(Bloomberg) -- Siemens AG saw orders largely stagnate in the fiscal first quarter as factory-automation purchases in China plummeted 55%, offsetting gains in its mobility and industrial units.

The digital industries division that makes devices and software that control the flow of production in factories saw global orders fall 31%, led by the decline in China, the company said Thursday. Siemens left its outlook for the unit and the overall group unchanged and said it sees the Chinese economy recovering later this year.

“The Chinese market is still very slow,” Chief Executive Officer Roland Busch said in an interview with Bloomberg Television. “We hope that we will see a pick-up in China in the second half of the year.”

Shares fell as much as 2.5% in early trading, eating into gains over the past year, which stand at roughly 18%.

Siemens and the rest of the industrial sector are grappling with weaker demand in China, where consumers and businesses have cut back on spending amid rising inflation and interest rates. The company expects China’s economy to recover in the second half with the government’s push to boost high-tech manufacturing. 

In recent years, Siemens has revamped its business to focus on software-driven product lines with higher profitability levels, and Busch has said Siemens could target larger acquisitions in that area this year. The company is also pursuing plans for an initial public offering or divestment of heavy-duty electric-motor manufacturer Innomotics, valued at roughly €3 billion ($3.2 billion). 

Siemens’ mobility unit saw orders nearly double from the same period a year earlier, largely due to two orders in Austria totaling €1.3 billion from existing agreements for delivery of trains. Profit in the industrial business totaled €2.72 billion, a record for the first quarter, Busch said in a call with reporters.

“A robust set of numbers by Siemens, with headline profits ahead and an unchanged outlook,” RBC analyst Mark Fielding said in a note, adding that comments on forecasts for the digital industries unit and China were “reassuring.” 

Net income attributable to shareholders came in at €2.39 billion in the last quarter, boosted by a one-off €500 million gain from the transfer of an 8% stake in Siemens Energy AG to Siemens Pension-Trust e.V.

What Bloomberg Intelligence Says:

Organic-order growth of 3% at Siemens Industrial Business (IB) is a positive outcome and 10% above consensus, thanks to better-than-expected Smart Infra (SI) orders and a doubling of Mobility orders. A sequential rise in book-to-bill to 1.21x — next to the noted improvement in automation demand in China and Germany vs. fiscal 4Q that suggests the trough of destocking may have passed — and SI remaining at healthy levels deliver scope for an increase in guidance for IB. Consensus could revise up 2024 profit a touch.

— Omid Vaziri, BI industrials analyst

Some shareholders have urged Siemens to unload its stake in Siemens Energy, as the company posted massive losses from faulty wind turbines. Siemens said the transfer means it no longer has significant influence over Siemens Energy, and the investment isn’t expected to impact earnings per share going forward. 

--With assistance from Oliver Crook.

(Updates with shares in fourth paragraph.)

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