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| Siemens: A tired set of numbers |
| Shobhana Subramanian / Mumbai Nov 28, 2009, 00:44 IST |
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The energy division has fared badly, dragging down profits, but the order book remains fairly robust.
It’s the highly competitive transmission and distribution (T&D) segment that’s hurting engineering firm Siemens’ numbers. During the September 2009 quarter, the T&D business saw a drop in revenues, thanks to pricing pressures. That dragged down revenues for the company as a whole, which ended the quarter with an increase in the top line of just 4 per cent year-on-year, at Rs 2,518 crore, even though the industry division did fairly well, reporting a rise in revenues of 23 per cent.
 However, with the ratio of raw material costs to sales deteriorating, profitability wasn’t too strong for either of the segments, though it was definitely weaker for the energy business. As a result ,Siemens saw a near-300 basis points contraction in the operating margin to 9.7 per cent, with the net profit lower by 32.6 per cent year-on-year at Rs 152 crore. The Siemens stock fell 5.09 per cent on Friday.
Analysts are not comfortable with the valuation ascribed to the acquisition of Siemens Building Technology, in which Siemens has raised its stake to 86.2 per cent. The subsidiary has thus been valued at Rs 1,160 crore, which as JPMorgan points out, is 127 times its profits for the 2007-08 financial year of Rs 91 crore. Siemens intends to pick up the remaining 13.8 per cent in the subsidiary for Rs 70.2 crore, implying a valuation of close to Rs 500 crore, which the brokerage believes is also expensive. Siemens has also wrapped up the acquisition of Flender, picking up the remaining 50 per cent stake for Rs 91 crore. The first 50 per cent had been picked up in mid-2006 for Rs 67.8 crore. JPMorgan says that at the time the company had indicated it wouldn’t pay more than Rs 72.5 crore for the remaining stake.
The good news is that order inflows in the year to September have risen somewhat to Rs 880 crore and the order book stands at a reasonably good Rs 10,300 crore. With the economy on the mend, investments in new projects should pick up over the next few months. That should help companies like Siemens do better.
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