Siemens delays Healthineers IPO until 2018, USA likely location

Joe Kaeser. (AP)

FRANKFURT: Siemens said it plans to wait until next year to list its health care business, one of the world’s top medical technology providers and a solid performer in a generally disappointing third quarter for the German industrial group.
Investors have been wondering about Siemens’ plans for Healthineers, valued at up to €40 billion ($47 billion), since Chief Executive Joe Kaeser announced last November he planned some kind of listing but gave no details.
The delay, along with quarterly results that were dragged down by the group’s energy-related businesses, sent Siemens shares down more than 3 percent to the bottom of the blue-chip DAX and an eight-month low on Thursday.
Kaeser pronounced himself partially satisfied with the quarter, which was however overshadowed by a controversy about Siemens gas turbines that were transported from Russia to Crimea, the subject of energy-technology sanctions.
“Everything is not perfect at Siemens,” Kaeser, who extended his contract until 2021, told reporters on a conference call.
“The Crimea affair has cost us much time and effort. We have to ask ourselves what this means for our future business processes and relationships.”
Siemens said last month it had credible evidence that all four gas turbines it delivered a year ago for a project in southern Russia had been illegally moved to Crimea, confirming a series of Reuters reports.. A review of Siemens business practices in Russia could cost €100-200 million in sales, Kaeser said.
The Power and Gas business faced challenges from a global trend away from the large turbines in which Siemens specializes. It reported a 41 percent drop in orders and a worse-than-expected 23 percent fall in profit.
Chief Financial Officer Ralf Thomas said competition in that business remained intense. “We have a tough year before us and also a very difficult 2018. Structural changes will be unavoidable,” he told reporters on a conference call.
Wind power unit Siemens Gamesa already disappointed the market with results published last week, while oil industry-dependent Process Industries and Drives reported a profit well below what had been expected.
“Siemens Gamesa Renewable Energy was responsible for 90 percent of the consensus miss regarding orders,” Baader wrote in a note, keeping its “buy” rating.
“Furthermore, the order decline in Power and Gas was more pronounced than expected.”
Thomas said Power and Gas was unlikely to hit its profit margin target range in the year to the end of September.
Siemens’ overall industrial profit margin fell to 10.4 percent from 10.8 percent due to acquisition-related effects.
The company wants to get closer to the profitability of rivals, as Kaeser moves the trains-to-turbines group gradually away from its conglomerate structure.
General Electric last month reported a 13.2 percent industrial operating margin, up 1 percentage point, despite portfolio and management turmoil.
Kaeser, a former Siemens finance chief who seized power in a boardroom coup in 2013, is popular with investors for eliminating the nasty surprises that used to plague the group and slimming down its portfolio.
He dampened expectations, however, for a quick agreement with Bombardier to combine their rail businesses. “I wouldn’t bet on short-term things,” he said.
Alongside Healthineers, Siemens’ profits were supported by automation software unit Digital Factory and transportation unit Mobility, which beat expectations.
Siemens’ overall profit from its industrial businesses was €2.25 billion, below a Reuters poll average of €2.41 billion. Orders fell 9 percent and sales rose 3 percent.
The company confirmed its full-year forecasts, which include moderate sales growth, a book-to-bill ratio above 1 and an industrial profit margin of 11-12 percent.
Siemens wants Healthineers to have its own currency for acquisitions and investments as the global health care market shifts focus from Siemens’ core business of imaging to molecular diagnosis and patient self-management.
But Michael Sen, the board member with responsibility for Healthineers, said there was no list of M&A targets as such. “The equity story begins with a highly attractive portfolio, which we already have,” he told reporters.
Sen highlighted the attractions of a listing in the United States rather than Germany. Siemens has so far left it open where it will list Healthineers.
“Most peer group companies... are listed in the US,” he told reporters. “One has to ask where will one get the best research and coverage... and sufficient market making capacity and liquidity.”