Siemens collapses by over 5% attributable to the decline in profits, which results in a slowdown within the automation division

Shares of German tech giant Siemens fell over 5% on Thursday after the corporate reported a decline in second-quarter profit and said its automation division had slowed.

The company’s industrial profit was 2.51 billion euros ($2.73 billion) within the three months ended March, down 2% from the identical quarter last yr. The value was also below the corporate’s analyst forecast of two.68 billion euros reported by Reuters.

Net profit fell to 2.2 billion euros within the three months to the top of March, down 38% from a yr earlier, while sales fell 1% to 19.16 billion euros.

Shares in Siemens were trading around 5.1% lower at 11:49 a.m. London time.

Siemens focuses on automation and digitalization, producing technology for a variety of industries resembling transportation and healthcare.

The company said its automation division, a part of its Digital Industries division, has declined sharply.

“We see a decline of minus 20%. However, you have to see this against the background of a record high in the previous quarter and you still see weakness in the Chinese market, so overall there are no structural reasons for this,” Siemens boss Roland Busch told CNBC’s Annette Weisbach on Thursday.

The quarter was “solid” overall, said Busch. “Demand for our products is strong and our growth drivers, digitalization and sustainability, are fully intact.”

Busch said there was a “huge increase” in demand for automation lately, which has led to a rise in inventory levels. Reducing these now will take a while and can result in a “destocking effect,” he said.

“It will take a little longer because demand is not that great and we are gradually reducing inventory,” Busch added.

Lower demand in China is attributable to weaker private consumption, non-accelerating exports and fewer direct investment within the country, he said – but there may be “no doubt” that China will come back sooner or later.