Siemens employees leave the Siemens headquarters in Munich, Germany

Siemens AG, Europe’s largest engineer, will be forced to run down the order book at its energy division in the first half of its next financial year as investment tails off.

Siemens faces falling orders and a “noticeable” drop in earnings in the third-quarter compared with both the year-earlier period and the previous quarter, Kaeser said. Investors watch order levels at European industrial companies such as Siemens for signs the recession is easing and that businesses are once again investing in machinery and components.

So-called “short-cycle” businesses spanning light bulbs to building controls should start to improve from fiscal second half, said Kaeser. The period starts in April 2010.

“We will reduce excess personnel by shorter work weeks, and we believe we will be able to continue doing that until the short-cyclical business experience a revival in demand,” he said. “We will not see the record volumes of fiscal 2007/2008 for the time being.”

At 1.29, the energy unit had the strongest book-to-bill ratio of Siemens’s three main businesses in the second quarter. The industry division, Siemens’s largest, was at 1.18, and the health care unit was below 1, meaning its order book was shrinking. The company said earlier that it expects energy orders to outstrip sales in the second half of the current fiscal year through September.

Job cuts

Siemens plans 1,400 job cuts beyond the 17,000 announced last year as Chief Executive Officer Peter Loescher battles against a global recession to meet a goal of beating last year’s 6.6 billion euros (US$9.4 billion) in so-called “sector profit” at its three main units. About 19,000 workers are currently on reduced hours.

The German maker of high-speed trains and power turbines was little changed in Frankfurt trading at 53.41 euros as of 2:36 p.m. local time. The stock is up 1.4 percent his year valuing the company at almost 50 billion euros.

Net income at Siemens probably fell 35 percent to 926 million euros in its fiscal third quarter, according to the average of 10 estimates in a Bloomberg survey. Sales totaled 18.8 billion euros, a decline of 2 percent, according to 14 estimates.

Source: Bloomberg