Heinrich Hiesinger, Member of the CEC
Johannes Milde, Group President
Capital Market Days 2007
June 21-22, Berlin
Siemens
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.
SBT – Our scope
Building Comfort
Fire Safety
Electronic Security
Comfort, energy saving
and building efficiency
HVAC controls
Valves, actuators
Energy services and
solutions
Protecting people,
assets and processes
Access control
Video surveillance
Intrusion protection
Central monitoring
stations
Protecting life and
property
Fire detection
Extinguishing
Evacuation
SBT – Our key figures
Sales (€ bn)
Fiscal Year
2006
Employees
Market position
Building
Comfort
Total SBT
~2.3
4.8
12,900
No. 2
Fire Safety
~1.5
9,900
No. 1
Electronic
Security
~1.0
4,800
Top 5
28,600
Security drives SBT market development
2006 - 2008 growth driven by:
All business fields in Americas and
Asia / Pacific
Security in Europe
2006 - 2008 growth in all business fields:
Highest growth rates in Security
Moderate growth in Fire Safety and
Building Comfort
3
35
28
25
2006
40
18
20
3
80
2008
Europe
Americas
Asia / Pacific
Other
5%
8%
7%
CAGR
7%
14
22
20
80
2006
13
47
55
91
2008
Electronic
Security
Fire Safety
Building
Comfort
5%
8%
CAGR
3%
in € bn
91
in € bn
7%
Where we come from –
and our plan we presented to you last year
0.2
0.3
4.2
FY 2004
4.4
FY 2005
FY 2007
5.0
FY 2003
0.3
+4%
Growth above
Market
Divestment
Facility-management
Project Selection
Criteria, Currency
Exit Electrical
Project Business
Achieve
Target Margin
Portfolio Clean-up
Strategic Alignment
Operational Excellence
Gain Growth Momentum
Maintain Growth
Strengthen Portfolio
Reach Target Margin
in € bn
The road to success is ...
... sustainable improvements on 4 levers
Additional strong focus on asset management AND
strong cash generation
Target margin
4.1%
~5%
7.0%
2005 2006 2007
Focus and performance
of solutions business
Optimized business mix
Capacity and competence of
employees
Competitive cost position
1
3
Continuous learning is key in order to respond to changes in the
business environment and to grow profitably
Siemens Learning Campus
Management & Leadership
Individual Development
Intercultural Management
Strategic Marketing
SBT Academy & Training on the Job
SBT specific training content
Applications
Project Management
Branch Management
Quality Management
SBT Products
SBT is a people's business and ~80% of project value is added in the Regions
SBT adds
industry
specific
training
modules
addressing
employees
in HQ and
in regions
Optimization of business mix shows first results
Strategic direction
High growth in Product and Service business, improved margin quality in Backlog
This we have achieved …
2.8
H1 062.9
H1 07 Large projects Solutions Service Products+2%
New orders
+11% +8% +2%Manage growth in solutions business
towards stronger differentiation and
high service potential
Maximize service business out of very
large installed base
Accelerate growth in products
business based on strong portfolio
Products
Service
Solutions
Considerable step towards benchmark cost structure and improved
performance of solutions business …
Profit development of Solution business
… are the main pillars of SBT’s target margin achievement
Solutions Business
FY 05
FY06
FY07E
Project selection
Stringent selection criteria
Project approval process
Process improvement
PM@Siemens tool box
Strict controlling of margin slippage
Cost Structure (OpEx)
Concentration of HQ in one location
Improved cost efficiency in regional
organizations
Actions
Group Profit Margin
High market recognition of SBT‘s offering
«Best Energy Service Provider»
European Parlament
«Security Excellence Award»
Customers in UK
«Ifsec Innovation Award»
Intrusion Detector
Eyetec
«Reddot Innovation Award»
Synco Living
Wireless Home
Automation
New orders
5,235
2,750
Sales
4,796
2,548
Group profit
234
172
Free Cash Flow
1
117
Employees
28,600
28,400
(in € m)
FY 06
H1 07
SBT successfully cleaned up its portfolio and managed the turn-around
Q2 target margin achieved along with strong cash contribution
Profit margin & sales
(in € bn)
5.0
4.2
4.4
4.8
2.0%
2.5%
4.1%
4.9%
2003
2004
2005
2006
Q1 Q2
2007
US GAAP: 2003 – 20065.9%
7.5%
1.3
1.2
Focus on business mix and Solutions’ performance ...
... while improving the cash position
Focus and performance
of Solutions business
Optimized business mix
Capacity and competence of
employees
Competitive cost position
1
3
4
2
Enhance value proposition
Vertical Market solutions
Priorities to achieve the goals
People Excellence Portfolio Corporate Responsibility Operational Excellence
Develop talent globally Strengthen leadership
development Attain high performance
culture Strengthen expert careers
Execute Siemens Management System (powered by top+) with focus on Innovation Customer Focus Global Competitiveness
Build on our strengths in Energy & Environmental
Care Automation & Control,
Industrial & Public Infrastructures Healthcare IPO of Siemens VDO Achieve best-in-class in Corporate Governance Compliance Climate protection Corporate Citizenship Portfolio People Excellence Operational Excellence Corporate Responsibility 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
Strong growth in Products/Services
Selective growth in value markets
Target margin
7.0%
9.0%
2007
2010
Working Capital
Profit & Cash
SBT will achieve Cash and ROCE targets
1.0
0.7
0.0
FY 04
FY 05
FY 06
0.7
H1 07
Cash Conversion Rate (CCR)
SBT has set the grounds for improvement:
Return on Capital Employed (ROCE)
Improved cost structure and enhanced
business portfolio
Implemented measures & processes on
branch level to reduce Working Capital
Moderate Fixed Assets development
CCR
&
ROCE
FY 04
FY 05
FY 06
H1 07
People Excellence Portfolio Corporate Responsibility Operational Excellence Develop talent globally Strengthen leadership
development Attain high performance
culture Strengthen expert careers
Execute Siemens Management System (powered by top+) with focus on Innovation Customer Focus Global Competitiveness
Build on our strengths in Energy & Environmental
Care Automation & Control,
Industrial & Public Infrastructures Healthcare IPO of Siemens VDO Achieve best-in-class in Corporate Governance Compliance Climate protection Corporate Citizenship Portfolio People Excellence Operational Excellence Corporate Responsibility 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
Future priorities for SBT
Energy
Efficiency
Security
Service
Total
Building
Solutions
(TBS)
Consistent performance within target margin range
Growth opportunities…
A
B
C
D
People Excellence Portfolio Corporate Responsibility Operational Excellence Develop talent globally Strengthen leadership
development Attain high performance
culture Strengthen expert careers
Execute Siemens Management System (powered by top+) with focus on Innovation Customer Focus Global Competitiveness
Build on our strengths in Energy & Environmental
Care Automation & Control,
Industrial & Public Infrastructures Healthcare IPO of Siemens VDO Achieve best-in-class in Corporate Governance Compliance Climate protection Corporate Citizenship Portfolio People Excellence Operational Excellence Corporate Responsibility 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
Energy Efficiency – Impressive track record due to high customer value
SBT Energy & Environmental Services
Creating customer value
Clinical Center Reinkenheide, Germany:
Replacement of a competitor‘s Building Automation System and Service contract
Solution encompasses: Building Management System and modern Heating, Ventilation and Air Conditioning Systems
¾Reduction of energy cost of more than 40% ¾Reduction of CO2-emission by 4,100 tons p.a. 182 FY04 238 FY05 261 FY06 FY07E +31% +10% >25%
Profit
margin
Sales
(in € m) 6% 8% 7% >7% EU USA AsiaA
SBT Energy & Environmental Services – Front-runner in Energy Services
Our performance in Energy Efficiency ...
More than 1,300 energy projects realized
globally since 1994
Total energy savings of € ~1.5bn
over a period of 10 years
CO
2reduction of all energy projects:
~700,000 tons per year
… is excellent
SBT winner of the European Energy Service
Award for:
'Best Provider 2006'
Demand for Energy Efficiency creates high growth potential for SBT
SBT will tap this large and fast growing potential
in selected high value segments
Rising energy costs and
stronger environmental focus
create new
market opportunities
Environmental regulations and
governmental programs
accelerate this trend
A
Additional
SBT market potential of
€ ~20bn
Energy Consulting Services
Energy Supply Side Services
Energy Optimization Services
Green Building Solutions
Total Building Solutions (TBS) – SBT meets complex customer demands
B
Hotel Palafitte, Neuchâtel (CH)
All hotel services are fully
integrated and delivered
through one single network
and can be centrally supervised
and controlled
This € 4m Total Building Solution consists of:
Building Management system
Heating and Ventilation equipment
Fire Safety and Security system
Low Voltage and Lighting systems
Communication and Information infrastructure
Access Control Remote
Services
Building Management Server
Ethernet TCP/IP
Ventilation Heating Lighting & Blinds Fire Safety
Total Building Solutions (TBS) allow for competitive differentiation
Total Building Solutions go beyond today's SBT core portfolio and
include lighting, blinds and low-voltage equipment
Together with A&D, I&S and other Siemens Groups, SBT has a unique market
position in this fast growing segment
DESIGO Power Distribution MV/LV Intrusion Detection and Video Surveillance Fire / Gas Detection, Evacuation, Extin-guishing Access Control & Identi-fication Systems Heating, Ventilating, Air Conditioning HVAC Integrated Control Room Lighting and Blinds
What are the customer benefits?
Full building management functionality
Reduction of total lifecycle costs
High flexibility (e.g. wireless connectivity, retrofit)
Value-added services and improved
functionalities
Our Total Building Solutions approach
Cross-discipline, intelligent automation node
Flat hierarchy, open standards
Easy retrofit and migrations
B
2x market growth
Security is our growth engine – From € 700m to >€ 1,100m in 3 years
Focus on value segment solutions and
services, e.g. Command & Control
C
Focus on video over IP and other
differentiating technology
Security Solutions and Services
Security Products
~1,000 Services FY 06 902 +18% FY 05 762 FY 04 FY 07E 606 Solutions 136 FY 04 124 FY 05 174 FY 06 ~220 FY 07E +17% Sales (in € m) Sales (in € m)Security Solutions business will move beyond traditional “Protect” focus
C
SBT will tap additional potential – supported by acquisitions
Prevent Protect Respond Recover
Prevent incident from happening
Generate alarm in case of incident
Deal with actual incident
Deduction of conse-quences from incident
Goal
Perimeter control (electronic fence)
Glass break sensor Security operation center Evidence search in video data Example Share of security market ~15% ~50% ~35% ~1%
Market growth Above average Below average Above average Above average
Future growth opportunities Traditional focus
Service Business - Future priority and growth opportunity
Leveraging existing customer base
Additional Service offering
Example Kintec (acquired in 2006):
Remote monitoring, servicing of unmanned sites
Transfer concept to develop emerging markets
such as Turkey, Brazil or Poland
Transfer technology, know-how and business
model to vertical markets that have a large
number of remote unmanned technological sites
Vertical Market Telecom
D
Market
Transparency
Demand for Energy Efficiency and Security opens
Traditional Services Value Added
Services
grew by ~ 60,000
projects p.a. over the
last 20 years
Demand
for
Security ...
… and
Energy
Efficiency
Installed Base
Advantage Services™ - Business and mindset
Customer satisfaction and loyalty are predicated on our quality of service
Service as a business
Service as a mindset and behavior
Comprehensive Service portfolio across all
disciplines, including Maintenance,
Operational Services, Energy Services and
Customer Training
Full lifecycle approach to optimize
customer value
Intelligent system migration concepts
Short reaction times & 24/7 customer care
Defined high quality standards
Responsiveness to customer needs
Understanding customer processes
and priorities
SBT’s growth plans are driven by innovative products
Reshuffling from portfolio streamlining to innovation
SBT is continuously increasing its investment in R&D
Examples of new products and systems launched
Apogee – Wireless BAS
Energy Monitoring & Control
Sinteso – Fire Safety
Sistore – Digital Video
SiPass – Access Control
Innovative applications at its best – Automated wide area surveillance
Interactive animated view of your site on a single screen
Virtual fences (site-based alarm zones) set to security policy
Classified object detection and tracking in real-time
Video cameras
Thermal cameras
Radar
GPS
Access control
RFID
“Smart Fence”
Bio-chemical
Sensor types
Object types
Pedestrians
Vehicles
Boats / ships
Airplanes
SBT’s key take aways
SBT targets upper
end of target range
by 2010
People Excellence Portfolio Corporate Responsibility Operational Excellence Develop talent globally Strengthen leadership
development Attain high performance
culture Strengthen expert careers
Execute Siemens Management System (powered by top+) with focus on Innovation Customer Focus Global Competitiveness
Build on our strengths in Energy & Environmental
Care Automation & Control,
Industrial & Public Infrastructures Healthcare IPO of Siemens VDO Achieve best-in-class in Corporate Governance Compliance Climate protection Corporate Citizenship Portfolio People Excellence Operational Excellence Corporate Responsibility 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
SBT will grow above market growth, based on:
Service potential in installed base
Security needs
Energy Efficiency
2004 - 2007
2008 - 2010
FY10
FY07E
Further OPEX reduction Profitable growth in value markets based on innovation7%
9%
SBT is successfully repositioned and reached target range
Building Technologies
High value for our customers
Katy Stadium, Houston
We protect people and property
We protect families and kids against fire,
theft and crime
We make people feel safe and
comfortable at work and at home
While people are working or sleeping at
night, we save energy and, helping
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 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
