>SIEMENS AG: Implications for Siemens India

New orders slide


Key highlight of Siemens Q3FY12 results was the 23% decline in its order inflow which was much steeper than expected as customers, wary of European debt crisis, increasingly refrained from making investments. The market environment was less favorable in the third quarter, particularly for Siemens’ industrial short‐cycle businesses. Revenue rose 10% YoY to €19.542bn. The management indicated that the deteriorating environment poses difficult task to achieve their FY12 guidance.


Implications for Siemens India
Order intake from India (all Siemens entities‐India) was up 7% in EUR terms at EUR633mn; adjusted for currency, it was a growth of 16 % YoY. We believe, Siemens India’s order intake could be around INR27bn‐29 bn (up 16 %, YoY) given that largely ~70 % of total business for the parent comes from the listed entity (Siemens India). Order intake from Emerging Markets (India China, Brazil etc) grew 5% YoY, led by strong inflows from India while China order intake declined 5% YoY.


Absence of big ticket size, short cycle business orders thin inflow
Siemens posted a 23% drop in quarterly new orders, steeper than expected, as customers, wary of Europe's debt crisis, increasingly refrained from making investments. The iIndustry sector ‐ the bread and butter of Siemens ‐ has been the worst‐hit among its four segments as demand declined for a range of products including electric drive systems and control machinery for factory assembly lines and amusement park rides. Orders came in at €17.770bn, 23% below the prior‐year period which included a €3.7bn order for trains in
Germany and a substantially higher volume from large orders in Energy. Growth in new order intake for Siemens AG got impacted by a sharp dip in key market of Europe (down 38 % YoY) and Americas (down 19 % YoY). The book‐to‐bill ratio for the quarter was 0.91, and the order backlog was €100bn.


Outlook: Challenging, FY12 guidance seems too ambitious for now
The company has seen growing reluctance among its customers regarding capital expenditures besides strong economic headwinds, especially in its industrial short‐cycle businesses. Siemens expects a moderate organic revenue growth compared to fiscal 2011, and orders exceeding revenues for a book‐to‐bill above 1. Due to lower than expected earnings in its industrial short cycle business and deteriorating environment, it will be very challenging and over ambitious for the company to achieve its guidance of €5.4bn income for FY12.



Other Key Highlights


Higher revenue in all Sectors and regions
All Sectors reported revenue growth in the third quarter, benefiting from currency translation effects. Energy’s growth was supported by conversion from its strong order backlog. Infrastructure & Cities and Industry generated moderate increases. The Americas and Asia, Australia saw double‐digit revenue growth, and the region comprising Europe, the Commonwealth of Independent States, Africa and the Middle East (Europe/CAME) showed a moderate increase. Emerging markets on a global basis grew 8% year‐over‐year, and accounted for €6.329 billion, or 32%, of total revenue for the quarter.


Substantially lower volume from large orders
Both Infrastructure & Cities and Energy saw orders fall due to lower volume from large orders compared to a year earlier. The drop in large order volume YoY was most evident in Europe/CAME and the Americas. Asia, Australia posted moderate growth. Globally, orders grew 5% in emerging markets and accounted for €6.708 billion, or 38%, of total orders for the quarter.

RISH TRADER