into three major divisions: industry, energy and healthcare.