GERMANY – Industrial group Siemens says its worldwide pension plans lost 1.2 billion euros in fiscal 2002 and that it added 442 million euros to its pensions trusts in Germany and the UK and transferred 377 million euros in real estate to its German pension trust in the first quarter.
The company has now made additional contributions to its pension schemes of 2.6 billion euros in the last two quarters.
The company’s 2002 annual report released today says that its pension plans suffered a negative actual return on plan assets of 1.2 billion euros in the 2002 fiscal year. The figure includes a negative return of 0.7 billion euros in its German Pension Trust, which has been hit by stock market declines.
According to the report, Siemens’ total pension obligations were 19.5 billion euros and were underfunded by five billion euros as at the end of September 2002.
Siemens’ pension funds’ investment in equities declined to 33% at the end of the 2002 fiscal year, compared to 61% at the end of 2001. And 46% was invested in fixed income, up from 31% a year earlier.
Its pension costs, including service costs, surged to 447 million euros, from 51 million euros in 2001 due to losses on its domestic plans. And the costs are set to rise. “Based on the determined actuarial assumptions, net periodic pension expense in fiscal 2003 will increase by approximately 550 million euros,” says the annual report.
It attributed the higher costs to a further decline in the rate of return on plan assets and lower market expectations.
No one at Siemens was able to comment on the projected rise in costs, which if correct, would see the company’s pension costs rise to almost one billion euros in the current fiscal year.
It has also adjusted its expected rate of return to 6.8% in fiscal 2003 from 8.0%. For the German Pension Trust, the expectation is now 6.75%, compared to 8.25% before.
In November, Siemens said the assets of its major pension plans totalled around 15.4 billion euros. Its chief financial officer Heinz-Joachim Neubuerger said at the time: “Covering our pension obligations via segregated pension assets is the only sound means of financing these long-term obligations."
Going forward, Siemens says funding decisions for its pension plans are made “based on due consideration of developments affecting plan assets and pension liabilities” as well as minimum funding requirements and taxation.
Overall, the company reported that net income for the quarter slipped to 521 million euros from 538 million euros a year earlier. Sales declined 10% to 18.8 billion euros
“Our first-quarter results are better than we expected, however we stand by the overall outlook which we provided in December,” said chief executive Heinrich von Pierer.