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German industrial conglomerate Siemens AG is set to report a significant increase in net profit on a one-time gain from the sale of a minority stake in nuclear power venture Areva NP, while its order book is set to benefit from the continuing rebound across its business lines.
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Siemens earlier this year sold its 34 per cent holding in Areva NP for €1.62 billion to France’s Areva SA, which gained full control. The transaction will boost Siemens’ profit as the stake was valued at only €190 million in the company’s books at the end of September, the end of its fiscal year.
As a result, fiscal second-quarter net profit is expected to surge 74 per cent to €2.57 billion, according to the average estimate in a Dow Jones poll of analysts.
Siemens decided more than two years ago to pull out of Areva NP, saying at the time it planned to form a partnership with Russia’s Rosatom instead. Areva objected to the move and initiated arbitration against Siemens, which is still ongoing and will decide whether the value of the 34 per cent stake in Areva NP will be reduced or increased by as much as 40 per cent.
Meanwhile, Siemens said in early April that business was “robust”, with order intake expected to come in near the first quarter level of €20.8 billion, while revenue should “easily” have reached the December quarter’s €17.6 billion.
A rebound in demand is expected to lead to a significant increase in second- quarter orders compared with a year earlier.
“Demand is still recovering,” Deutsche Bank analysts Peter Reilly and Martin Wilkie said in a recent note on Siemens, in which they confirmed their buy rating for the stock. “We therefore think profits can continue to grow even if margins are close to peak.”
Siemens previously forecast profit from continued operations to gain at least 25 per cent to 35 per cent in fiscal 2011, with order intake to rise significantly and sales to grow moderately.