Siemens Takes Impairment Charge on Energy but Continues to Post Solid Cash Flow Generation

Siemens continued to experience good demand in its fiscal third quarter, with all divisions still reporting a book/bill above 1. Siemens Gamesa (now part of Siemens Energy) continues to struggle to reach solid profitability, resulting in Siemens Group taking a sizeable impairment charge of nearly EUR 2.9 billion, mainly from a lower valuation of Siemens Energy and to a lesser extent from the mobility division's Russia operations. While the impairment charges weighed down reported earnings, cash flow generation remained solid. Cash flow from operations was in line with the previous year, and the company's liquidity position has been boosted by asset disposals as well as up-front payments for orders in China related to company's digital industries division. Orders and revenue in digital industries were slightly above our expectations, while the margin headwinds in mobility were greater. We have made some modest adjustments to our forecast but are maintaining our EUR 145 fair value estimate and narrow moat rating.