As we pointed out in Nokia: This time it's different, not all oligopolies necessarily translate into hard cash profits for their members.
Despite its dominance of the sector, alongside GE and Philips, the spin-off of Siemens' healthcare segment, which has been flying solo on the stockmarket since 2018 – even though its parent company still controls over two-thirds of its capital – provides another example.
Despite fairly decent annual results—revenue rose from €22.36bn to €23.37bn, and net income from €1.96bn to €2.17bn—it cannot be said that Healthineers has had a stellar stockmarket performance.
The reason behind its painful stagnation on the stockmarket can be found in value creation: despite real growth in revenue, which owes much to the acquisition of the American radiotherapy specialist Varian, consolidated operating profit has been stagnant since this supposedly transformative transaction.
It is barely keeping pace with inflation, which is a poor result for an external growth operation that cost a whopping $16.4bn and overloaded Healthineers' balance sheet with debt. Fortunately, the creditor is the former parent company, Siemens itself, of course on preferential terms.
Under these conditions, Siemens Healthineers' net debt still represents four years of operating profit. For the record, this operating profit was $1.94bn before the Varian acquisition, compared to $2.85bn today, on an absolute basis, without adjustment for inflation.
It is therefore with a certain degree of caution—and quite rightly so—that the market continues to treat Healthineers stock. This caution is reinforced by the capital still tightly controlled by Siemens and the strong selling pressure that arises as soon as the former parent company—which remains so de facto—begins to reduce its stake.
