Siemens (Pakistan) Engineering

Incorporated as a public limited company in 1953, Siemens (Pakistan) Engineering (PSX: SIEM) has been a cornerstone of innovation and engineering excellence in the country. The company specializes in executing large-scale projects under contracts, as well as manufacturing, installing, and selling electronic and electrical capital goods.

SIEM’s diverse business portfolio spans multiple cutting-edge domains, including smart infrastructure, digital industries, smart grids, and smart buildings. The company is also a leader in power generation and distribution, as well as automation and digitization, among other advanced technologies.

Historical Performance

After facing significant challenges in 2019 and 2020, SIEM demonstrated a strong turnaround in 2021, recovering from prior losses. However, while revenue growth remained consistent in subsequent years, profitability pressures resurfaced in 2023. Margins, which had been in decline until 2020, peaked at a historic high in 2022 before contracting in 2023.

In 2019, SIEM’s topline declined by 14.6 percent, primarily due to unfavorable macroeconomic conditions in Pakistan and the completion of major projects in Afghanistan during 2018. Rising costs, driven by inflation, rupee depreciation, and underutilized capacity, caused gross profit to fall by 24.2 percent. Additionally, high finance costs pushed net profit down by 38.8 percent, ending the year at Rs709 million, with a GP margin of 15 percent.

The situation worsened in 2020, as the COVID-19 pandemic disrupted economic activity. Revenue dropped by 23.2 percent, resulting in the lowest GP margin of 6.95 percent over the period. Despite cost reductions and limited support from lower finance expenses, SIEM recorded a net loss of Rs496 million for the year, with an EPS of negative Rs60.14.

A recovery began in 2021, with revenue increasing by 12 percent, driven by growth in the energy transmission segment, which secured orders worth Rs15 billion. Strategic cost optimizations led to a 172 percent surge in gross profit, with GP margins rebounding to 16.9 percent, levels last seen in 2018. The net profit reached Rs850 million, and the company achieved operational efficiency and an EPS of Rs103.07.

Despite macroeconomic and geopolitical challenges in 2022, SIEM achieved a remarkable 30.4 percent increase in revenue. Key wins included energy transmission contracts for K-Electric and NTDC, as well as significant derivative gains due to rupee depreciation. Gross profit doubled, achieving a record GP margin of 26 percent. However, higher expected credit losses, increased payroll expenses, and other operational costs tempered profitability, with net profit growing by 103 percent to Rs1.73 billion and an EPS of Rs209.29.

In 2023, SIEM’s topline grew by an impressive 56.9 percent, largely driven by energy transmission projects, including a major contract with NTDC for the Allama Iqbal Industrial City grid station. However, rising commodity prices, rupee depreciation, and inflation significantly increased costs, leading to a decline in GP margin to 18.35 percent. Distribution and administrative expenses rose due to higher payroll and operational costs, while finance costs surged by over 1,140 percent due to increased borrowings. These factors contributed to a 17.9 percent drop in net profit to Rs1.42 billion, with an EPS of Rs117.72.

SIEM in 2024 and beyond

In 2024, Siemens Pakistan Engineering faced a mixed financial and operational environment. The company achieved a 20 percent growth in revenue, supported by eased macroeconomic pressures, import relaxations, and a robust order backlog conversion. New orders amounted to Rs26.1 billion, led by the Energy segment (Rs16.9 billion), followed by Smart Infrastructure (Rs5.5 billion) and Digital Industries (Rs3.4 billion). Sales for the year rose by Rs5.8 billion compared to 2023, primarily driven by industrial business segments.

Despite healthy topline growth, the company reported a net loss of Rs2.05 billion, largely impacted by unrealized losses of Rs2.6 billion due to the re-measurement of foreign currency embedded derivatives amid PKR appreciation. Additionally, net finance costs of Rs2 billion from funding large-scale energy projects further weighed on profitability. The gross profit ratio declined to 6.32 percent, reflecting the challenging cost environment.

Operationally, Siemens Pakistan maintained its focus on key segments, including Smart Infrastructure and Digital Industries, while transitioning its Energy segment to a separate entity. The company continued to emphasize efficiency, automation, and sustainable growth, leveraging its strong portfolio of smart and digital technologies to address customer needs.

Looking forward, Siemens Pakistan aims to consolidate its market position and capitalize on opportunities within its restructured portfolio while navigating financial headwinds. Siemens Pakistan Engineering is focusing on its core portfolios of Smart Infrastructure and Digital Industries, following the separation of its Energy business into an independent entity. The company aims to strengthen its market position by leveraging improvements in the business environment and enhancing operational efficiencies. Smart Infrastructure will remain a key focus, connecting energy systems, buildings, and industries with advanced technologies to drive efficiency and sustainability. Similarly, the Digital Industries segment will empower customers by offering automation and digitalization solutions, unlocking their full potential in process and manufacturing industries. Siemens is committed to consolidating its position in the market by delivering on stakeholder and customer commitments while enhancing its technological offerings to meet evolving industry demands and address operational challenges.