Siemen’s 4Q recurring earnings grew 14% y-o-y (6% below consensus), despite a modest top-line growth of 3% y-o-y (9% y-o-y adjusted for metals business). Top-line growth was driven by the Healthcare (up 32% y-o-y), Mobility (up 13% y-o-y) and Energy management (up 10% y-o-y) segments. However, earnings were lower than expected on the back of lower-than-expected EBITDA margin (down 210bps q/q) largely due to weakness in the Digital Factory and Process Industry segments. New orders grew by a modest 6% y-o-y, though a higher execution rate on the back of few project finalisations pulled down the order book by 21% y-o-y. Hence unless new orders show a sharp improvement, sales growth during FY16 will remain under pressure. The board has approved a special dividend of R4/share (R10/share total) in view of the large exceptional income (sales of metals business) during the year.
Management continued to argue in favour of Railway and Power T&D sectors which are among the few sectors to show an improved growth outlook, while traditional industrial capex segments (Steel, Cement and Other process industries) continued to underperform. Management also expects a shift in capex spending in the healthcare segment from the Centre to state governments to hurt near-term growth.