| Fitch Affirms Siemens at 'A+'; Outlook Stable |
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16/03/2010 11:24 (697 Day 17:01 minutes ago) | |||||
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The FINANCIAL -- Fitch ratings has on March 15 affirmed Siemens AG's (Siemens) Long-term Issuer Default Rating (IDR) and senior unsecured credit ratings at 'A+', respectively, and the company's Short-term IDR at 'F1'.
Fitch has also affirmed the ratings of Siemens' two hybrid bonds at 'A-'. The Outlook for Siemens' Long-term IDR is Stable.
"The slowdown in the global economy over the past 18 months has undoubtedly had an effect on Siemens' business; although this is mitigated by the company's strong liquidity, financial flexibility and operational diversity," says Tom Chruszcz, Director in Fitch's European Industrials team.
Siemens' Q110 results showed the company's EBITDAR margins improving to 16.6% (at Q110) from 14.1% (at Q109) as a result of market conditions stabilising and prior restructuring measures taking effect. For FY09 the group achieved improved underlying profit margins in all of its divisions, although at the industrial and healthcare sectors, these margins remain below the company's target range. Operating margins and cash generation remain weak for the present ratings, although free cash flow is expected to remain positive, and moreover, should gradually improve during 2010 as market conditions stabilise.
Siemens' balance sheet cash and cash equivalents at FYE09 were EUR10.6bn, against short-term debt of EUR423m and total debt of EUR18.7bn. The group has three long-term USD- and EUR-denominated committed credit lines totalling over EUR7bn, of which USD1bn was drawn in Q110.
As of 31 December 2009, Siemens had adjusted net debt, including off-balance sheet operating leases, of EUR17.7bn, down from EUR18.4bn at 30 September 2009. The adjusted net debt position of the company's industrial operations (i.e. excluding Siemens Financial Services (SFS), the group's financial services arm) at FYE09 was EUR9.1bn (no details provided for Q110); giving a lease-adjusted net leverage of 0.9x, broadly stable from the prior year, and within the parameters of the present rating level. Fitch notes that SFS appears to be appropriately capitalised; however, it offers weak public disclosure of its operations and financial profile, which somewhat clouds the visibility of the performance of the group as a whole. However, as of Q110 the group retains more than sufficient back-up liquidity to support the FS division in the unlikely event it should require support.
The Stable Outlook reflects Fitch's belief that Siemens' operating and financial profile is likely to remain firmly within the parameters of the 'A+' rating level in the medium-term. Fitch expects short-cycle markets to stabilise in FYE10; however, longer-cycle markets like power generation are likely to take longer to recover. Nevertheless, whilst Fitch expects some moderate pressure on earnings and cash generation in the short term, the company's financial performance should remain resilient in the medium to long term. Although revenues and profit margins are expected by Fitch to contract further during 2010, the agency expects a modest recovery from 2011 onwards.
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