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Siemens stands by outlook
MUNICH, Germany (Reuters) -- German industrial giant Siemens said on Thursday it was cautiously optimistic about the year ahead and would boost operating profitability after posting better-than-expected first quarter earnings. Siemens reported net profit for the three months to December 31 of 521 million euros ($558 million), down from 538 million a year earlier but well ahead of most market forecasts as its power generation and medical units turned in strong results. Sales were down 10 percent at 18.845 billion euros, lower than forecasts as the effects of the weaker dollar hit international sales figures and after the group shed a number of businesses including its Unisphere networks unit. The troubled ICN telecoms network unit widened its loss and the weaker dollar hit both operating earnings and sales, while there were further heavy top-up payments to the pension fund, which has been hit by falling capital markets. "Our first quarter results are better than we expected, however we stand by the overall outlook we provided in December," Chief Executive Heinrich von Pierer said in a statement at the company's annual shareholder meeting. "The margins of our groups continue to move towards their target ranges specified in Operation 2003." Earnings before interest and tax (EBIT) climbed 24 percent to 604 million euros, above market consensus of 536 million. Von Pierer said the business environment remained beset by a considerable degree of uncertainty which made it difficult to make any precise forecasts. Orders fell 21 percent to 20.1 billion in the quarter but Von Pierer said he was broadly happy with the group's situation. "Cautiously optimistic, that's what we are," he said. SHARES RISEThe first quarter results and the fact that Siemens did not alter its view of prospects sent the stock higher in morning trade, making up some of the previous day's sharp drop. By 1035 GMT, Siemens shares, which lost almost half their value amid stuttering global economic growth last year, were 3.4 percent higher at 39.64 euros, outperforming the pan-European DJ Stoxx tech index which was 2.3 percent higher. "The most important thing is that the outlook remains unchanged. There was a lot of fear about a downward revision of the outlook but Von Pierer kept his outlook and that is a real positive," said a Munich-based fund manager. Siemens, which makes products ranging from high-speed trains to medical scanners, turbines and mobile phones has been hit by slack economic growth but has escaped the losses seen by some rivals in recent years due to the broad range of its businesses. But it has struggled with perceptions it is not profitable enough compared with rivals like General Electric (GE). Von Pierer said in December that conditions would remain difficult this year but that Siemens was confident of meeting margin targets in each of its operating segments as its "Operation 2003" restructuring programme bites. BROAD RANGEPower Generation saw EBIT rise to 409 million euros from 302 million lifted by a net gain of 125 million euros from the effect of project cancellations, which analysts cautioned may have a negative impact in future quarters as the boom in U.S. demand seen in recent years tails off. "On the face of it, the numbers were pretty good but there are some question marks about the quality and sustainability of earnings given that most of the upside seems to have come from the Power Generation side," said Schroder Salomon Smith Barney analyst Mark Davies-Jones, who rates the stock neutral. Medical Solutions posted EBIT of 245 million, up from 212 million a year earlier, while the Automation and Drives unit lifted earnings slightly to 179 million euros. The automotive unit turned slight losses into a profit of 73 million euros. However the troubled ICN unit, which has shed thousands of jobs over the past two years remained a problem, widening its operating loss to 151 million euros from 124 million a year ago. Analysts also said lower charges in the quarter suggested the pace of restructuring may be slowing in the face of a prolonged wrangle over job cuts at the unit's Munich centre. But von Pierer said the group still aimed to reach break even at the unit by the end of the year. ICM, the mobile telecoms division, boosted its operating profit to 59 million euros from 37 million a year earlier, as handset sales in the Christmas quarter reached 11 million units. Net cash from operating activities and investment was a negative 1.137 billion euros by the end of the first quarter as the company paid in an additional 442 million euros to its pension fund, bringing total additional funding to the fund to 2.6 billion euros over the past two quarters. Group net profit was depressed by a 17 million charge related to Siemens' stake in loss-making chipmaker Infineon (FIFX).
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