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    1COV   DE0006062144

COVESTRO AG

(1COV)
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Siemens' $18 billion energy spin-off falls in Frankfurt debut

09/28/2020 | 11:59am EDT
Siemens Energy AG starts trading after IPO

By Christoph Steitz and Alexander Hübner

Shares in Siemens Energy opened lower than expected on their first day of trading on the Frankfurt stock exchange, as Germany's biggest-ever spin-off gears up for a challenging future independent from parent Siemens.

Shares in Siemens Energy - which makes gas turbines, power transmission systems and holds a 67% stake in Siemens Gamesa - opened at 22.01 euros apiece on Monday, giving the company a market value of 16 billion euros ($18.6 billion).

A source had previously said estimates were for a market valuation of between 21-22 billion euros.

Shares eventually closed at 21.21 euros, down 3.6% from the first price, after trading in a range of 19.21-22.98 euros during the session. This puts Siemens Energy's market capitalisation at 15.4 billion euros.

"I have repeatedly pointed out that we expect volatility to be high in the first few weeks," Siemens Chief Financial Officer Ralf Thomas told Reuters. "It's not a situation specific to Siemens Energy, it's the same with every spin-off."

Siemens Energy is Germany's largest spin-off ever, even surpassing Lanxess and Covestro, which were both spun off from Bayer.

For Siemens AG investors the deal has paid off: They have received one Siemens Energy share for every two shares they own in the former parent. Yet Siemens shares traded only 1.7% below Friday's closing price, a tiny discount given a substantial part of the conglomerate has been spun out in a separate listing.

Thomas said it would take until at least mid-October to get a first idea of how Siemens Energy, which competes with General Electric and Mitsubishi Heavy Industries, will be valued.

Spun off from Siemens due to weak profit margins, the unit is expecting an adjusted margin of not more than 1% in 2020 on earnings before interest, tax and amortisation before special items, due to the coronavirus crisis and weaknesses in its onshore wind turbine business.

That should rise to between 6.5% and 8.5% in 2023, helped by more than 1.3 billion euros of cost cuts that a source said will include the shutdown of some of the group's production plants.

Siemens Energy expects sales to fall by as much as 1.4 billion euros to 27.4 billion euros this year, before growing again in a range of 2-12% 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.

Siemens AG has initially spun off 55% of Siemens Energy to shareholders but plans to reduce its remaining direct stake of 35.1% significantly within 12-18 months of the listing. The Siemens pension fund owns 9.9% in Siemens Energy.

Siemens CFO Thomas said the firm wanted to preserve a right to influence key decisions at Siemens Energy at least over the next five years, adding a stake of anywhere between 20% and 28% could achieve this.

($1 = 0.8580 euros)

(Writing by Christoph Steitz and Caroline Copley; Editing by Michelle Adair, Susan Fenton and David Evans)


© Reuters 2020
Stocks mentioned in the article
ChangeLast1st jan.
BAYER AG 0.51% 45.64 Delayed Quote.-5.70%
COVESTRO AG 1.15% 58.18 Delayed Quote.13.95%
GENERAL ELECTRIC COMPANY -0.64% 101.5 Delayed Quote.18.24%
LANXESS AG -1.38% 64.42 Delayed Quote.4.08%
MITSUBISHI HEAVY INDUSTRIES, LTD. -0.07% 3053 End-of-day quote.-3.26%
SIEMENS AG 2.09% 149.78 Delayed Quote.24.85%
SIEMENS GAMESA RENEWABLE ENERGY, S.A. 0.13% 22.48 Delayed Quote.-32.15%
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Financials
Sales 2021 14 132 M 16 613 M 16 613 M
Net income 2021 1 422 M 1 672 M 1 672 M
Net Debt 2021 1 016 M 1 195 M 1 195 M
P/E ratio 2021 7,86x
Yield 2021 4,62%
Capitalization 11 111 M 13 071 M 13 061 M
EV / Sales 2021 0,86x
EV / Sales 2022 0,81x
Nbr of Employees 18 039
Free-Float 97,0%
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Mean consensus OUTPERFORM
Number of Analysts 21
Last Close Price 57,52 €
Average target price 67,37 €
Spread / Average Target 17,1%
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Managers and Directors
Markus Steilemann Chief Executive Officer
Thomas Toepfer Chief Financial Officer & Labor Director
Richard Pott Chairman-Supervisory Board
Klaus Schäfer Chief Technology Officer
Petra Kronen Vice Chairman-Supervisory Board
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