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FINANCIAL ROUNDUP: Rolls-Royce Issues New Profits Warning

Nov. 12, 2015
Siemens forecasts a good year amid massive restructuring. ... With energy prices dropping, E.ON notches a record quarterly loss. ... Lenovo reports a quarterly loss, too, though not as bad as predicted.

LONDON — British engine maker Rolls-Royce issued another gloomy profits warning on Thursday that cited “sharply weaker” demand, sending its shares slumping by almost one- fifth.

For 2015, Rolls-Royce cautioned that its pre-tax profit would be “at the lower end” of its forecast range of between £1.32 billion and £1.47 billion ($2.01 billion and $2.23 billion). Looking ahead to next year, the company said it would face “profit headwinds”, or negative impact on profits, of £650 million ($987.35 million) in 2016. That compared with a previous estimate of £300 million ($455.70 million) from July.

In reaction, the company’s share price tumbled by 16% in opening deals on the London stock market. CEO Warren East, who launched a review of the group after taking charge in July, will meanwhile launch a new restructuring plan.

The cost reduction program will target savings of between £150 million and £200 million ($227.85 million and $303.80 million) per year from 2017 onwards, the group said.

SIEMENS: BERLIN — German engineering giant Siemens predicted growth for the coming year on Thursday, despite a weak economic environment, as it looked to its recent massive restructuring to boost profitability.

Siemens embarked on a major restructuring program earlier this year, slashing around 12,000 jobs in a bid to save up to 1 billion euros ($1.07 billion). The sprawling conglomerate also sought to streamline its businesses by selling several divisions including electronic appliances and telecoms, as well as floating others on the market like its Osram ligh tbulb business.

The reorganization sharpens the group’s focus on certain sectors, including energy, medical equipment and digitized systems for industry and transport, and had a strong effect on Siemens’ net profit for the year ending September 2015: 7.4 billion euros ($7.94 billion), sharply up from last year’s 5.5 billion euros ($5.90 billion).

Net profit for the quarter fell to 1.0 billion euros ($1.07 billion), with sales up 6% for the fiscal year.

E.ON: BERLIN — German energy giant E.ON announced a record loss for the third quarter on Wednesday, in large thanks to heavy writedowns in the value of its power plants. 

Amid rock-bottom prices for wholesale electricity, the company said it wrote down power generation assets by 8.3 billion euros ($8.90 billion) for the period July to September, which led to a net loss of nearly 7.0 billion euros ($7.51 billion).

“The impairment charges were triggered by the significant decline in commodity and energy prices, which is mainly a result of structural changes on global energy markets and on the regulatory framework,” CFO Michael Sen said. “Our operating environment remains very difficult.”

The third-quarter losses, despite a nearly 5.0% rise in turnover to 27 billion euros ($28.96 billion), left little doubt that E.ON will post heavy losses for the full year, probably even more than the 3.2 billion euros ($3.43 billion) incurred last year.

LENOVO: HONG KONG — Chinese technology giant Lenovo announced a second-quarter Thursday following a restructuring plan, despite stronger sales in its mobile business. The loss, though, was narrower than analysts’ forecasts.

“With strong execution, Lenovo acted swiftly and decisively to address challenges, while still delivering better-than-previous-quarter results,” Lenovo chairman Yang Yuanqing said in statement on Thursday.

Lenovo had said that it would seek to slash costs by $1.35 billion annually and cut 3,200 staff from its non-manufacturing workforce – around 5% of its worldwide headcount, when it announced its first quarter results in August.

The company posted a net loss of $714 million for the second quarter ending September 30, compared to a profit of $262 million in the same period last year. Analysts had expected the firm to report a $803 million loss, according to Bloomberg News. Revenue, meanwhile, increased 16% to $12.15 billion, while the company also saw a pre-tax loss of $842 million.

Copyright Agence France-Presse, 2015

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