Shares in Siemens Energy opened lower than expected on their first day of trading on the Frankfurt stock exchange, as the business gears up for a standalone future independent from parent Siemens.
Shares in Siemens Energy - which makes gas turbines, power transmission systems and holds a 67% stake in Siemens Gamesa - opened at 22.01 euros apiece on Monday, giving the company a market value of 16 billion euros ($18.6 billion).
A source had previously said estimates were for a market valuation of between 21-22 billion euros.
By 0950 GMT the shares were trading up 0.4% from their listing price at 22.10 euros, after hitting a low of 19.21 euros per share at one point.
“I have repeatedly pointed out that we expect volatility to be high in the first few weeks,” Siemens Chief Financial Officer Ralf Thomas told Reuters. “It’s not a situation specific to Siemens Energy, it’s the same with every spin-off.”
Thomas said it would take until at least mid-October to get a first idea of how Siemens Energy, which competes with General Electric and Mitsubishi Heavy Industries, will be valued.
Spun off from Siemens due to weak profit margins, the unit is expecting an adjusted margin of not more than 1% in 2020 on earnings before interest, tax and amortisation before special items, due to the coronavirus crisis and weaknesses in its onshore wind turbine business.
That should rise to between 6.5% and 8.5% in 2023, helped by more than 1.3 billion euros of cost cuts that a source said will include the shutdown of some of the group’s production plants.
Siemens Energy expects sales to fall by as much as 1.4 billion euros to 27.4 billion euros this year, before growing again in a range of 2-12% in 2021.
Siemens AG has initially spun off 55% of Siemens Energy to shareholders but plans to reduce its remaining direct stake of 35.1% significantly within 12-18 months of the listing. The Siemens pension fund owns 9.9% in Siemens Energy.
Siemens will keep a stake of around 25% in Siemens Energy, a person familiar with the matter said, giving it the power to block unwanted takeover attempts. It could keep that blocking minority for at least five years, the source said.
($1 = 0.8589 euros)
Writing by Christoph Steitz and Caroline Copley; Editing by Michelle Adair and Susan Fenton