July 30, 2015

Siemens and Bombardier rail divisions report drop in profit

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Both Siemens and Bombardier have been involved in earlier ICE train projects. Both Siemens and Bombardier have been involved in earlier ICE train projects.

BOTH Siemens Mobility and Bombardier Transportation have reported reductions in revenue and profit in their latest quarterly results, while Bombardier has denied reports in the financial press of a merger.


Third-quarter results published today by Siemens for its 2014-15 financial year show a 2% drop in revenue for Siemens Mobility from €1.85bn in 2014 to €1.82bn in 2015, and a 28% fall in profit from €145m to €105m. This is despite a 123% increase in orders from €1.26bn to €2.82bn. Siemens attributes the decline in revenue to the timing of large rail projects.

 

Siemens Mobility's overall performance for the first three quarters of 2014-15 was much better with a 7% increase in revenue to €5.5bn and a 2.2% rise in profit to €417m.

Bombardier Transportation recorded a 12% drop in revenue in its second quarter ending July 30 from $US 2.38bn to $US 2.09bn, while Ebit fell 8% from $US 125m to $US 115m. However, order intake increased by 18% from $US 1.7bn to $US 2bn, and Bombardier Transportation expects to improve its Ebit margin slightly for the year as a whole.

Bombardier confirmed that it plans to file documentation with securities regulators during the fourth quarter of 2015 for an initial public offering (IPO) of a minority stake in Bombardier Transportation. "When completed, the IPO is expected to crystallise the full value of Bombardier Transportation and further strengthen the Corporation's financial position, while preserving flexibility should the Corporation wish to participate in future rail equipment industry consolidation," says Bombardier.

However, Bombardier has refuted a report in the US Wall Street Journal that it is in talks with Siemens over a possible merger between their two railway divisions, or with other potential partners.

Both companies are major players in the global railway equipment supply market. However, Bombardier Transportation accounts for 45% of group revenues and 50% of group profits, while Siemens Mobility only produces 10% of Siemens' overall turnover and just 7.3% of profit.

Nevertheless, a merger would face considerable opposition from competition authorities in Europe due to the dominant position of the two companies. While the newly-formed CRRC in China poses a potential threat, its exports are currently tiny in comparison with its domestic production.

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