por Lynn Shapiro
, Writer | January 28, 2009
Although Siemens AG said net profits plunged 81 percent in the most recent quarter, the earnings dive was largely due to the sale of the company's VDO automotive business last year, which had contributed €5.4 billion to profits.
As a result of the sale, profit for Siemens' first fiscal '09 quarter, ended in December, dropped to €1.23 billion ($1.62 billion) from €6.47 billion, a year ago. Not considering the one-time item, Siemens fared better than its rivals, GE and Philips (see related stories).
Total sector profit - covering all three of Siemens' main divisions--industrial, energy and health care -- climbed 20 percent to approximately €2 billion ($2.64 billion).
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Siemens' earnings exceeded analysts' expectations, which called for sales of €19.24 billion and core operating profit of €1.81 billion. Order intake met expectations at €22.25 billion, as the company reaffirmed its full-year target profits of between $8 billion to $8.5 billion.
Siemens said its industrial division led the company's earnings for the quarter, with profits of €907 million. Earnings for the unit dropped 9 percent, from €994 million, a year ago.
The second of its three core businesses, energy, reported earnings of €756 million, above the year-ago figure. Fossil fuel power generation contributed the most to those profits. Year-ago results were hurt by one-time by charges, the company said.
Meanwhile, health care profits climbed to €342 million. The company said that the imaging business was a top performer for Siemens during the quarter.
"Siemens got off to a good start in fiscal 2009, including a better order performance than most of our competitors in the December quarter," chief executive Peter Loescher said.
Loescher told shareholders at the company's annual meeting in Munich on January 27, that he is dedicated to strengthening core business segments and has decided to pull out of a nuclear power plant joint venture with French company Areva SA by 2012, citing a lack of "entrepreneurial influence."
He said Siemens would terminate its shareholder agreement with Areva by Jan. 30, 2012, and sell the stake to the French company, which owns the remaining 66 percent, while continuing to be a major player in the nuclear power arena.
Meanwhile, Siemens spent €1.57 billion ($1.6 billion) in legal fees during the last quarter to settle bribery cases in the U.S. and Germany. Prosecutors alleged the German conglomerate had bribed officials to win huge public works contracts around the world.
Siemens recently pleaded guilty in Federal court in Washington to charges that it violated a 1977 law banning the use of corrupt practices in foreign business dealings.