Engineering

Feeble margins could stall Alstom’s speed-up

11 May 2016

The French train maker boasts a strong balance sheet, record order intake and big mid-term growth ambitions. Yet a lacklustre operating margin of 5.3 pct leaves little room to cope with intensifying global competition. Sorting this quickly should be Alstom’s key focus.

ABB’s soul-searching is dragging on too long

20 Apr 2016

The Swiss engineer says it needs until October to decide what to do with its Power Grids unit, under review since the autumn. CEO Ulrich Spiesshofer deserves credit for improving the division’s operational performance. But the decision to sell the unit looks clear enough now. 

New Alfa Laval boss can sweeten sour news

2 Feb 2016

The high-flying $7 bln Swedish engineer is being hit hard by collapsing orders in the marine as well as oil-and-gas sectors. Shares dropped 13 pct after a bleak outlook. Incoming boss Tom Erixon needs quick wins. As costs are under control, a share buyback could be his best bet. 

Siemens’ strong earnings have many moving parts

26 Jan 2016

The German engineer raised its expected earnings per share for 2016 by 2.5 percent. Cost-cutting seems to be taking effect. But earnings per share, which hinge on many inputs, make for a slippery target, especially as Siemens is sticking to its former revenue and margin guidance. 

BAE deal beats Rolls-Royce nationalisation

14 Dec 2015

The British government has concerns about the aero-engine maker that also handles some nuclear submarine work for the UK. In extremis, nationalisation is a possibility. A better scenario is that defence contractor BAE steps in. It might dust off deal ideas in any event. 

Abengoa’s creditors face certain pain

25 Nov 2015

The heavily indebted engineering firm is seeking creditor protection after a new investor backed out of injecting fresh equity. Abengoa is probably viable, but only with a lot less debt. That makes debt-for-equity swaps and writeoffs the likely next step. 

ABB’s weakening cash generation is concerning

21 Oct 2015

The Swiss engineer’s cost-cutting zeal bore fruit in the third quarter. But despite squeezing working capital by $845 mln, its cash generation fell year-on-year. ABB is already dogged by slow growth and falling orders. Customers paying up more slowly is an unwelcome trend. 

ABB’s $4 bln grid sale is key to reinvigoration

9 Sep 2015

The Swiss engineer is in strategic review mode. As customer demand weakens, it wants to take $1 bln from overall annual costs too. Given growth challenges elsewhere in its empire, ABB could do without its grid operation that generates low profit margins yet is also risk-prone.

Rolls-Royce’s new pilot puts safety first

6 Jul 2015

The aero-engine maker’s brand new chief has halted a share buyback programme. The stock slid 9 pct. The decison flags growing cashflow woes but safeguards a crucial investment grade rating. Rolls-Royce’s Warren East is acting with the kind of boldness the company requires. 

Slow Siemens is stretching investors’ patience

7 May 2015

Reinventing the lacklustre engineer is taking a long time. Siemens’ industrial profit fell by 5 pct to 1.7 bln euros in its second quarter. CEO Joe Kaeser is stepping up cost-cutting by slashing another 4,500 jobs. But it looks like 2015 may be another lost year. 

Europe’s top activist gets bogged down in Germany

23 Apr 2015

Cevian takes a longer-term, lower-key approach than U.S. rivals. But it’s found a particularly knotty problem at Bilfinger. The industrial group has seen five profit warnings and a 45 pct stock decline over the last year. A good exit is conceivable, but not straightforward.

Rolls-Royce’s margin of error is narrowing

13 Feb 2015

The UK engineer has met lowered 2014 revenue and profit targets but has become more pessimistic. Free cashflow, down 42 pct last year, is likely to halve again this year. Rolls’ strong balance sheet can cope for now. But if the trends continue, management faces some tough choices.

ABB’s growth targets are group’s biggest challenge

5 Feb 2015

The Swiss engineer underperformed in the fourth quarter, sending shares down 2 pct. But profitability is not ABB’s main problem. Underlying margins are up and restructuring is on track. The goal of 4 to 7 pct annual revenue growth until 2020 will be harder to reach.    

Honeymoon really is over for Siemens boss

27 Jan 2015

Lacklustre quarterly results hit shares in Europe’s largest industrial group. After 18 months, CEO Joe Kaeser has not lived up to early hopes. He’s completed some smart disposals. But he’s also overspent on shale and, by centralising power, hobbled unit managers.

ABB’s $4 bln buyback camouflages still-tough future

9 Sep 2014

The Swiss engineer pleased investors by promising to buy back shares equivalent to 7.5 pct of its market cap. But it also cut growth and margin targets. There’s an organisational rejig too. Even after the reset, ABB will have to work hard to meet its goals.

Infineon’s $3 bln buy relies on profit margin hike

21 Aug 2014

The German semiconductor company is paying a rich 48 pct premium to snap up International Rectifier. The fit is complementary: its U.S. peer’s strength is chips that consume less power than the typical Infineon product. But top-notch execution is required.

Bilfinger’s best option could be a breakup

6 Aug 2014

Two profit warnings in five weeks have wiped a third off the German industrial services group’s share price, costing the CEO his job. Unless it can be turned around, Bilfinger’s unwieldy structure and muted growth prospects make a breakup as plausible as a full sale.

Next stop: Siemens-Alstom train merger

24 Jun 2014

Losing the competition for Alstom’s power assets was a blessing in disguise for the German engineering group. It can now focus fully on its internal restructuring. Fixing the ailing train unit is crucial. Hiving it off to Alstom itself could well be the best solution.

Investors beware: France will get more erratic

23 Jun 2014

Paris is to buy most of Bouygues’ stake in Alstom in an expensive concession by François Hollande to his protectionist economy minister. Weakened by his unpopularity, the president seems increasingly unable to bring cohesion to his own cabinet. It can only get worse.

GE remains the best bet for Alstom’s board

20 Jun 2014

Rival bids from GE and Siemens for Alstom’s energy business have converged in terms of cash, complexity, political acceptability, and Alstom’s future structure. This is not conventional M&A, so the outcome is unpredictable. But GE’s bid remains simpler, and richer in cash.