The Wall Street Journal-20080125-Earnings Digest- Siemens-s Sale Lifts Profit Amid Bribery Flap
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Earnings Digest: Siemens's Sale Lifts Profit Amid Bribery Flap
Siemens AG's net profit for its fiscal first quarter surged on a gain from the sale of the company's automotive-electronics division and strong demand for industrial services, despite the regulatory cloud surrounding the German conglomerate.
Siemens said it hopes to begin settlement talks as soon as next month with the U.S. Justice Department and the Securities and Exchange Commission. The company is the target of investigations in several countries over allegations of bribery to win contracts and union payoffs.
Supervisory Board Chairman Gerhard Cromme cautioned that talks with U.S. authorities "are most likely to last several months" and that Siemens doesn't know when a settlement might be reached.
The company said it has recorded compliance costs of 1.1 billion euros ($1.6 billion) related to the scandal, plus 520 million euros in tax liabilities.
"Intangible damage is much harder to measure -- the loss of reputation and trust in the general public," said Chief Executive Peter Loescher. "We cannot undo this. But we are conducting a comprehensive clarification of the facts and are acting on the basis of those facts."
Net profit jumped to 6.48 billion euros in the quarter ended Dec. 31 from 788 million euros a year earlier, boosted by a 5.4 billion euro gain from selling Siemens VDO Automotive to tire maker Continental AG.
Siemens increased profit at its operations in automation and drives, industrial solutions and services, and power transmission and distribution. Results were helped by a decline in legal and regulatory costs.
Another positive was the lower-than-anticipated restructuring charge of 120 million euros at the Nokia Siemens Networks telecom-equipment joint venture with Nokia Corp., said Gael de Bray, an analyst at Societe Generale.
Power generation was a disappointment. Profit at the division dropped 20% because of more than 200 million euros in charges on a number of big projects. The division's profit margin came in at 4.5%, well below the target of 10% to 14%.
Siemens shares were up 2.5% to 84.30 euros in Frankfurt trading.
Siemens's revenue increased 10% to 18.4 billion euros from 16.73 billion euros. Profit from continuing operations rose 16% to 1.72 billion euros, while new orders rose 9% to 24.24 billion euros.
Mr. Loescher said he remains optimistic for the full year and beyond. He said he expects no direct impact on operations from the U.S. subprime-loan crisis in the current fiscal year, which ends in September. Though higher oil prices increased costs, they also helped business in the Gulf region and Russia, he said.
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Mike Esterl and Archibald Preuschat contributed to this article.
