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Siemens: Dismal show continues
Aug 5, 2013

Siemens has announced its third quarter results of financial year 2013 (September ending fiscal). The company has reported 13% YoY decline in sales with a net loss of Rs 488 m during the quarter. Here is our analysis of the results.

Performance summary
  • Sales declined by 13% YoY in 3QFY13.
  • The company reported operating loss of Rs 62m in 3QFY13. The loss was majorly on account of revision in estimated revenues, cost and project related provisions.
  • Operating loss and decline in other income led to net loss of Rs 488 m.
  • The company received new orders worth Rs 26.2 bn during the quarter.
  • 3QFY13 results include effects of Amalgamation of Winergy Drive Systems Pvt Ltd (Winergy), Siemens Power Engineering Pvt Ltd. and Siemens VAI Metals Technologies Pvt Ltd (all 100% subsidiaries of the company). As such, the current quarter results are not strictly comparable with the corresponding quarter of previous year.

Standalone financial performance
(Rs m) 3QFY12 3QFY13 Change 9MY12 9MFY13 Change
Sales 29,764 25,884 -13.0% 94,390 79,580 -15.7%
Other operating income 422 542 28.5% 1,059 1,364 28.8%
Expenditure 28,887 26,488 -8.3% 87,532 78,690 -10.1%
Operating profit (EBDITA) 1,299 (62) - 7,918 2,254 -71.5%
Operating profit margin (%) 4.3% -0.2%   8.3% 2.8%  
Finance costs 122 39 -67.7% 204 210 2.7%
Other income 120 26 -78.3% 448 213 -52.4%
Depreciation 519 626 20.6% 1,451 1,824 25.7%
Exceptional item 240 0 - 791 - -
Profit before tax 537 (701) - 5,921 434 -92.7%
Tax 175 (213) - 1,931 (15) -
Profit after tax/(loss) 362 (488) - 3,989 448 -
Net profit margin (%) 1.2% -1.8%   4.2% 0.6%  
No. of shares         356  
Basic & Diluted earnings per share (Rs)         1.3  
P/E ratio (x)*         NM  
*On a trailing 12-month basis

What has driven performance in 3QFY13?
  • Siemens recorded 13% YoY decline in sales during 3QFY13. All its segments reported decline in sales. The highest decline was seen in Energy and Industry Segments.

  • The company reported operating loss of Rs62 m. The company made several cost and project related provisions which led to sharp increase in all cost overheads. There was loss in all segments at EBIT level except Infrastructure & Cities which reported EBIT margin of 1%.

  • At net level, Siemens reported loss of Rs 488m.Due to net losses, the company was entitled to tax benefit of Rs 213m which controlled further increase in net loss.

  • Performance for 9MFY13 has been a tad better than 3QFY13 at operating level. For 9MFY13, sales declined by 15.7% YoY. Operating profit of the company declined by 71.5% YoY. EBITDA margin stood at 2.8% vs 8.3% in 9MFY12.

  • Net profits declined by 92.7% YoY during 9MFY13. The decline was on account of subdued operating performance, decline in other income and increase in depreciation expenses.

    Segment-wise performance (Standalone)
      3QFY12 3QFY13  
    (Rs m) Sales % of total PBIT margins Sales % of total PBIT margins Sales growth
    Continuing operations
    Infrastructure & Cities 6,950 21% -0.2% 6,872 25% 1.0% -1%
    Energy 12,119 37% 2.4% 9,409 34% -3.5% -22%
    Industry 10,755 33% 4.1% 9,064 32% -3.5% -16%
    Healthcare 2,780 9% 2.4%  2,615 9% -1.5% -6%
    Total* 32,603 100.0%   27,961 100.0%   -14.2%
    * Excluding inter-segment adjustments & unallocable operating revenue

What to expect?

At the current price of Rs 445, the stock is trading at 13.7 times our estimated FY14 earnings. Siemens’ dismal performance has continued quarter over quarter. Top line and bottom-line both have been on a declining spree. Since our Sell recommendation in August 2012, the stock has declined by 33.6%. Given its declining order book and uncertain investment scenario, turnaround in near to medium term is unlikely. As a result, we maintain our SELL view on the stock. Since, Siemens’ performance has further deteriorated in past few quarters; we shall soon update investors with our revised estimates and valuation.

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