But orders rose 12 percent to €23.37 billion ($36.4 billion), the group added, helping to push up its share price.
Profit in the second quarter to March of Siemens’ 2007/2008 fiscal year fell to €412 million, a company statement said, while sales edged up 1.0 percent to €18.09 billion.
Shares in the company nonetheless gained 0.95 percent to €74.09 in midday trade as investors welcomed the strong rise in new orders, a lower than expected charge and an ambitious plan to cut selling, general and administrative (SGA) costs.
The DAX index of leading shares was 0.36 percent lower overall.
“Despite the rather weak results, we were surprised by the company’s figures on new orders, the charge which came in lower than feared and the ambitious expected drop in SGA costs,” said a London-based analyst.
Siemens expected full-year earnings to stagnate; however, whereas it had initially forecast an increase in operating profit for the fiscal year to September.
At the same time, it maintained its outlook for internal growth at twice the rate of the global economy.
Chief executive Peter Loescher said: “We have now concluded our project reviews in the fossil power business, and in total, we have a clear picture of the relevant risks.”
Last month, Siemens, which has been rocked by a scandal over how it obtained foreign contracts, announced it would take a charge of €900 million due to problems with a range of major projects.
On Wednesday, it said the amount had come in fact to €857 million, but it also warned more charges could follow in the next three quarters.
The group, whose operations span lightbulbs, computers, power turbines and trains, said it had been unable to keep up with the contracts it signed in the past few years.
It could face further headwinds this year as well since the planned sale of its telecommunications unit SEN was expected to result in a substantial capital loss, the company said.
Siemens could also be hit by heavy costs related to the corporate scandal which has unfolded relentlessly since late 2006.
It faces possible heavy fines in the United States and an internal probe released on Tuesday found that almost all sectors of activity had been subject to corrupt practices.
Loescher acknowledged during a press conference that he “did not expect an affair of this size” when he agreed to become the Siemens boss last year.
The group has recognized the existence of special funds worth €1.3 billion used to illicitly obtain foreign contracts and agreed in October to pay a fine of €201 million to put an end to some German legal proceedings.
It has also incurred compliance costs of around €1.8 billion to date and said in November that it would announce ‘annually’ the number of people that had been dismissed during the year for compliance violations.
Meanwhile, Loescher said Siemens planned to cut SGA costs to less than €11 billion by 2010, which would represent a decrease of €1.2 billion.
He warned that the global economic slowdown had led to increased caution on the part of clients.
“We expect the consequences of the crisis in the finance sector to be felt in other sectors in the course of the next fiscal year,” Loescher said.
“We already see the first signs of greater cautiousness on the part of customers in our standard products business here in Germany,” he added.