Siemens Sees Uptick in Orders in Fiscal First-Quarter 2014, Despite Difficult Global Market

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Researched by Industrial Info Resources (Sugar Land, Texas)--Leading global engineering and electronics company Siemens AG (NYSE:SI) (Munich, Germany) saw a significant growth in orders in the first quarter of the company's fiscal year 2014. Although market conditions proved very challenging, including currency effects that constrained volume and income growth, the order backlog hit a record 102 billion euros ($139.31 billion) and the company benefited from major windfarm projects. Net income was reported to be 1.46 billion euros ($1.99 billion), a 20.02% increase from the first quarter of fiscal 2013.

Total revenue stood at 17.33 billion euros ($23.68 billion), a 3.35% decrease from the same period last year. The Infrastructure & Cities segment was the only one to report revenue growth, partly due to last year's acquisition of Invensys Rail (Chippenham, England), a designer and manufacturer of railway equipment. The Energy segment suffered from weaker results in the fossil solutions and gas turbine businesses; in the past year, the market for gas turbines shifted to low-cost countries with fewer turn-key opportunities. During the quarter, the euro strengthened against all major currencies, which hindered otherwise strong order growth and proved detrimental to overall revenues.

Orders totaled 20.84 billion euros ($28.47 billion), an 8.67% increase from first-quarter 2013, as Siemens saw a rising number of large orders. Again, the leading segment was Infrastructure & Cities, which got a major boost from a 1.6 billion-euro ($2.19 billion) order for two driverless subway lines in Saudi Arabia. The regional segment that consists of the Middle East, Europe, Africa, and the former Soviet states saw a strong overall growth in business, including two large orders for windfarms; it also boosted results in the Energy segment, especially with an order for a combined-cycle power plant in Germany. A major onshore windfarm order also drove business in the Americas. Infrastructure & Cities recorded double-digit order growth in all regions.

The company's book-to-bill ratio for the quarter stood at 1.2; a ratio of more than 1 indicates a company has a demand for orders that exceeds what it can immediately supply. Siemens closed the sale its Water Technologies business following the end of the quarter with a preliminary consideration of 600 million euros ($819.79 million), the effects of which will be seen at the end of the current quarter.

Industrial Info is tracking about $100 billion in active projects involving Siemens, including the $1.6 billion addition to a hot strip mill owned by ATI Allegheny Ludlum Corporation in Brackenridge, Pennsylvania. The project involves the construction of a mill & process center to produce specialty alloys (titanium, nickel-based, zirconium and stainless), flat-rolled titanium, grain-oriented electrical steel, strip, precision-rolled strip products, and continuous-mill plate product forms. Siemens is serving as the design-build contractor.

Industrial Info also is tracking the $4.2 billion construction of a nuclear unit at Tennessee Valley Authority's (NYSE:TVC) Watts Bar Nuclear Power Station in Spring City, Tennessee. The project involves the completion of construction on a Westinghouse nuclear pressurized water reactor and a 1,220-megawatt Siemens steam turbine generator set. For more information, see November 19, 2013, article - TVA Benefits from Hydro Generation in Fiscal 2013, Continues to Reduce Investments in Coal.

"Key drivers were emerging markets, growing 27% and accounting for 41% of the total order volume," said Joe Kaeser, the chief executive officer of Siemens, in the conference call. "China, for example, was up 23%, while emerging countries delivered remarkable 40% order growth."

Siemens executives expect the market to remain challenging throughout fiscal 2014, with the short-cycle businesses not likely to see a recovery until late in the fiscal year. Still, orders are expected to continue exceeding revenue, with the book-to-bill ratio remaining above 1.

"Overall, the market environment for energy remains highly competitive, and should not change any time soon," Kaeser said.

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