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Siemens posts stronger than expected industrial profit

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Siemens posts stronger than expected industrial profit
FILE PHOTO: The logo of German industrial group Siemens is seen in Zurich, Switzerland, January 30, 2019. REUTERS/Arnd Wiegmann   -   Copyright  Arnd Wiegmann(Reuters)
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By John Revill

MUNICH (Reuters) – Siemens posted better-than-expected adjusted operating profit from its industrial business during its second quarter as the German industrial giant began separating and spinning off its struggling power and gas business.

The trains to industrial turbines maker said on Wednesday that its industrial profit rose 7 percent to 2.4 billion euros (2.1 billion pounds) in the three months that ended on March 31, beating estimates of 2.24 billion euros in an Infront data poll.

Revenue rose 4 percent to 20.94 billion euros, matching estimates, while orders rose 6 percent to 23.61 billion euros.

The company confirmed its outlook for its 2019 fiscal year, saying it expected a profit margin of 11 to 12 percent for its industrial business and a basic earnings per share from net income of 6.30 to 7.00 euros.

“We delivered on our promises again this quarter, and even exceeded expectations in many areas,” said Siemens Chief Executive Joe Kaeser.

“Now we enter into a new era to become an even stronger and more focussed Siemens.”

On Tuesday Siemens said it would spin off its gas and power business, which has dragged on the engineering firm’s performance as the rise of renewable power hits demand for gas turbines.

Siemens is leaving behind the business where revenues and profit have collapsed due to plummeting demand and cut-throat competition from rivals including Mitsubishi Heavy Industries and General Electric Co.

During the first three months of the year revenue at the division fell 4 percent, although the adjusted operating profit recovered due to a strong contribution from services.

In future Siemens will concentrate its energies on its Digital Industries business, which automates factories with drives and software.

Siemens Digital Factory unit, which will be the basis for the new division, struggled during the quarter with weaker demand for automation products and weaker investment sentiment in China. Although revenue rose by 4 percent, operating profit fell.

Building technologies, which will be the basis for Siemens Smart Infrastructure – the other half of the company’s new focus – saw its orders and revenue rise during the quarter.

With the reorganisation Siemens wants to raise the profit margin for its industrial business to 14 to 18 percent, from the current goal of 11 to 15 percent.

(Reporting by John Revill; Editing by Michelle Martin)

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