Siemens India: High costs, employee costs weighed heavy on financial performance

MUMBAI: High costs, especially those on account of raw materials and employee costs weighed heavy on the financial performance of Siemens India for the financial year 2011-12. The company's EBITDA (earnings before interest, tax and depreciation) margins declined by more than 400 basis points for the year to less than 7% as compared to the previous year despite registering 7.5% growth in revenues during the year.

The company's Managing Director, Dr Armin Bruck, said, "The results reflect the slowdown in the Indian economy and the same are below our own expectations. Higher project costs and un-booked profits due to customers delaying off-take has impacted the overall profitability."

An impairment loss of about 120 crores provided for the company during the year also took a toll on the overall profitability and Siemens India's net profit sank by about 60% for the year 2011-12 as compared to a year ago.

The impairment loss, provided for, by the company, pertains to expenditure incurred by the company for setting up manufacturing facility for wind energy business. The management has now decided to review its plans for setting up wind energy business in light of the current muted and challenging business environment and has thus decided to use these assets for alternate purposes.

Interestingly, despite weak profitability, Siemens India has declared a healthy dividend of 300% or Rs 6 per share on face value of Rs 2.