Daily Management Review

Not A Good Start For Siemens' Record 16 Billion Euro Spin-Off T Frankfurt


Not A Good Start For Siemens' Record 16 Billion Euro Spin-Off T Frankfurt
The first day of trading of the largest spin off ever in Germany, which created the company called Siemens Energy, as not good as the shares of the new company opened lower than expected at the Frankfurt stock exchange which reflected the challenge for the company to make an impression functioning independently of its parent Siemens .
Shares in Siemens Energy - which manufactures gas turbines, power transmission systems and has a a 67 per cent stake in Siemens Gamesa - opened at 22.01 euros a share on Monday which resulted in the company attaining a market value of 16 billion euros or $18.6 billion.
The company had targeted to get a market valuation of between 21 and 22 billion at the stock market, said reports quoting sources.
By 1352 GMT, shares were trading at 20.86 euros, down 5per cent from the first trading price, after having traded in a range of 19.21-22.98 euros during the session so far.
"I have repeatedly pointed out that we expect volatility to be high in the first few weeks," Siemens Chief Financial Officer Ralf Thomas told the media. "It's not a situation specific to Siemens Energy, it's the same with every spin-off."
The spin offs of Lanxess and Covestro, which were both spun off from Bayer, were both surpassed by the spin off of Siemens Energy which made it the largest spin-off ever for Germany.
The deal has paid off for investors of Siemens AG as they were awarded with one Siemens Energy share for every two shares they own in the former parent. Despite this, shares of Siemens traded only 1.7 per cent below Friday's closing price which was a small discount considering that a substantial part of the conglomerate has been spun out in a separate listing.
A first idea of how Siemens Energy can only be had by at least mid-October, Thomas said. The company is set to rival the likes of General Electric and Mitsubishi Heavy Industries.
The spinoff of Siemens Energy was done because of weak profit margins. Because of the novel coronavirus pandemic and weakness in its onshore wind turbine business, the company is expecting to generate an adjusted margin of not more than 1per cent in 2020 on earnings before interest, tax and amortisation before special items.
For the current years, its sale could fall by as much as 1.4 billion euros to 27.4 billion euros, Siemens Energy expects, and then would grow again in a range of 2 and 12 per cent in 2021.
"We are now doing everything in our power to seize the opportunities offered by the global energy transformation," Siemens Energy CEO Christian Bruch said.
Initially, 55 per cent of Siemens Energy s spun off to shareholders by Siemens AG. The parent company however also plans to reduce its remaining direct stake of 35.1 per cent significantly within 12-18 months of the listing.