German electronics group Siemens AG yesterday reported a shortfall in its profits for the first nine months of its fiscal year (which ends on September 30) and announced that, as a result, it is stepping up its restructuring, selling its high voltage cable business to Italy’s Pirelli SpA and cutting production of memory chips at its loss-making semiconductor division. Group CEO Heinrich von Pierer unveiled the results for the nine months to June 30, which showed increases of 15% in sales to $45.4bn and 6% in new orders to $48.5bn. Net income, meanwhile, came in at $988m, a 5% increase in comparison with the same period in fiscal 1997, while there were also extraordinary gains after tax of US$221m from the sale of various businesses. Von Pierer said business had continued to expand in the Americas and Europe during the period of the interim report, though not in Germany, where orders were down 6% in comparison with the same period last fiscal year. New orders were also down in the Asia- Pacific region. With net profit falling short of the company’s expectations, von Pierer said Siemens ‘can’t be satisfied’ with the result. In response to this performance, he unveiled a ten- point program of measures, including a New York Stock Exchange listing and a switch to reporting, in 1999-2000, in accordance with US GAAP accounting standards. The program consisted of: moves to increase productivity and reduce capacity at the semiconductor division, for which a heavy loss is predicted this year; a more specific focus on increasing company value; shedding of problem areas within the group; no major new acquisitions for the time being; increased profitability through a reorganization of business sectors; measures to reduce ted-up capital; improvements to the capital structure, including stock repurchases; US GAAP reporting; listing on NYSE; and a one-time restructuring charge in the 1998 financial statements. The markets responded well to the company’s announcement of further restructuring plans, with the company’s shares trading up as much as 20.25% at the end of the afternoon on the Frankfurt Stock Exchange.
