Industrial Solutions and Services

Transcription

1 Industrial Solutions and Services Jørgen Ole Haslestad, Group President Capital Market Days 2007 June 21-22, Berlin

2 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, and on the SEC s website, 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. Slide 2

3 I&S holds a leading position in all businesses I&S Industry Infrastructure Metals Technologies Oil, Gas, Marine Solutions Industrial Services Water Technologies Intelligent Traffic Systems Infrastructure Logistics MT OGM IS WT ITS IL Market Position No. 1 No. 2 No. 1 No. 1 No. 1 No. 1 Market Volume* Market Growth** 3.4% 3.2% 5.4% 6.3% 3.1% 8.9% * FY 06 in bn ** CAGR Slide 3

4 We have been growing two times faster than the market Group Sales in bn % p.a. FY 04 FY 05 FY 06 Market Growth p.a. +4.8% +6.4% +11% p.a. through organic growth Strongest overall growth in NME (+155%), CIS (+76%) and Asia/Pacific (+48%) Regional split of sales (FY 06): 50% Europe/CIS 30% Americas 20% Asia/Pacific/Africa/NME MT, OGM & WT major growth contributors Infrastructure Industry Slide 4

5 Profit has grown faster than sales Group Profit in m % +74% p.a. 2.6% 3.3% Group Profit Margin in % Target Margin FY 07 will be achieved Implementation of efficient and binding business processes worldwide Standardization of products and solutions Change in business mix: Successful integration of VAI Expansion of worldwide water business FY 04 FY 05 FY 06 Group Profit ( m) Group Profit (%) Slide 5

6 Profitability improvement and low capital employed drive ROCE ROCE (%) 30 Average NCE ( bn) 1.8 I&S is a solution provider with a relatively low capital employed ( 1.6bn FY06) and an attractive ROCE We have improved our ROCE driven by Excellent cash and asset management (e.g. increased advanced payments) Improved margins FY 04 FY 05 * FY 06 Average NCE ( bn) ROCE (%) * One time goodwill effect due to acquisition Slide 6

7 Cash Conversion Rate > 1 over the last three years FCF ( m) 350 CCR 1 Stringent asset management to increase free cash flow Tight NWC management (e.g. contract management, procurement, processing) Binding asset targets with all regional companies Stringent frame for capex and R&D FY 04 FY 05 * FY 06 Free Cash Flow (FCF) ( m) Cash Conversion Rate (CCR), pre tax * One time CCR effect in 2005 through VAI Acquisition Slide 7

8 Products and services are the key profit drivers I&S Order Structure FY 06 Market Characteristics Market Opportunity No mass market for our sector-specific products End customer contacts through solutions Largest profit potential in service and modernization Sector-Specific Products Chlorination Module (Water) Services 25% Sector- Specific Products 15 % Solutions 60% 30% standard products 30% Integration High demand for total solutions from our end customers (engineering and plant building outsourced) Solution business is basis for attractive service business Standardized Solution Products SmartCrown (Metals) Traffic Lights (Traffic) 2-Level-Sorter (Postal) Slide 8

9 Europe and USA primarily modernization and service business, new plants in emerging markets I&S Order Intake / Employees FY 06 Americas w/o South America OI: 4.1bn Emp.: 21,400 Europe CIS OI: 0.5bn Emp.: 200 OI: 2.2bn Emp.: 8,700 Africa/NME Asia/Pacific OI: 0.3bn Emp.: 2,100 South America OI: 0.4bn Emp.: 1,000 OI: 1.5bn Emp.: 2,800 New Plants/ Revamps Modernization/ Services Slide 9

10 Modernization and service business will drive industry growth FY 06 FY 07 FY 08 FY 09 FY 10 Sustained Growth: 2 x GDP Growth I&S Order Income split 40% Size: > 2.5m Runtime: months New Plants/ Revamps 45% Order Backlog Modernization 30% Order Backlog 32% Size: 0.25m 2.5m Runtime: 3 12 months Services 25% Order Backlog (Long term contracts) Size: < 0.25m 28% Runtime: 2 days 10 years Slide 10

11 Industry: We optimize steel plants across the whole lifetime (20 30 years) SmartCrown Patented SmartCrown roll contour allows flatness defects to be corrected MULPIC Used to control material microstructure and enhance plate properties Plate Mill Production capacity: up to 2 million tons per year in a two stand mill Usage of produced steel: e.g. pipeline, ship-plate, military armor Investment cost: 50m 400m depending on configuration Hot and Cold Leveler Used to minimize shape effects through elongation of products Slide 11

12 Infrastructure: Our total solutions in the REMA project enable Swiss Post to reduce costs and increase service quality Automated Storage and Retrieval System Parcel Sorter Flexible and efficient packet sorting Intermediate tray storage between sorting processes, guaranteed on-time delivery Sorting Center Zurich Most modern sorting center worldwide 60,000 sqm 5 million letters per day Up to 45,000 letters per hour per sorting machine Mülligen plant handles 40% of Swiss letter volume Slide 12 2-Level Sorter Culler-Facer Canceller State-of-the-art letter sorting machine with integrated address interpretation Automated pre-sorting and segregation of letter box mail June 2007 Capital Market Days 2007

13 Infrastructure: London City Toll getting London moving London City Toll Traffic Control Center Traffic Lights Intelligent Cameras 15% (60,000 cars) reduction in the number of cars in the city Smoother traffic flow Significant reduction in air and noise pollution (Low Emission Zone) 50 60% of car drivers switched to public transport 15 25% of car drivers switched to car share, motorcycle, bicycle Car occupancy rose by 10% Only 20 30% diverted to other roads Traffic delays decreased by 30% Slide 13

14 Profitable growth through services and plant products ROCE EBIT Value Add Own Manufacturing Modernization Value Add Service Standard products Solutions Slide 14

15 People Excellence Portfolio Priorities to achieve the goals Develop talent globally Strengthen leadership development Attain high performance culture Strengthen expert careers Operational Excellence Execute Siemens Management System (powered by top + ) with focus on Innovation Customer Focus Global Competitiveness People Portfolio Excellence Performance Optimize capital efficiency with ROCE of >14 16% Attain cash conversion rate of "1 growth rate" Sustain 2x GDP growth Achieve new margin ranges Operational Corporate Excellence Responsibility Build on our strengths in Energy & Environmental Care Automation & Control, Industrial & Public Infrastructures Healthcare IPO of Siemens VDO Corporate Responsibility Achieve best-in-class in Corporate Governance Compliance Climate protection Corporate Citizenship Portfolio Leverage leading market position through superior solutions, standardized products and regional presence close to the customer Enhancing high margin service business worldwide Innovation Differentiate by trendsetting technologies Higher share of standardized solutions & components Profitability Improve value added in LCC Drive profitability of product and service business Improve ROCE Slide 15

16 I&S commitment to Sustain growth above market growth Achieve new target margin range of 5 7 % Attain Cash Conversion Rate of 1 - Growth Rate Clear roadmap in place to increase ROCE Slide 16

17 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 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 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. Slide 17

18 Siemens Investor Relations Team Marcus Desimoni Roland Bischofberger Florian Flossmann Irina Pchelova Christof Schwab Susanne Wölfinger Webpage: Telephone: Fax: Slide 18