siemens · 2019-12-04 · analyst presentation april 26, 2007 klaus kleinfeld / joe kaeser. page 2...

Siemens Analyst presentation

April 26, 2007

Klaus Kleinfeld / Joe Kaeser

March 2007 Q2 Analyst Conference

Disclaimer

This presentation contains forward-looking statements and information – that is, statements related to future, not past, events. These statements may be identified by words as “expects”, ”looks forward to”, “anticipates,” “intends,” “plans,”“believes,” “seeks,” “estimates,” “will” or words of similar meaning. Such statements are based on our current expectations and certain assumptions, and are, therefore, subject to certain risks and uncertainties. A variety of factors, many of which are beyond Siemens’ control, affect its operations, performance, business strategy and results and could cause the actual results, performance or achievements of Siemens worldwide to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements. For us, particular uncertainties arise, among others, from: changes in general economic and business conditions (including margin developments in major business areas); the challenges of integrating major acquisitions and implementing joint ventures and other significant portfolio measures; changes in currency exchange rates and interest rates; introduction of competing products or technologies by other companies; lack of acceptance of new products or services by customers targeted by Siemens worldwide; changes in business strategy; the outcome of pending investigations and legal proceedings; our analysis of the potential impact of such matters on our financial statements; as well as various other factors. More detailed information about our risk factors is contained in Siemens’ filings with the SEC, which are available on the Siemens website, www.siemens.com and on the SEC’s website, www.sec.gov. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in the relevant forward-looking statement as expected, anticipated, intended, planned, believed sought, estimated or projected. Siemens does not intend or assume any obligation to update or revise these forward-looking statements in light of developments which differ from those anticipated.

http://www.siemens.com/

http://www.sec.gov/


Key figures – Q2 FY07

—

+0.36

+36

+49

+10

+9

Δ(in %, except for

EPS)

538(901)Net cash(continuing operations)

9231,259Net income

1,3141,964Group profit(from Operations)

0.98

18,824

21,529

Q2 FY06

1.34

20,626

23,469

Q2 FY07

Sales

Earnings per share(in €, not diluted; change in €)

New orders

In millions of euros


All Groups reached or exceeded their margin ranges

Groups Profit marginQ2 FY07 IFRS Margin ranges Status

SBS 5.2%14.2%4.6%7.5%

10.7%8.1%5.0%6.3%

13.4%10.5%52.6%

5–6%A&D 11–13%I&S 4–6%SBT 7–9%PG 10–13%PTD 5–7%TS 5–7%SV 5–6%Med 11–13%Osram 10–11%SFS* 18–22%

* Return on equity


Fit4More – Short term action program started in April 2005

• Portfolio optimizationnecessary

• Margin targets "Operation 2003" (set 2000) partially reached

• Weak growth/no quantified growth target

• top+ Siemens Management System well established

Initial situation beginning 2005 April 2005 – Start Fit4More Program

Performanceand PortfolioPerformanceand Portfolio

OperationalExcellence

CorporateResponsibility

PeopleExcellence

Fit4More: Profit & Growth Program

Execution by April 2007!

Solve Mobile Devices

Finalize strategic reorientation of I&C i.e. Com and SBS

Strategic reorientation of L&A

Reach target margins at all groups

Build portfolio for2x GDP growth

Siemens Management System (powered by top+) with focus on

Innovation

Customer Focus

GlobalCompetitiveness

Achieve high performance culture

Establish Leadership Excellence Program

Increase global talent pool

Strengthen expert careers

Achieve Best in Class in

Corporate Governance

Business Practices

Sustainability

Corporate Citizenship

The Objectives The Enablers


Two-pronged strategy successfully implemented

~ 75

Q2 FY07trailing 4 quarters

~ 50

Sales2004

~ 80- 33%

+60%

e.g.Sale of DematicReorientation of I&C incl. JV Nokia SiemensRestructuring SBS

AcquisitionsOrganic growthSIS Reorganization

Sales afterstrategic

reorientation

in bn. €

Strengtheningour strengths

Strategic Reorientation


We significantly strengthened our strongest businesses

Market position

CTI Molecular Imaging (3/2005) # 2Diagnostic Products (4/2006) IVD overall # 3Bayer Diagnostic (6/2006) ImmunoD # 2

Healthcare

Energy & Environmental Care

Automation & Control, Industrial & Public Infrastructures

AcquisitionsVA Tech (7/2005) T&D # 4Wheelabrator (10/2005) U.S. leader in flue gas

desulphurizationSustec (5/2006) leading in gasification

Electrium (12/2005) UK # 3UGS (01/2007) leading in PLM software

Kühnle, Kopp & Kausch (7/2006) leading in ST<5MWBonus Energy (10/2004) worldwide # 5

offshore # 1USFilter (5/2004) U.S. # 1Flender (3/2005) Industry & Wind # 1Robicon (7/2005) MV converters # 1VA Tech (7/2005) VAI # 1

Application fields


Fit4More – A great success

Achieved what we set out to do

• Fostered profitable growth

• Company value substantially increased

• All Groups reached their margin ranges• Revenue growth of > 15% p.a.1)

• Company value increased 54%2)

• Two-pronged successfully applied to companyportfolio

• Innovation leadership strengthened

• Successful reorientation of major parts of portfolio• Acquisitions of ~12 bn. €3) in our successful

businesses• Significant investments in organic growth

• Successful execution of enabling programs• Operational Excellence• People Excellence• Corporate Responsibility

• Established Siemens Management/ top+ System further implemented

• Talent development and leadership excellencesignificantly strengthened

• Top ranking within Dow Jones Sustainability index, but serious compliance issues

1) Revenue growth total operations Groups from Q2 FY05 to Q2 FY07 excl. Com2) April 2005 until end of day April, 23rd 3) Volume of acquisitions since April 2005


: Accelerating Profit & Growth

PeopleExcellence Portfolio



Develop talent globallyStrengthen leadership developmentAttain high performance cultureStrengthen expert careers

Execute SiemensManagement System(powered by top+)with focus on

InnovationCustomer FocusGlobal Competitiveness

Build on our strengths inEnergy & EnvironmentalCareAutomation & Control, Industrial & PublicInfrastructuresHealthcare

IPO of Siemens VDO

Achieve best-in-class in Corporate GovernanceComplianceClimate protectionCorporate Citizenship

PortfolioPeopleExcellence



PerformanceOptimize capital efficiency with ROCE of >14–16%Attain cash conversion rate of "1–growth rate"Sustain 2x GDP growthAchieve new margin ranges


Company targets address all value drivers

Profitability CashGrowth

• Outpace world economic growthwith a growth rate > 2 x GDP

• Stronger focus on cash to finance future growth and investments

• Improved profitability on Group level through new margin ranges

• Additional target to optimizeSiemens overall profitability and more efficient capital utilization

Growth ROCE1) Cash conversion1)

> 2 x GDP10.0%

2006

>14-16%

2010

0.6

2006 2010

1- growth rate

1) Continuing operations


Margin ranges increased for nine out of eleven Groups

Margin rangesFit4More Q2 FY07

SIS 5-6% 5.2%

A&D 11-13% 14.2%

I&S 4-6% 4.6%

SBT 7-9% 7.5%

Med 11-13% 13.4%

Osram 10-11% 10.5%

SFS* 18-22% 52.6%

PG 10-13% 10.7%

PTD 5-7% 8.1%

TS 5-7% 5.0%

SV 5-6% 6.3%

New margin ranges

Fit4 2010

5-7%

12-15%

5-7%

7-9%

10-14%

7-10%

5-7%

7-9%

13-15%

10-12%

20-23%* Return on equity


Our strategy: Strong businesses in attractive markets

Energy &Environmental Care

Automation & ControlIndustrial & Public Infrastructures

Healthcare

Application fields

Megatrends

DemographicChange

Urbanization

Attractive markets with tailwind from megatrends

Increasing scarcity ofnatural resourcesGrowing need forenvironmental careGrowing demand forhealth and elder care

Increasing mobility

Growing demand forsafety and securityRegional shift ofeconomic gravity

High quality of our businesses

PG PTD Os-ram A&D I&S SBT TS SV Med SIS

No. 1 or No. 2 position


Power Generation: Growth through innovations and acquisitions

New H-Frame turbine:• World's most efficient turbine, efficiency > 60%

(CCPP)• Reduces CO2 emissions by 40.000 t p.a. compared

to today's best in class

Wheelabrator – Air pollution reduction technology• U.S. leader in flue gas desulphurization• Advanced burner technology

Siemens Wind Power• Entry into strongly growing wind energy market via

acquisition of Bonus Energy• No. 1 in offshore wind parks

H1 07H1 06

Wind revenues+51%

H1 07H1 06

Wheelabratorrevenues

+117%

SGT5-8000H


Automation: High energy savings through new drive systems

New energy saving motor range with aluminum housing• Highly efficient motors with copper rotors• Significant increase of efficiency, e.g. from 77% to 84%

Robicon Perfect Harmony medium-voltage converter• Compact design, even smaller footprint• Enabling exact control of motor speed according to requirements • Potential energy savings of up to 50% by replacement of conventional

drives with variable speed drives

Potential energy savings of 43 TWh p.a. (€ ≅3 bn) in Europe


Acquisition of UGS is on track

Siemens A&DUGS

TIA4)

TIP5)PLM3)

Automationdesign

Manufacturing

Factory design

Product design

Factory automation: #1Process automation: #3Electrical installation tech.: #2

Digital Factory: #2 CAx1) : #2cPDM2): #1

Winning combination

1) CAx: Computer aided design, engineering and manufacturing 4) Totally integrated automation 7) 1998-20062) Collaborative Product Data Management 5) Totally integrated power3) Product Lifecycle Management 6) UGS FY ending Dec. 31st

978

2004

1,155

2005

1,219

2006

+11,6% p.a.

UGS Revenue 6) (USD in million)

9%

14%

5%

A&D sales growth7)

Factory automation

Process automation

Electricalinstallation tech.

> 2x market growth

Closing expected in Q3 FY07Integration preparations

on track


Healthcare: Strong organic growth through innovations

1) 2002-20062) Total imaging matrix3) Angiography, fluoroscopy, radiology

Tim2) technology:• Most successful innovation in MR• Higher image quality, more patient comfort,

optimized workflow in MR• 50% higher patient throughput, up to 50% shorter

examination times

syngo DynaCT:• Eliminates need to move patient to a CT during

interventions• CT-like inter-operational images with an angio suite

– no time loss and no additional risk for patient

MagneticResonance

AX3)

+14% p.

+5% p.

Market share gains1)Leadership in innovations (examples)

https://intranet.med.siemens.com/sales/html/salesintranet/divisions/magneticresonance/productssystems/MAGNETOM Trio


Siemens automotive systems –A success story

IPO preparations for SV on track

Future trends and basic requirements

Investments to further strengthen technology position and regional set-up

Siemens as majority shareholderExcellent access to capital markets, sector specific capital structureCreation of acquisition currencyRealization of full growth and innovation potential

+

Intended IPO

Alw

ays

on

Zero emissions

Zero

acc

iden

ts

EUR 10 billion global businessAverage growth of 10% a year (1989 –2006)Margin range reached every year since 2003Outstanding position in high-growth automobile electronics sector


Outlook: We believe we can do even better

Compliance: Zero tolerance

Strong focus on cash and capital efficiency

Continued profitable growth

FY07: Maintain operating momentum built up in first half year

Financial Performance & Priorities

Joe Kaeser


Significant improvement in Net Cash

+0.8

Income from Operations(Continuing)

+1.8

+1.3

Net Working Capital

(1.0)

(0.2)

Depreciationon PPE

SFS, SRE,Corporate Treasury

(4.5)(1.7)

Other DiscontinuedOperations

(0.2)+2.2 (5.5)

Net CashCF Used in Investing Activities

(3.8)CF Provided by

Operating Activities

Net Cash from Operations (Continuing Operations)Net CashDisc. Op.

Acquisitions (4.5) EURthereof: Bayer (net of cash) (4.2) EUR

Other Net Cash

Net Cash„all in“

therein:CAPEX (PPE) (1.0) EUR

+1.2 +0.4 +0.6 +0.4 +2.6 (4.5) +1.0 (0.7) (1.6)Q2 FY07

€ in billion; YTD 2007


We take clear actions on cash: Trend in Capex reversed

2003 2006

TargetRange

PPE Capex*

Depreciation

115%

95%

2004 2005

100%

2007

98%

106%

122%

x 100%144%

YTD FY07

121%

* Capital expenditures on property, plant and equipment of Siemens‘ Operating Groups.2003 to 2006 are US GAAP numbers, The 2006 IFRS Capex/Depreciation ratio is 148%. YTD FY07 ratio according to IFRS.


We take clear actions on cash: 9 of 10 Groups have improved their Turns

7.4

6.9

Right direction, not good enough yet

FY05

FY06

NWC turns*

* Last 12 Months Sales/NWC as of period-end of Total Operations Groups, Continuing Operations, excluding SEI and Other Operations

vs. PY

12345678910

PGSVI&STSSBSOsramMedA&DPTDSBT

Ranking NWC Turns 2006 and Q2 FY07

7.6

Q2 FY07

123457968

10

Q2 Q2 vs. PQFY06 Ranking


Growth, profit and cash define the current performance, active portfolio management drives future success

ValueCreation

Cash

Cash Conversion

Growth

2 x GDP Growth

Group Profit Margins/ROCE

Profitability/Capital Efficiency


Our targeted ROCE has not been reached in any of the last 6 years

Profit*

Capital Employed*

* 2001 to 2004 US GAAP, from 2005 IFRS. See Appendix for a definition of ROCE.** YTD based on linear assumptions.

5,7%

8,4% 9,1%

12,9% 12,4%

10,0%

13,2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

2001 2002 2003 2004 2005 2006 YTD 2007**

ROCE*

>14-16% Target Range

2.0% (0.3)% 3.8% (1.0)% (0.5)% 4.1 %

0.8% 1.0 % 0.1% 0.5 % (1.9)% (0.9)%

% Change Attributable to Change in


We focus our financial resources on value creation*

Organic Growth

2x GDPworld

Growth

high

low

RO

CE

**

Top Groups

High Growth Groups

Substance Keepers

1x GDPworld

Growth

* Size of bubble = Value contribution of Groups (EVA)** ROCE = Group EBIT / avg. business assets

Profiteers

>14 – 16% ROCE


On Transparency: Refined Segment Reporting for better Tracking

OLD NEW

Group Profit

“Net Cash from Operating and Investing Activities” by Group

CapexCapital Spending on PPE, Intangibles, Acquisitions, and Non-Current Available for Sale Financial Assets and Investments

Depreciation & AmortizationMatching Capex definition above

Group Profit

“Free Cash Flow” by GroupCash Flow from OperationsUnchangedCapex as defined below

CapexCapital Spending on PPE and Intangibles (incl. PPA) as beforeAcquisitions etc. excluded

Depreciation & AmortizationMatching Capex definition above

Cash Conversionby Group

Operating CFby Group

Capex/Depreciation


We are committed to providing shareholder return

Balance Sheet Considerations

0.00 €

0.20 €

0.40 €

0.60 €

0.80 €

1.00 €

1.20 €

1.40 €

1.60 €

1.80 €

1977

1987

1997

1998

1999

2000

*20

0120

0220

0320

0420

0520

06

Net Dividend Payments in EUR

* Special dividend of 0.67 € in 2000 related to the Infineon IPO

10% CAGR

6% CAGR

1. Share buyback:Don‘t expect a share buybackin the short-term

2. Convertible:Multiple options

3. Gearing: Debt capacity will increase withhigher Free Cash FlowHigher debt capacity providesopportunity to grow EPS at a faster rate than profit fromoperations

We see a very good potential to grow EPS and dividends at or above historical rates


What else is on the CFO’s mind?

Focus on organic growth

Wise consideration of the M&A sellers market

Cash conversion through

Moderate Capex spend

Streamline NWC turns

Move down “break-even point” of business segments

Prioritize resources on most promising projects for sustainable capital efficiency

“In times of a robust cycle, it is time to look ahead”

Appendix


New orders – Strong growth with 9%

Groups Q2 FY07(in mio. €)

Δ(in %)

964 -29

A&D 4,154 18

I&S 2,434 -1

SBT 1,364 3

PTD 2,476 38

TS 714 -60

SV 2,678 3

Med 2,544 21

Osram 1,189 -1

PG 5,017 54

SBS

Regions Q2 FY07(in mio. €)

Δ(in %)

8,105 19

5

12

19

-29

3,826

Americas 6,332

Asia-Pacific 3,396

1,810

Europe excl. Germany

Germany

Middle East / C.I.S. / Africa

23.521.5

Q2 FY06 Q2 FY07

in bn. €

9%


Revenue +10% – Outstanding growth in the Power Groups

Groups Q2 FY07(in mio. €)

Δ(in %)

1,206 -13

A&D 3,711 16

I&S 2,172 2

SBT 1,335 14

PTD 1,756 17

TS 1,161 16

SV 2,687 3

Med 2,470 21

Osram 1,189 -1

PG 3,072 25

SBS

Regions Q2 FY07(in mio. €)

Δ(in %)

6,795 16

6

1

8

30

3,860

Americas 5,376

Asia-Pacific 2,892

1,703

Europe excl. Germany

Germany

Middle East / C.I.S. / Africa

20.618.8

Q2 FY06 Q2 FY07

in bn. €

10%


Defined benefit obligation (DBO) 2) of Principal Pension BenefitsDiscount rate 3)

Fair Value of plan assets Funded status 2)

Additional contributionRegular fundingActual Return on plan assets 4)

Actual Return on plan assets (in %)EROPA (in %)DBO of other Principal Postretirement BenefitsAsset allocation of pension assets• Equities• Fixed income• Real estate• Cash

1) Principal Funded Pension Plans and Principal other Postretirement Benefits 2) As of September, 30 for FY05 and FY063) Basis for calculation of DBO as of September, 30 and March, 31 respectively 4) For Principal Funded Pension Plans

FY05 FY06€ in billions

25.04.6%21.6(3.4)

1.50.52.4

11.9%6.7%

0.9

31%55%8%6%

31/03/0726.7

4.7%23.8(2.9)

0.00.71.4

6.2%6.7%

0.8

26.25.0%24.5(1.7)

0.00.50.8

7.3%6.5%

0.8

33%47%8%

12%

33%54%8%5%

Estimated underfunding of Siemens pension plans1) improved by € 1.2 bn

Despite the negative impact of interest rate increases on fixed income investments Siemens was able to generatean Actual Return of 7.3% annualized (€ 0.8 bn) over the last six months, mainly due to strong equity marketsIncrease in discount rates reduced Siemens’ estimated DBO by € 0.9 billion


SFS: Assets and Liabilities as of 31 March 2007

Finance & Operating

leases

Other assets & inventory 1)

Cash Purchased receivables

Investments Total assets/

liabilities

Equity Accruals & other liabilities

Total debt

Approx. 70% internal

business

Almost all leasing business is with

external customers

Assets LiabilitiesSFS debt for financing of operating groups

Almost all SFS assets, and consequently SFS debt, are related to business with external customers except for the internal receivables financing business

1) Other assets & inventory includes: Securities, fair values (positive) derivatives/FX, tax receivables, fixed assets, intangible assets, land and building, prepaid expenses, loan receivables and inventories

9.6 bn 1.0 bn

7.8 bn

1.6 bn1.6 bn

€ in billion


SFS: Net Debt as of 31 March 2007

In order to reflect SFS in the SOTP, the internal debt component has to be reflected in the SFS net debt for the enterprise value calculation

Equity value SFS

7.8 bn

SFS net debt FY07

SFS debt for financing of operating groups

Enterprise value SFS corrected

1.6 bn

6.2 bn

Equity value SFS

SFS adapted net debt

6.2 bn

€ in billion


ROCE Definition

Source

Income (loss) from continuing operations (i.e. post tax) (Profit and Loss Statement)+/– Other interest income, net (Notes to Consolidated Financial Statements, e.g. Note 8, p.35 of IFRS FY06 Statements)+/– Tax effect on other interest income, net (Effective tax rate derived from Profit and Loss Statement)= Income (loss) from continuing operations (post tax), before net interest expense

Total equity (incl. minorities) (Balance Sheet)+ Long-term debt (Balance Sheet)+ Short-term debt and current maturities of long-term debt (Balance Sheet)- Cash and cash equivalents (Balance Sheet)- Assets classified as held for disposal (Balance Sheet)+ Liabilities associated with assets classified as held for disposal (Balance Sheet)= Capital Employed*

* Capital Employed for a fiscal year is determined as the average of five datapoints: the capital employed at the beginning of the fiscalyear and the capital employed at the end of each of the four quarters of the fiscal year.

Post-tax ROCE from Continuing Operations =Income from Continuing Operations (post tax), before net interest expense

Capital Employed (for Siemens, including SFS, SRE and Treasury)


Cash Conversion Rate Definition

Cash Conversion Rate (Continuing Operations) =Free Cash Flow

Income from Continuing Operations

Source

Cash Flow from Operations (Continuing Operations) (Cash Flow Statement)+ Additions to intangible assets and property, plant and equipment (Continuing Operations) (from Q3: Segment Reporting)= Free Cash Flow

Income from Continuing Operations (Profit and Loss Statement)


Financial calendar FY07*

* Preliminary, updates will be posted at: www.siemens.com/financial_calender

July

June 21-22Capital Market Days 2007,Berlin

November

July 26Third quarter financial results FY07 – conference call

January

November 8Preliminary figures for FY07

June

January 24Annual General Meeting


Reconciliations and definitions

”Group profit from Operations” is reconciled to ”Income before income taxes” of Operations under ”Reconciliation to financial statements” on the table ”Segment information.” See ”Financial Publications/Quarterly Reports, FY07 Q2, Financial Statements” at our Investor Relations website under www.siemens.com.

ROE (Return on equity) margin for SFS was calculated as SFS' income before income taxes divided by the allocated equity for SFS. Allocated equity for SFS for the financial year 2007 is € 1.041 billion.

The allocated equity for SFS is determined and influenced by the respective credit ratings of the rating agencies and by the expected size and quality of its portfolio of leasing and factoring assets and equity investments and is determined annually. This allocation is designed to cover the risks of the underlying business and is in line with common credit risk management standards in banking. The actual risk profile of the SFS portfolio is monitored and controlled monthly and is evaluated against the allocated equity.

Siemens ties a portion of its executive incentive compensation to achieving economic value added (EVA) targets. EVA measures the profitability of a business (using Group profit for the Operating Groups and income before income taxes for the Financing and Real estate businesses as a base) against the additional cost of capital used to run a business, (using Net capital employed for the Operating Groups and risk-adjusted equity for the Financing and Real estate businesses as a base). A positive EVA means that a business has earned more than its cost of capital, and is therefore defined as value-creating. A negative EVA means that a business is earning less than its cost of capital and is therefore defined as value-destroying. Other organizations that use EVA may define and calculate EVA differently.

To measure Siemens' achievement of the goal to grow twice the rate of global GDP we use GDP on real basis (i.e. excluding inflation and currency translation effects) with data provided by Global Insight Inc. and compare those growth rates with growth rates of our revenue (under IFRS). In accordance with IFRS, our revenue numbers are not adjusted by inflation and currency translation effects.

http://www.siemens.com/


Siemens Investor Relations Team

Webpage: http://www.siemens.com Investor Relations

e-mail: [email protected]

Telephone: +49-89-636-32474

Fax: +49-89-636-32830

Marcus Desimoni +49-89-636-32445

Roland Bischofberger +49-89-636-36165

Irina Pchelova +49-89-636-33693

Christof Schwab +49-89-636-32677

Susanne Wölfinger +49-89-636-30639

siemens · 2019-12-04 · analyst presentation april 26, 2007 klaus kleinfeld / joe kaeser. page 2...

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