Stock Review: SIEMENS INDIA

ELECTRICAL equipment manufacturer Siemens India appears to have emerged stronger after its restructuring. The company has once again started generating healthy cash from operations. The outlook is promising considering that a good part of the restructuring exercise has been completed, which should help the company take advantage of the improving demand. The performance of Siemens in the quarter to September is a testimony to all these. Sales during the quarter grew by 21% from the year-ago period, the highest in the last 12 quarters. Though raw material cost remained high, employee and other operating costs were under check, resulting in a more than 60% growth in both operating profit and net profit. The growth in profits has come after four successive quarters of decline.

   Its industry division, whose fortunes hinge a great deal on the revival in industrial sentiments, is still facing pressure. But its operations in two other significant segments, energy and healthcare, have recorded impressive sales growth of almost 40%. For the full year (the company's fiscal ends in September), profits excluding extraordinary items showed a growth of 26%, against a decline of 8% last year.

   The standalone results are above expectations, but there is still some pressure on the company from its subsidiaries, which re-ported a loss of close to . 70 crore for the year. However, the performance has improved significantly over the last year and the company should be on course to report profitability of its subsidiaries in the current year.

   What is also encouraging is the sharp increase in cash generated from core operations. It rose to more than 1,000 crore, nearly three times the year-ago level. With zero debt and experience of closing out acquisitions swiftly, investors can expect the company to seal a mid-size acquisition deal during this fiscal.

   The outlook for Siemens appears much better with a significant turnaround in its operating performance. This is supported by the sharp increase in order intake over the previous quarter and robust growth in the aggregate order backlog, which stands at about 16 months of trailing 12 months' sales. However, there could still be a challenge in terms of actual execution of projects given that clients may seek delayed execution.