By John Revill

ZURICH (Reuters) -Siemens reported first-quarter profit slightly ahead of expectations on Thursday despite the German engineering group seeing a slowdown at its flagship factory automation unit.

Digital Industries, which supplies companies with software and controllers to operate their production lines, saw new orders fall by a third and profit by a fifth as market conditions weakened.

Like other major industrial companies, Siemens’s results are seen as a barometer of the global economy.

Customers that previously built up stocks of components to avoid shortages also held off buying new equipment and decided to run down their stocks, Siemens said.

The downturn was seen most strongly in Asia and Australia, due particularly to weakening demand from China, it added.

Although the situation in China was improving from the previous quarter, Siemens said it expected conditions to remain tough in its third biggest market after the United States and Germany.

“We anticipate regional differences in the way customers ultimately reduce their inventories to normal levels,” Chief Executive Roland Busch told reporters.

“Depending on the speed and scale of its economic recovery, China might take somewhat longer.”

The trend could continue into the second half of its 2024 financial year, Siemens said.

Still, a stronger performance from its train-making Mobility business helped offset the downturn, while Siemens’s building automation arm Smart Infrastructure had its best-ever quarter.

Busch said the Red Sea shipping crisis was having “practically no impact” on Siemens, due to its local supply chains and experience in handling such problems.

Busch pointed to an order backlog, which now stood at 113 billion euros and Siemens’s highest ever, as giving him confidence for the future.

Overall, Siemens reported a rise in industrial profit of 3% to 2.72 billion euros ($2.93 billion) for the three months to the end of December, beating forecasts of 2.64 billion euros in a company-gathered consensus of analysts.

Revenue rose 2% to 18.41 billion euros, below the 18.58 billion euros forecast after currency translation effects – mainly from a stronger dollar – reduced sales reported in euros.

Siemens confirmed its full year outlook, saying it still expected revenue growth of 4% to 8%, after divestments and when currency effects are removed.

The company’s stock opened 2.5% lower after the results, which Jefferies described a solid but lagging peers like France’s Schneider Electric.

($1 = 0.9276 euros)

(Reporting by John Revill; Editing by Alexander Smith and Mark Potter)

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