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| Siemens: Low voltage |
| Shobhana Subramanian & Varun Sharma / Mumbai Feb 13, 2009, 00:58 IST |
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The momentum in the top line has slowed down considerably.
It may seem small but in these challenging times even a Rs 200 crore order is a comfort. The Siemens stock, which has been under a bit of a cloud after it hived of its information technology subsidiary recently, rose 2 per cent though the broader market was down. Siemens has won an order worth Rs 212 crore from Steel Authority of India to provide a power distribution package to the latter’s Rourkela Steel plant.
It’s precisely this segment that has been a bit of a concern for the firm — it now contributes just 36 per cent to revenues much lower than the 47 per cent in December 2007. In fact, sales from this division fell 35 per cent in the December 2008 quarter, one reason why revenues for the firm were down 15 per cent y-o-y.
 That should have hurt the firm’s operating profit margin but the company kept raw material costs in check — down nearly 500 basis points — thereby posting a 200 basis points increase in the opm to 9.8 per cent. Adjusted for exceptional items, the profit before tax rose by about 10 per cent. Competitor BHEL’s opm in the quarter was 17 per cent, even after a fall of 320 basis points. BHEL’s margins should improve, however, as commodity prices ease.
That may not be the case for Siemens unless revenues gain momentum. The results of peers such as Crompton, Thermax and Voltas indicate a slowdown in capital expenditure with customers compelled to delay plans in the absence of a clear picture on the demand front. So orders could remain unexecuted.
It’s not that orders are pouring in though because Siemen’s order book in the December 2008 quarter grew by just 3.5 per cent y-o-y. The backlog of Rs 10,000 crore should take care of revenues for some time, though analysts point out that companies such as Siemens are dependent on private sector spending which could be scaled back. As for power projects that are backed by the government, the increased competition could keep margins under pressure.
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