Mumbai: Siemens Ltd’s September quarter (Q4FY20) results fell short of analysts’ expectations on most counts, mirroring the challenging times in domestic and global markets.
The Indian arm of the multinational capital goods firm Siemens AG posted weak operating performance for the quarter.
Revenue for the quarter rose 5% year-on-year (yoy) to ₹4,128 crore, in-line with forecasts. However, material cost pressures and one-time employee benefit expenses on “rationalization of operations in the digital industries and portfolio companies”, dragged operating margin down 80 basis points (bps) yoy to 9.8%. This was a significant 130 bps below Bloomberg’s 11-analysts’ average estimate of 11.1%. One basis point is one hundredth of a percentage point.
A segment-wise analysis showed the two key businesses of gas and power, and smart infrastructure reported a drop in revenue. While these segments maintained profitability, the mobility segment’s earnings (before interest and tax) as a percentage to sales fell sharply to 10.3% in Q4 from 15.5% a year-ago.
Also, Siemens was no exception to the impact of capex cycle slowdown. Order flow of ₹3,189 crore in the quarter fell 14.2% yoy. However, the management indicated that new order enquiries are mainly from segments such as digitalization of small and medium manufacturing industries, gas and power and smart cities are
Although execution is on track, lower order flow reflects in a weaker order book at the end of the fourth quarter. Sunil Mathur, managing director and chief executive officer, Siemens Ltd said, “we see muted capex spending in the next couple of quarters by both public and private sectors.“
Continued weakness in order flows will weigh on revenue and earnings growth in the final run. Siemens’ shares were 1% lower in early trade on Wednesday, showing poor investor interest in the firm. But, they have steadily outperformed the benchmark BSE capital goods index. Perhaps, a strong parentage and healthy balance sheet are positives during challenging times.
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