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Siemens Conference Call Highlights

Siemens Conference Call Highlights

Published on 10 August 2021 Views 11 Comments 0
  • The short cycle business is doing pretty well. The project business, long cycle business which is primarily government related is getting pushed out.
  • The increase in commodity prices, the impact of shortage of semiconductors impacts the supply chain and it delays buying behaviour for many customers who are actually believing that the increase in commodity prices is a short-term phenomenon and they prefer to wait a couple of months hoping that prices may ease.
  • The opportunity pipeline stays healthy. There is no project cancellation. There are some delays in finalization, not because the demand has gone down, but more because people are impacted by COVID.
  •  Do not have any concerns in the supply chain either in their ability to supply or the ability of major suppliers to deliver to them.
  • Factories and most of their project sites are largely operational. There are regional impacts of one side, or the other being impacted for a short period of time because of labour falling ill or a customer not available. But broadly this is not really having a material impact on their numbers.
  • On the 1st of March, they were able to close the C&S acquisition successfully. They now have, a management team in place and are now focusing on the market and addressing the demand that is there. Smart infrastructure segment closed the C&S electric acquisition for Rs. 21.6 billion and this is fully in line with their strategy to grow in India and adjacent markets, aim is to get access to a fast-growing low voltage power distribution market in India and at the same time C&S electric Ltd will serve as an export hub for further markets in the regions.
  • The focus on solar increases, there is an increased demand for power evacuation and STATCOMs (static synchronous compensator) and GIS substation.
  • Good interest in waste heat recovery projects partly due to intentions of customers to decarbonize, but also to increase the efficiency of plants by using the waste heat there. And a lot of interest here is in the cement and steel sector.
  • Technology of the voltage source inverter-based drives is also gaining traction as the water management activities on the government gain traction.
  •  As also on mobility dedicated for freight corridor projects, Eastern dedicated freight corridor project here with signalling technology order that they won.
  • The TBCB (Tariff based competitive bidding) orders are also beginning to take off. Some of it spill over from the prior period, but also a clear interest in moving towards GIS (Gas insulated) substations and switching from AIS (air insulated subsystems) to GIS.
  • Prestigious project for the parliament building on their smart infrastructure where they are doing the electrical distribution, the fire safety building management, video surveillance and access control activities.
  • They had some real strategic initiatives that they were able to close in the last six months with their partnership with Ola to build its upcoming electrical vehicle manufacturing facility will be one of the largest in the world. 2 to 5 million scooters, electric scooters will be manufactured there, and they will have accessed through this partnership with them through Siemens integrated digital twin design and manufacturing solutions which will help them really to digitalize and validate the product, the production and finally the performance activities as well.
  • Signed an MOU, which Switch Mobility a subsidiary of Ashok Leyland today to work with them on delivering cost-effective E-Mobility solutions which will be available to commercial vehicle customers in India. Here Siemens will provide the charging infrastructure technology and the charging infrastructure management software solutions which will enhance the performance of the charging stations there. The infrastructure will be supplemented with a management software solution to enhance the energy efficient operation there and both Switch Mobility and Siemens will collaborate on introducing new business models, such as E-Mobility as a service or integrated depot energy management or vehicle to grid as well as the onsite-offsite renewable energy sources by leveraging batteries from commercial vehicles as well.
  • Gross margin was impacted by higher logistics costs as well as increased commodity and material pricing. This is partially due to weakening of INR versus Euro and US dollar, which led to increase in cost for imported goods. However, that negative impact was limited due to pricing actions and the stringent hedging activities.
  • Sir, what is the market positioning for C&S domestic and international markets, and how do you see roadmaps for long term growth for the Company? And there is a second question, how is digitalization gaining traction, have you seen overall inquiries building out disproportionately here from Indian industry? Do you see trends of private capex building out over the last 4 years, and any interesting change or trend there? Sunil Mathur So, Parikshit, just to come back to your first question,
  • Marketing position of C&S: Strategy to acquire a company was basically to take the products global and start export business there. So that activity has started, they have started brand labelling already in select markets where they are introducing the brand or the products into those markets. They are also looking to see what more can be done in expanding the business within the country.
  • Digitalization:  Lot of areas like cyber security, Industry 4.0, artificial intelligence, additive manufacturing, energy efficiency, machine safety, industrial security. So, all these are areas of virtual commissioning, remote services. So absolutely digitalization has taken off, and they started off with 20 projects and 30 then 100 projects in the pipeline.
  • Digital industries business is a mixture of essentially 3 parts. One part is the automation part where there are imports that take place of PLCs and certain products from Germany. The second is digitalization which is software, and that is generated entirely locally. And the third is customer services which is servicing all the plants that they are working on, which is also entirely local. Imports are of low value. The average value of an order in digital industries or product order could be 40 maybe 25 to 50,000 rupees. So, it is not substantial product-based business. Localization here, the capex and the business case would not make sense. Where they do look at possible increases in top line/bottom line are through the digitalization which is software
  • Data centres: Roughly 60 to 65% of the cost of a data centre, running cost of a data centre is electricity. And that's where they can come in completely with the switch gears, the substations, security solutions, building management situations, managing the heating ventilation, air conditioning, etc.  On data centres, probably around 25 to 30% of the data centre capex cost is what they would probably be active in. What is not in the system are the the HVAC (Heating, ventilation and Air conditioning), the UPS (uninterruptible power supply), the generators and the civil activity that is something they don’t do.
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