Go for Profit and Growth
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Go for profit and growth Heinz-Joachim Neubürger, CFO Deutsche Bank – German Corporate Conference March 31, 2004 Key figures – Fiscal Year in billions of euros FY 03 FY 02 New orders 75.1 86.2 Sales 74.2 84.0 Group profit from Operations 4.295 3.756 Net income 2.445 1.661* EPS (in euros) 2.75 1.87** Net cash from operating and investing activities 1.773 4.754 * excl. EUR 936 millon gain on sales of Infineon shares ** excl. EUR 1,05 gain on sales of Infineon shares MAR-04 2 Successful Operation 2003 Reached Margin Targets Restore profitability in I&C Integrate Atecs Asset management U.S. Business Initiative Reduce central costs MAR-04 3 Key figures – First quarter in billions of euros Q1-04 Q1-03 New orders 20.5 20.1 Sales 18.3 18.8 Group profit from Operations 1.361 1.097 Net income 0.726 0.521 EPS (in euros) 0.82 0.59 Net cash from operating and investing activities (1.191) (1.137) MAR-04 4 Major efforts in the I&C segment in Q1-04 ICN – Information and Communication Networks ! Profit improvement as a result of restructuring in FY 03 ! Carrier and Enterprise business in the black ! Demand situation “flat” - tish ICM – Information and Communication Mobile ! More than doubled Q1-04 Group profit y-o-y ! Gaining market share – new record with 15.2 million sold handsets ! Well positioned with 29 contracts for 3G-Networks – more than 30.000 node B-stations installed MAR-04 5 Sustainable success A&D – Automation and Drives ! Market share gain in all businesses PG – Power Generation ! Performing within margin range; benefit from service Med – Medical Solutions ! World class innovation supports growth push Osram ! Leading position in lighting technologies MAR-04 6 Challenges TS – Transportation Systems ! Technical issues in Light Rail business require additional provisions SD – Siemens Dematic ! Project revisions will be essentially completed in Q2 MAR-04 7 Pension management Net periodic pension costs will increase slightly in FY 04 ! Due to adjusted discount rate from 6.0% to 5.4% ! Partly compensated by higher expected return resulting out of additional funding Cash contribution of service costs going forward ! Changing to Defined Contribution pension plan in Germany as of Oct. 1, 2004; impact on funding status is being analyzed ! Comprehensive review of liability structure may influence future asset allocation Pension accounting rules are being revised by FASB and IASB – impact currently not quantifiable MAR-04 8 Development of prices and salary Index (1995=100) 125 Wages and salary development within the electrical industry 120 115 CPI 110 105 100 PPI electrical industry 95 90 1995 1996 1997 1998 1999 2000 2001 2002 2003 MAR-04 9 Outlook for FY 04 Environment Weak global economy Ongoing strength of Euro relative to US $ Overcapacities and pricing pressure Our objectives Cost reduction and productivity programs Profit and growth Double digit percentage growth in earnings MAR-04 10 Appendix MAR-04 Target margins remain unchanged in percent Q1-04 target margin ICN Information and Communication Networks 3.0 8 - 11 ICM Information and Communication Mobile 4.2 8 - 11 SBS Siemens Business Services 3.6 5 - 6 A&D Automation and Drives 10.8 11 - 13 I&S Industrial Solutions and Services 1.5 4 - 6 SD Siemens Dematic (6.8) 7 - 9 SBT Siemens Building Technologies 3.8 7 - 9 PG Power Generation 12.9 10 - 13 PTD Power Transmission and Distribution 6.2 5 - 7 TS Transportation Systems 3.1 5 - 7 SV Siemens VDO Automotive 4.9 5 - 6 Med Medical Solutions 19.8 11 - 13 Osram 10.2 10 - 11 SFS Siemens Financial Services 22.5 1) 18 - 221) MAR-04 1) Return on Equity before taxes 12 Information and Communication Networks (ICN) Partner for profitable networks Sales Group profit in billions of euros margin Performance drivers 11.3 12.9 9.6 8-11% Successful implementation of program 7.1 Continuation with focus on process optimization " Size the business 6.1% - Monitor capacities, considering market conditions " Manage assets - Maintain world-class turnover ratio FY 2000 2001 2002 2003 target - Reduced working capital by 2.1 bn by end of FY03 (5.1%) " Reduce costs (6.7%) (7.2%) - Achieved target of 1.7 bn cost reduction in FY03 and 1.8 bn in FY02 - Reduced workforce to 33,000 by the end of FY03 End-to-end solution provider for Next - Launch initiative for productivity enhancement Generation Networks (NGN) through process optimization in FY04 ! Leading market positions in 2003 " Maximize synergies of carrier and enterprise - No.1 in Enterprise Switching - Offer enterprise services to carrier customers - No.1 in Carrier Switching " Leverage expertise through enhanced services - No.2 in Broadband Access " Optimize customer orientation and enter into - Leading in Real Time Communications growth phase - Leading in Next Generation Networks (Carrier - Win new customers, generate new business, Convergence, Metro and Long Haul Transport) and increase market share ! Goals for 2005 - Focus on profitable business and growth fields - Maintain and expand leading positions " Lead in innovation - Drive growth in application and service business - 90% of R&D in Next Generation Networks MAR-04 13 Information and Communication Mobile (ICM) Innovating the mobile world Sales Group profit in billions of euros Performance drivers 11.0 margin 10.0 Targets 8.9 11.3 8-11% " Increase market share 8.1% " Become the leading provider in innovative solutions like end-to-end, EDGE, 3G, M2M, WLAN 1.8% 0.9% " Further adjustment to market conditions FY 2000 2001 2002 2003 target Strategic orientation (2.7%) 1. Drive innovation in processes, Mobile technology and business models Infrastructure Mobile Phones 2. Expand into high-margin services ! Significant profit ! Highest volume and products increase despite increase in Q4 FY03 volume decrease among top vendors 3. Benchmark in quality excellence for our customers ! GSM: growth in ! Market share > 9 % emerging markets ! Full year growth 4. Continue to develop ! EDGE: market again above market the Siemens mobile brand leadership ! 26 new products ! UMTS: technology announced in FY 03 leadership; 7 of 12 commercial networks MAR-04 14 Siemens Business Services (SBS) Moving Siemens Business Services forward Sales Group profit in billions of euros margin Performance drivers 5-6% " Growth 5.9 6.0 5.8 5.2 - International expansion of the portfolio - Europe: Improve market presence 1.7% - USA: Strong growth focused on IT 1.2% 0.2% outsourcing - Expand BPO (Business Process Out- FY 2000 2001 2002 2003 target sourcing) business (4.3%) " Productivity improvement - Cost optimization Sales breakdown FY 2003 - Capacity adjustments (reduction in working hours, insourcing) ... by services ... by region " Customer focus Solution 28% - Intensify account management services Germany 49% - Existing customers: increase share of Operation-related wallet services 47% Europe - Industries: manufacturing, financial 39% services, government Americas Product-related 8% services 25% Asia-Pacific, Africa & M.E. 4% MAR-04 15 Automation & Drives (A&D) World leader in automation Sales Group profit in billions of euros margin Performance drivers 10.9% 11.0% 11-13% 8.4% 9.6% " Build on clear global No. 1 position 8.9 " Technology trendsetter in innovation 7.9 8.6 8.4 " Leading company active in manufacturing and process automation; expand Simatic into process automation " Increase market shares with new Simotion systems, Sinamics drive FY 2000 2001 2002 2003 target platform and MES (Manufacturing Execution Systems) business Gaining market share " Manufacturing Automation Low Voltage Control and Gain market share and new customers Installation Technologies (key account management, increase FY 2003 FY 2003 effectiveness and efficiency in sales) FY 2002 14% FY 2002 9% " Extend regional coverage: Asia, USA FY 2001 13% FY 2001 9% " Optimize headquarters, processes and Motion Control Process Automation asset management FY 2003 FY 2003 FY 2002 11% FY 2002 6% " Strong earnings and cash generator FY 2001 10% FY 2001 5% MAR-04 16 Industrial Solutions and Services (I&S) Improving customer productivity Sales Group profit in billions of euros margin Performance drivers 4-6% " Impacts in FY2003 - restructuring charges for portfolio 4.6 4.5 adjustments and reorganization 4.2 4.0 - difficult market conditions 2.6% 2.1% - profit oriented order selection FY 2000 2001 2002 2003 target " Reorganization to strengthen (1.0%) (4.4%) competitiveness as a supplier of industrial systems, maintenance services and sector-specific IT solutions with a joint Restructuring achievements marketing and sales force !Workforce reduced by 2,200 employees worldwide in FY03 " Development of standardized solutions !Transfer of 2,600 employees into three new and service packages for global service units of Siemens AG customers !Productivity improvement and cost reduction through “ target” and regional performance dialogues MAR-04 17 Siemens Dematic (SD) We supply the perfect material flow Sales 11.0% Group profit in billions Restructuring measures of euros margin 7-9% " Convert regionally structured Material Handling Automation business into 2.5 3.0 2.6 three global divisions: Distribution & 1.8 1.5% Industry Logistics, Airport Logistics and Customer Service FY 20002001 2002 2003 target " Shift of “Courier, Express and Parcel”- business to Postal Automation division (2.3%) to ensure one-face-to-the-customers " Set up a global manufacturing network (8.4%) to leverage synergy potential " Setup global R&D structures to Performance impacts in FY03 synchronize innovation efforts Three major one-time-effects: " Refocus of program with special " High risk provisions for two big projects emphasis on quality, project (Airport Logistics, Postal/Parcel Logistics) management & execution and asset stemming out of the pre-merger phase management " Weak markets primarily in Material Handling " Enhance targets for Power STEP to Automation 252 million euros in fiscal 2003 " Restructuring costs " Integrate Siemens Dematic subsidiaries The operational business was positive.