SIEMENS reported a drop in second-quarter earnings at its industrial business, the German engineering group said on Thursday (May 16), after a slowdown at its flagship factory automation division.

The trains to industrial software maker said industrial profit fell 2 per cent to 2.51 billion euros (S$3.7 billion) in the three months to the end of March. That missed an average analyst forecast for 2.68 billion euros in a company-gathered consensus.

Sales fell 1 per cent to 19.16 billion euros, below the 19.28 billion euros expected, while net profit fell to 2.19 billion euros.

Digital Industries – the company’s factory software and automation division – struggled with lower orders, sales and profit during the period, the company said.

In contrast, Siemens’s buildings and transport division both posted increases in revenues.

“Siemens proved its resilience with strong revenue performance in Smart Infrastructure, Mobility and industrial software; this nearly offset currently muted demand in Digital Industries’ automation business,” chief executive Roland Busch said.

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Siemens, which warned in March that revenues at digital industries would be lower, said the market environment had been “challenging”.

Digital Industries’ orders fell 14 per cent during the quarter while sales were 13 per cent down, as customers preferred to run through their existing stocks of industrial controllers, rather than buying new ones.

China was flagged as being particularly weak, with lower orders and revenues, while Europe also struggled.

Profit at the division fell sharply as Siemens sold fewer of its higher-margin products, and utilised its own factories less.

Siemens said it now expected the destocking trend to continue into the second half of 2024, and reduced its sales outlook for digital industries.

Still, the company confirmed its outlook for annual sales at group level to increase by 4 to 8 per cent, helped by a slightly stronger growth at its Smart Infrastructure business. REUTERS