Siemens issues shock profit warning

Siemens has issued a shock profit warning today saying its 3-month earnings would be cut by €900 million (£692 million). Following the news, shares in the engineering group tumbled more than 10%.

Project delays were blamed, particularly at its power station unit, which were due to problems with suppliers and difficulties with recruiting engineers.

However, the German company said none of them were related to the sub-prime crisis that is hitting the financial markets which, so far, has had little impact on European industrials.

The profit warning came as a shock to the markets because back in January, Siemens issued a positive statement, predicting that its sales would grow at double the rate of the global economy.

Peter Löscher, Siemens’ chief executive since July, said the company is in the middle of a restructuring programme. So far, his changes have included reorganising the company’s 10 units into 3 divisions.

Investors said Mr Löscher’s credibility was hanging by a thread. The market will see this as a clear-up by Löscher but it is probably the last thing he can get away with, said one leading investor.

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