Siemens analysis: Betting on diversification

Résumé du document

Siemens AG is an electronics and electrical engineering company. The company is an integrated technology company with activities in the fields of industry, energy and healthcare. Siemens operates in six segments: Industry, Energy, Healthcare, and "below the line" segments composed of Equity Investments, Siemens IT Solutions and Services and Siemens Financial Services (SFS).

Siemens has changed its structure as of FY 2012 to Industry, Energy, Healthcare and the new Infrastructure & Cities segment. These segments are reported along with 14 divisions, recently restructured into 19 which comprise the divisions, Industry Automation, Drive Technologies, Customer Services, belonging to the Industry Sector, the Divisions, Fossil Power Generation, Wind Power, Solar & Hydro, Oil and Gas, Power Transmission and Energy Service, belonging to the Energy Sector and the Divisions, Imaging and Therapy, Clinical Products, Diagnostics and Customer Solutions belonging to the Healthcare Sector, and the Divisions, Rail Systems, Mobility and Logistics, Low and Medium Voltage, Smart Grid, Building Technologies as well as OSRAM (which has a planned listing for 2012) belonging to the Infrastructure & Cities. In this report, Siemens' analysis will be based on FY11's structure for a more accurate analysis.

The Electrical Equipment (or Capital Goods) sector has a small threat of new entrants because they are huge barriers of entry, like a large capital, specific experience and a tremendous know-how knowledge, the only possible threats would be small Emerging Market companies with low costs projects but that don't normally affect Siemens.

Extraits

[...] Opportunities: Siemens has a lot of potential in Emerging Markets. It is gaining increasing exposure to fast growing power markets in Asia and Middle East regions. For instance, according to data from Siemens, its equipment and systems are responsible for 50% of the electrical power generated in Brazil and has in place several strategic partnerships with key players in the Russian economy. In China, Siemens Energy has a variety of projects planned or underway, including the commission of the Yunnan-Guangdong HVDC line (the world's longest at 1,400km) together with China Southern Power Grid. [...]

[...] Its main competitor, Philips Lightning, trades at 10x its 2012 EBIT. Currently OSRAM's sales are of 4.68 B and EBIT of €569M. This makes OSRAM worth 15 between 5.5 B (assume 2012 EBIT of 600M x 10) to ( 1.5 x 4.68 With let's say 50-60% sale of shares from Siemens, this would result in a 4.2 B cash inflow for Siemens. Siemens will most likely spread out its sales of share throughout the years, hence the reason why I spread out the forecasted cash inflows in the “Income (loss) from discontinued operations, net of income taxes” account from 2012 to 2016 (which represents a 10% increase every year for a 3.2 B cash inflow). [...]

[...] Stickney, Paul Brown, Stephen P. [...]

[...] A slight increase should then take place in the following two years to finally stabilize at from 2015 on. Opex Part of the very brief 2012 management guidance was the expected expense in Research and Development 15.1 for 2012) and Marketing, selling and general administration (Opex). An increase of 1.1 B to 1.3 B is expected for 2012 Selling with primarily Selling and R&D increase, which results to a G&A 2.2 total of 15.1 B to 15.5 B in operating expense. [...]

[...] The oil and gas industry is benefiting from oil prices that have risen in line with the economic recovery. High commodity price levels are driving investments in the metals and mining sector higher in 2011 and they are expected to expand by 20% (slightly more than the previous year. The growth drivers include China, Australia, and a number of South American countries. Investments in the transport equipment industry are expected to expand by about 19% in 2011, while growth of around 18% is anticipated for transportation services. [...]