Crisis hits German industrial giants

The gloomy global economic outlook is taking a heavy toll on some of Germany’s mighty industrial firms, with Siemens on Thursday warning on profits and BASF complaining weakness in China was hitting orders. Engineering and technology giant Siemens, one of Germany’s biggest firms, admitted that orders were drying up and said it would be “more difficult” to hit its full year targets, sending its stock tumbling more than four percent. “We see growing reluctance among our customers” to invest, said Siemens boss Peter Loescher, adding that a “deceleration of the global economy” was to blame for thinning orders for the firm’s power plants, machines and vehicles. The group saw orders drop by 23 percent in the second three months of the year, compared to the same period in 2011. A particular disappointment was orders in the renewable energy sector, which declined by 66 percent despite the firm’s emphasis on growing its business in this domain. Referring to the crisis-hit countries of sunny southern Europe, the financial director of Siemens, Joe Kaeser, said: “The problem is that where there is sun, there is no money.” Kaeser announced a “deep revision” of the firm’s strategy in this sector. The company also said the long-planned listing of its lighting unit Osram was now “very unlikely” given the ongoing turmoil on markets in Europe and worldwide. Another German industrial behemoth, BASF, which is the world’s biggest chemicals maker, blamed a slowdown in China for its woes, as it reported a steep drop in second-quarter net profits. BASF said net profits came to 1.23 billion euros ($1.49 billion) in the second three months of the year, a decline of 15 percent on the same period in 2011. “The Chinese growth engine has started to stall, leading to a decrease in BASF’s sales in local-currency terms in Asia in the second quarter, as they also did in the first quarter of 2012,” the firm explained in a statement. Chief Executive Kurt Bock said: “Our customers are continuing to act cautiously and are reducing their inventories, also in expectation of falling prices due to declining raw material costs.” Bad news also from sportswear maker Puma, which announced cost-reduction measures likely to mean shops closing and jobs lost, after reporting a 29-percent drop in net profits on the eve of the London Olympics. Sprinter Usain Bolt’s sponsors downgraded its forecast for net sales growth for the full year from “a high single-digit” rate to a “mid single-digit” rate, adding that profits would decrease “significantly” compared to last year. Amid the gloom, it was left to Volkswagen, Europe’s biggest carmaker, to provide some cheer. The manufacturer of the Golf said its net profits soared by 36 percent in the first half of the year as it sold 4.6 million vehicles worldwide. The firm added that turnover rose by 23 percent to 95.38 billion euros, with operating profit jumping nearly seven percent to 6.50 billion euros. An index of consumer confidence also inched up fractionally. But while Germany has been relatively solid compared to the rest of the bloc, signs are growing that even the European powerhouse cannot remain immune forever. The closely watched Ifo survey of business sentiment dropped on Wednesday for the third consecutive month while another indicator of investment confidence compiled by the ZEW institute recently hit a six-month low.