Siemens in growth trajectory, rides robust order wave

Siemens India seems to be headed for a hat-trick with more than 50% sales growth. Its revenues for the year ended September ‘06 has risen 64% on top of a 54% sales growth in the previous year.

With an unexecuted order book of Rs 7,720 crore as of June ‘06, and more orders flowing in, the company is all set to repeat this feat. It has also announced the recast of its business by transferring its communication business to a joint venture with Nokia. This is in line with a global restructuring exercise and it gains from a stronger partner in an otherwise competitive business.

Siemens’ sales stood at Rs 4,510 crore during ‘06 while its profit was Rs 360 crore. Profit growth was slightly lower at 41% because of higher operating expenses. While raw material cost has risen by 68%, staff and other costs have shown a moderate growth. However, with volumes rising strongly, and winning of international orders with stiff deadlines, a dip in margins may not matter much.

Quarterly results show a similar trend, with sales rising by 60%, although profit growth was only 31%, again due to an increase in raw material cost. The company, which has little debt on its books, has an interest income rather than expenditure. The same has gone up by 70% to Rs 37 crore. While the quantum is not high, it indicates healthy internal cash accruals.

The other highlight is the Rs 4,000-crore contract from Qatar to a consortium of Siemens AG and Siemens India to be executed over 22 months (Siemens India’s share at Rs 3,600 crore). The contract, in the transmission and distribution segment, is a repeat order after the previous year’s order of Rs 2,600
crore. This order will play a large role in ensuring that Siemens’ sales growth continues to be robust.