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ECONOMY

Siemens third quarter profits dip

German industrial giant Siemens unveiled on Thursday charges that drove its third quarter net profit 65 percent lower than in the same period last year, a sharper decline than analysts had expected.

Siemens third quarter profits dip
Photo: DPA

Shares in the company rapidly posted a steep drop in early trading on the Frankfurt stock exchange.

Siemens booked several heavy charges that resulted in the sharp decline in net profit to €501 million ($719 million).

The drop was due in large part to the “re-evaluation of the commercial feasibility of particle therapy,” a subject of research by the group’s medical equipment unit, and the result of an arbitration decision on a joint venture with the French group Areva, a Siemens statement said.

Analysts polled by Dow Jones Newswires had expected a much smaller decline in net profit to €949 million.

Siemens shares showed a loss of 1.91 percent to €89.41 euros in early Frankfurt trading, while the DAX index on which they are listed was down by 0.97 percent overall.

An arbitration panel has ordered Siemens to pay Areva €648 million plus interest following Siemens’ withdrawal from a joint venture with the French company, and analysts had included that charge in their calculations.

What they did not expect was another charge of €381 million owing to Siemens’ re-evaluation of the feasibility of particle therapy, a new treatment for cancer.

The German group also booked a loss of €305 million in its information technology division which is being sold to the French firm Atos.

Siemens chief executive Peter Löscher gave a cautious outlook for the group’s full fiscal year, which runs from October 1 to September 30, saying: “Our markets are still robust, although the risks are increasing somewhat in the global economic environment.”

Those risks included the possible overheating of some emerging economies and fluctuating raw material prices, he added.

Löscher’s contract has been renewed for five years until 2017.

The company also reaffirmed its forecast for continuing operations to make a profit of at least €7.5 billion, excluding payment to Areva.

They had generated a profit of €4.3 billion in the previous exercise.

Siemens also expects new orders to rise significantly, and sales growth of around five percent.

Sales at its core industry, energy and medical technology divisions edged up by 2.0 percent from the third quarter of its previous fiscal year meanwhile, to €17.84 billion.

New orders surged by 20 percent to almost €23 billion, thanks to a huge new German railway order.

Siemens makes a broad range of products, from hearing aids to wind turbines and high-speed trains.

AFP/mdm

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ECONOMY

German consumer prices set to rise steeply amid war in Ukraine

Russia's war in Ukraine is slowing down the economy and accelerating inflation in Germany, the Ifo Institute has claimed.

German consumer prices set to rise steeply amid war in Ukraine

According to the Munich-based economics institute, inflation is expected to rise from 5.1 to 6.1 percent in March. This would be the steepest rise in consumer prices since 1982.

Over the past few months, consumers in Germany have already had to battle with huge hikes in energy costs, fuel prices and increases in the price of other everyday commodities.

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With Russia and Ukraine representing major suppliers of wheat and grain, further price rises in the food market are also expected, putting an additional strain on tight incomes. 

At the same time, the ongoing conflict is set to put a dampener on the country’s annual growth forecasts. 

“We only expect growth of between 2.2 and 3.1 percent this year,” Ifo’s head of economic research Timo Wollmershäuser said on Wednesday. 

Due to the increase in the cost of living, consumers in Germany could lose around €6 billion in purchasing power by the end of March alone.

With public life in Germany returning to normal and manufacturers’ order books filling up, a significant rebound in the economy was expected this year. 

But the war “is dampening the economy through significantly higher commodity prices, sanctions, increasing supply bottlenecks for raw materials and intermediate products as well as increased economic uncertainty”, Wollmershäuser said.

Because of the current uncertainly, the Ifo Institute calculated two separate forecasts for the upcoming year.

In the optimistic scenario, the price of oil falls gradually from the current €101 per barrel to €82 by the end of the year, and the price of natural gas falls in parallel.

In the pessimistic scenario, the oil price rises to €140 per barrel by May and only then falls to €122 by the end of the year.

Energy costs have a particularly strong impact on private consumer spending.

They could rise between 3.7 and 5 percent, depending on the developments in Ukraine, sanctions on Russia and the German government’s ability to source its energy. 

On Wednesday, German media reported that the government was in the process of thrashing out an additional set of measures designed to support consumers with their rising energy costs.

The hotly debated measures are expected to be finalised on Wednesday evening and could include increased subsidies, a mobility allowance, a fuel rebate and a child bonus for families. 

READ ALSO: KEY POINTS: Germany’s proposals for future energy price relief

In one piece of positive news, the number of unemployed people in Germany should fall to below 2.3 million, according to the Ifo Institute.

However, short-time work, known as Kurzarbeit in German, is likely to increase significantly in the pessimistic scenario.

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