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 last Thursday warning on profits and BASF complaining that weakness in China was hitting its 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 per cent.

“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 per cent 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 per cent despite the firm’s emphasis on growing its business in this domain.

Referring to the crisis-hit countries of sunny southern Europe, Joe Kaeser, Siemens financial director, 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 in the second three months of the year, a decline of 15 per cent 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 continue to act cautiously, reducing their inventories, also in expectation of falling prices due to lower 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-per cent drop in net profits on the eve of the London Olympics. It downgraded its forecast for net sales growth for the full year from “a high single-digit” rate to a “mid-single-digit” rate.