U.S. commercial construction to stay strong: Siemens

By Ben Klayman

NEW YORK (Reuters) - The U.S. commercial construction market will stay strong for another six to nine months, helping offset the still weakening residential market, a top U.S. executive for German conglomerate Siemens AG (SIEGn.DE: Quote, Profile, Research, Stock Buzz) said on Monday.

For more than a year, high prices and interest rates have ground down new residential construction activity, with January housing starts down 14.3 percent. Meanwhile, commercial real estate construction for hotels, office buildings and other facilities continues to rise, with nonresidential construction expected to rise 6.8 percent this year.

"Residential home building has been in decline and is likely to continue based on what we see," said Dennis Sadlowski, chief operating officer of the company's U.S. energy and automation business, at the Reuters Manufacturing Summit in New York.

"The indicators would indicate a further decline over the next nine to 12 months," he added. "It's likely some continued slide from where we are today."

The Siemens' business had sales north of $3 billion last year and Sadlowski said residential construction generates about 10 percent of that. The business employs more than 10,000 people, making products that control and distribute the flow of electricity for several industries, including commercial and residential construction markets.

Despite that, Sadlowski said there are many industries where Siemens still sees "double-digit type growth," including machine tools, aerospace and primary metals.

"Commercial construction has a phenomenal tail wind going right now," he said. "Our indicators suggest at least six to nine months of very, very good market in some of the commercial construction areas. A lot of the backlog is fairly well situated with the larger general contractors. Beyond nine months, anything is subject to a correction.

Volatile commodity costs could still slow some markets, Sadlowski said. "People need to keep inventories low in order to not get caught on either side of a big commodity swing," he said.

He also said U.S. probes into a corruption affair that started in Germany have not affected business in the United States, but declined to provide details.

German prosecutors are investigating $260 million missing from Siemens' accounts that is suspected was used for bribes to win telecoms equipment contracts. The company also is conducting its own internal probe into dubious payments that were booked as consultancy fees.

Relating to the matter, Siemens previously disclosed that the U.S. Department of Justice was conducting an investigation of possible criminal violations, while the Securities and Exchange Commission's enforcement division is conducting an informal inquiry.

"As far as the U.S., I would tell you it's pretty much business as usual with respect to our environment and the customer base," Sadlowski said.

"We haven't seen any kind of real impact on our business going forward in the U.S.," he added.