Shares in German technology giant Siemens fell over 5% on Thursday after the company posted a decline in earnings for the fiscal second quarter and reported a slowdown in its automation division.
Siemens’ industrial profit was 2.51 billion euros ($2.73 billion) for the three months ending in March, down 2% from the same quarter last year and below the analyst forecast of 2.68 billion euros reported by Reuters. Net income dropped 38% year-on-year to 2.2 billion euros, while sales decreased 1% to 19.16 billion euros. By 11:49 a.m. London time, Siemens shares were trading 5.1% lower.
Siemens focuses on automation and digitalization, producing technology for various sectors such as transport and healthcare. The company noted a sharp decline in its automation division, part of its digital industries business.
“We see a decline of minus 20%. However, you have to see that against the backdrop of a record-high prior quarter and still a weakness in the Chinese market, so overall there are no structural reasons for that,” Siemens CEO Roland Busch told CNBC’s Annette Weisbach on Thursday.
The quarter was overall “solid,” Busch said. “Demand for our products is strong and our growth drivers, digitalization and sustainability, are fully intact.”
Busch mentioned a “huge uptick” in demand for automation in recent years, leading to higher stock levels. Reducing this now is causing a “destocking effect,” he explained.
“It takes a little bit longer because demand is not that high and we are reducing the stock as we go,” Busch added.
Lower demand in China is driven by weaker private consumption, stagnant exports, and reduced direct investment, he said, but he expressed confidence that China will eventually recover.
