X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2018 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Siemens: Margin expansion lifts profits - Views on News from Equitymaster
StockSelect
  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Siemens: Margin expansion lifts profits
Nov 27, 2009

Performance summary
  • Sales fall by around 4% YoY in FY09 (September ended fiscal). This is led by a fall in industry automation, power transmission and healthcare segments.
  • Operating margins expand to 10.6% in FY09, from 8.9% in FY08. This is on account of lower costs incurred for purchase of traded goods and lower other costs (both as percentage of sales).
  • Net profits grow by 18% YoY during the fiscal. This is helped by expansion in operating margins, higher other income as also extraordinary income consisting of profit from the sale of investments of Rs 1.5 bn.
  • Board recommends a dividend of Rs 5 per share. (dividend yield of 1%)


Consolidated financial performance.
(Rs m) FY08 FY09 Change
Sales 96,798 92,865 -4.1%
Expenditure 88,193 82,976 -5.9%
Operating profit (EBDITA) 8,605 9,889 14.9%
Operating profit margin (%) 8.9% 10.6%  
Other income 597 742 24.2%
Interest expense/(income) (602) (485) -19.5%
Depreciation 1,617 1,733 7.2%
Profit before tax 8,187 9,382 14.6%
Extraordinary income/(expense) 1,235 1,501 21.5%
Tax 3,483 3,960 13.7%
Share of profit in associates 75 82  
Minority interest 19 (41)  
Profit after tax/(loss) 5,995 7,046 17.5%
Net profit margin (%) 6.2% 7.6%  
No. of shares 337.2 337.2  
Diluted earnings per share (Rs)   20.9  

What has driven performance in FY09?
  • Siemens reported an around 4% YoY fall in sales for FY09. Segment wise, Siemens’ industry automation, power transmission and healthcare businesses gave some of the better performances during the quarter. They together contributed to 43% of sales. The company's consolidated order book stood at about Rs 101 bn at the end of the year. This is a a marginal decline compared to FY08 (Rs 103 bn).

    Segment-wise performance.
      FY08 FY09    
    (Rs m) Sales % of total PBIT margins Sales % of total PBIT margins Sales growth Margin change
    Continuing operations                
    Industry Automation 9,904 11.1% 9.3% 9,622 10.3% 6.5% -2.8% -2.7%
    Drive Technology 10,108 11.4% 8.2% 11,682 12.5% 6.3% 15.6% -1.9%
    Building Technologies 925 1.0% 6.0% 850 0.9% 3.8% -8.1% -2.2%
    Industry Solutions 11,439 12.9% 13.1% 11,497 12.3% 9.3% 0.5% -3.8%
    Mobility 6,952 7.8% -2.7% 10,260 11.0% -0.7% 47.6% 1.9%
    Fossil Power Generation 1,300 1.5% -143.0% 4,228 4.5% 10.4% 225.3% 153.4%
    Oil and Gas 5,115 5.7% 11.2% 5,631 6.0% 14.4% 10.1% 3.3%
    Power Transmission 28,415 31.9% 12.0% 24,719 26.5% 16.2% -13.0% 4.2%
    Power Distribution 7,896 8.9% 12.3% 8,842 9.5% 7.4% 12.0% -4.9%
    Healthcare 6,053 6.8% 5.5% 5,431 5.8% 7.6% -10.3% 2.1%
    Real Estate 645 0.7% 95.3% 653 0.7% 129.3% 1.3% 34.0%
    Discontinued Operations 232 0.3% 3.6% - 0.0% 0.0% NA NA
    Total* 88,983 100.0% 8.1% 93,416 100.0% 10.2% 5.0% 2.2%
    * Excluding inter-segment adjustments

  • Siemens’ operating margins expanded to 10.6% in FY09 from 8.9% in FY08. This was on account of lower costs incurred for purchase of traded goods as also lower other costs (as percentage of sales). The segments that led this EBIT margins expansion were that of mobility, power generation, and power transmission.

  • The company’s net profits grew by 18% YoY during the year. This was helped by the expansion in operating margins. Profits also got a boost from higher other income. What also helped was the extraordinary income. This consisted of profit from the sale of investments in Siemens Information Systems of Rs 1.5 bn.

What to expect?
At the current price of Rs 519, the stock is trading at a multiple of 17 times our estimated FY11 earnings. The company has approved the acquisition of the balance stake of 13.8% in Siemens Building Technologies. This for a total consideration of Rs 702 m. Post this, the company will become a 100% subsidiary of Siemens. Further, the company also plans to amalgamate Siemens Healthcare Diagnostics Ltd. (SHDL) with itself. The parent, Siemens AG, currently holds 68.7% in SHDL. We maintain our negative view on the stock.

To Read the Full Story, Subscribe or Sign In


Small Investments
BIG Returns

Zero To Millions Guide 2018
Get our special report, Zero To Millions
(2018 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

SIEMENS SHARE PRICE


Feb 20, 2018 (Close)

TRACK SIEMENS

  • Track your investment in SIEMENS with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks

COMPARE SIEMENS WITH

MARKET STATS