Shares of Siemens Ltd., a key player in the heavy electrical equipment sector, tumbled by 10% on Friday, December 20, hitting a one-month low of ₹6,868 per share. This sharp decline, the largest intraday drop since early June, came in the wake of the company’s September quarter earnings call.
Key Highlights from the Earnings Call
Private Capex Uneven: While private capital expenditure remains robust in emerging sectors like semiconductors and batteries, the company noted sluggish activity in traditional technologies.
Energy Business Gains Momentum: Strong demand in the energy segment, particularly in high-voltage direct current (HVDC) technology, signals a bright outlook. Siemens sees HVDC as a growth driver fueled by the shift towards renewable energy.
Selective Tendering: Siemens confirmed its decision to avoid low-cost carrier (LCC) tenders globally, focusing instead on its Voltage Source Converter (VSC) portfolio.
Digital Industries Under Pressure: The semiconductor shortage and customer destocking weighed on Siemens’ digital industries business. Margins for the segment were also impacted by pricing pressures and an unfavorable product mix. However, the company expects recovery as destocking eases.
September Quarter Performance
Siemens, whose fiscal year runs from October to September, reported a revenue of ₹5,894 crore for the September quarter, marking an 11% year-on-year growth. Profit before tax surged to ₹775 crore, up from ₹534 crore in the corresponding period last year.
The company secured new orders worth ₹6,164 crore during the quarter, driven by robust demand across segments. Excluding a massive ₹9,000-crore locomotive order from Indian Railways in FY 2023, new orders for FY 2024 have grown by 14%.
Expanding Capacity
Siemens announced an additional ₹100 crore in capital expenditure for its power transformer factory at Kalwa, raising the total investment for the facility to ₹460 crore. This expansion aims to broaden the product portfolio and meet increasing demand.
Challenges Ahead
Despite its achievements, Siemens faces headwinds in the digital industries segment, which has been hit hard by global semiconductor shortages. Margins have also been affected by market dynamics.
As a 75% subsidiary of Siemens AG, Germany, the company continues to serve a global market with products ranging from transformers to cutting-edge machinery.
