Major Orders Fuel Fast Growth Profit Rises in All Sectors 2nd Tranche of Share Buyback Completed
Peter Löscher, President and Chief Executive Officer of Siemens AG Financial highlights:
“We shifted Siemens Orders rose 21%, to €23.677 billion, and revenue in- into a higher gear in creased 10%, to €19.182 billion. On an organic basis, the third quarter, excluding the net effect of portfolio transactions and reaching important currency translation, orders climbed 26% year-over-year, milestones on our and revenue rose 13%. reorganization path. We are becoming Total Sectors profit –a measure combining profit from faster, more efficient the Industry, Energy and Healthcare Sectors– climbed and more focused as 33%, to €2.084 billion. a company, with the timely entrepre- neurial approach that is required to stay Income from continuing operations rose strongly to on this course,” commented Siemens €1.475 billion from €608 million in the prior-year quar- CEO Peter Löscher. “Regarding fiscal ter. Basic earnings per share (EPS) from continuing op- 2008, we affirm our full-year outlook. erations were €1.61, up from €0.64 a year earlier. While we expect a less favorable ma- croeconomic situation in fiscal 2009, we Net income was €1.419 billion. A year earlier, net in- still plan to grow at twice the rate of come of €2.065 billion benefited from a substantial global GDP. We are also committed to gain in discontinued operations related to the transfer achieving a combined Sector operating of the carrier business into Nokia Siemens Networks. result of 8 to 8.5 billion euros for the Basic EPS declined to €1.55 compared to €2.25 in the year. Our new management incentive prior-year period. system should play an important role in our progress ahead, along with world- Siemens completed the second tranche of its share wide employee participation in Siemens’ buyback program in July, raising total purchases to €4.0 success through equity ownership.” billion in the fiscal year. Approximately €1.3 billion of the total occurred in the third quarter.
Table of contents
Siemens 2-4
Sectors, SEI and Cross-Sector Businesses 5-11 Other operating and corporate activities 12 Media Relations: Wolfram Trost Subsequent Events Phone: +49 89 636-34794 and Outlook 13 E-mail: [email protected] Note and Disclaimer 14 Siemens AG, 80200 Munich, Germany
Earnings Release Q3 2008
Munich, July 30, 2008 Siemens 2
Orders and Revenue
Robust growth and Good Sector balance In the Americas, orders and revenue strong book-to-bill rose 10% and 5%, respectively, despite Order growth was well-balanced, with strong negative currency translation Orders were €23.677 billion in the double-digit expansion in all Sectors. effects. These results include negative
third quarter, up 21% from the prior- currency translation effects of 15 per- Siemens year period, while revenue rose 10% Revenue growth included double-digit centage points on orders and 14 per- year-over-year, to €19.182 billion. increases in Energy and Healthcare centage points on revenue. Excluding and 8% growth in Siemens’s largest these effects and portfolio transac- These results include negative curren- Sector, Industry. tions, orders rose 21% and revenue cy translation effects of 7 percentage increased 15%. points on orders and 6 percentage points on revenue. Excluding these Major orders in Europe fuel high The region consisting of Asia, Australia effects and portfolio transactions, order growth and the Middle East saw 9% revenue orders rose 26% and revenue in- growth, including double-digit in- creased 13%. The region comprising Europe, the creases in China and India. Third- Commonwealth of Independent States quarter orders were nearly the same The book-to-bill ratio for the quarter (CIS) and Africa contributed 40% order year-over-year, despite a higher level was 1.23, driven by exceptionally large growth and 12% revenue growth in of large orders in the prior-year period. orders in Industry and Energy. the third quarter, due in part to the large orders in Industry and Energy.
Book-to-bill New Orders & Revenue 1.32 1.29 1.23 Q3 Q3 % Change 1.11 1.06 2007 2008 Act. Adj.
New Orders 19,494 23,677 21% 26%
19,494 17,517 21,328 20,201 24,242 18,400 23,371 18,094 23,677 19,182 Revenue 17,517 19,182 10% 13% Q3 2007 Q4 2007 Q1 2008 Q2 2008 Q3 2008 Figures in millions of € Figures in millions of € New Orders Revenue Book-to-bill ratio Act.: Actual; Adj.: Adjusted change
New Orders & Revenue by Region New Orders & Revenue by Sectors
31 % 33 % 5% 42 % 19 % 21 % 24 % 2 % 3 % 11 % 26 % 23 % 11 %
40 % 20 % 10 % 9 % 0 % 2 % 7 % New Orders New
New Orders New 1,420 1,455 9,188 12,827 2,780 3,328 5,578 6,136 4,188 4,576 4,728 4,714 601 643 9,149 11,508 6,556 8,077 2,517 2,801
Asia, Europe, therein: therein: Australia, therein: therein: Industry Energy Healthcare C.I.S.*, Americas Germany U.S. Middle China India Sector Sector Sector Africa East
12 % 26 % 3 % 12 % 13 % 15 % 7 % 12 % 26 % 37 % 8 % 19 % 10 %
12 % 14 % 5 % (4) % 9 % 24 % 33 %
Revenue Revenue 9,200 10,303 2,871 3,260 4,706 4,935 3,764 3,617 3,611 3,944 976 1,213 370 491 8,751 9,423 4,880 5,829 2,431 2,677 Figures in millions of € Figures in millions of € Q3 2007 Q3 2008 Actual change * Commonwealth of Independent States Q3 2007 Q3 2008 Actual change Adjusted change (Always: Excluding the net effect of currency translation and portfolio effects) Adjusted change
Siemens 3
Income and Profit
Higher profit margin drives Income and EPS from continuing Net income comparison increase in Total Sectors profit operations rise sharply influenced by prior-year gain
Siemens’ three Sectors delivered Income from continuing operations Net income in the third quarter was
€2.084 billion in Total Sectors profit, was €1.475 billion in the third quarter, €1.419 billion, with corresponding Siemens up 33% from €1.571 billion in the well above €608 million a year earlier. basic EPS of €1.55. third quarter a year earlier, with Basic EPS on a continuing basis particular strength in the Industry and climbed to €1.61 from €0.64 in the A year earlier, third-quarter net in- Energy Sectors. prior-year period. come was €2.065 billion. Correspond- ing EPS were €2.25. Within Industry, the leading profit The main factor in these increases was performers were the two Divisions the growth in Total Sectors profit year- The comparison year-over-year is created out of the former A&D Group: over-year. strongly influenced by discontinued Industry Automation and Drive operations, which posted a loss of €56 Technologies. Sector profit also In addition, Strategic Equity million in the current period in con- included a gain of €113 million on the Investments (SEI) posted profit of €1 trast to income of €1.457 billion in the sale of the wireless modules business million compared to a loss of €301 prior-year period. The major factors in in the Industry Automation Division. million in the third quarter a year the latter result were a preliminary earlier. The main factor in this change pre-tax non-cash gain of €1.7 billion Profit growth within Energy featured was significant progress at Nokia resulting from the transfer of Siemens’ strong contributions from the two new Siemens Networks B.V. (NSN), which telecommunications carrier business Divisions created out of the former improved its operating result and into NSN and positive operating results PTD Group: Power Transmission and sharply reduced restructuring and at Siemens VDO Automotive (SV), only Power Distribution. integration costs compared to the partly offset by an impairment of the prior-year quarter. enterprise networks business in the Siemens’ Healthcare Sector pre-tax amount of €355 million. contributed 6% profit growth and Siemens’ two Cross-Sector Businesses, sustained its profitability despite Siemens Financial Services (SFS) and challenging market conditions. Siemens IT Solutions and Services, contributed €123 million in profit, nearly unchanged year-over-year.
In addition, expenses for legal and regulatory matters were lower in the current quarter.
Total Sectors Profit Earnings per Share (EPS)*
33% 2,084 2.25 1.61 1,571 326 1.55 307 615 0.64 442 1,143 822 Income from Net Income continuing Q3 2007 Q3 2008 operations Figures in millions of € Figures in € Sectors: Industry Energy Healthcare Q3 2007 Q3 2008 Change in % * Basic
Income
143 % n.a. +5 % +15(31) % % +11 % +8 % +19 % +10 %
608 1,475 1,457 (56) 2,065 1,419 Revenue Income from continuing Income from discontinued8,751 9,423 4,880Net5,829 income2,431 2,677 operations operations Figures in millions of € Q3 2007 Q3 2008 Change in % Q3 2007 Q3 2008 Actual change Adjusted change
Siemens 4
Cash, Return on Capital Employed (ROCE), Pension Funding Status and Investigation Expenses
Cash conversion rate This effect more than offset higher Siemens completes the second above target income from continuing operations in tranche of its share buyback pro- the current period, and will continue gram Free cash flow from continuing opera- through the current fiscal year.
tions in the current quarter was The second share buyback tranche Siemens €1.547 billion. For comparison, free totaled €2.0 billion in purchases for cash flow of €1.943 billion in the Continued expenses for compliance 27,916,664 shares, and was com- prior-year quarter benefited from a investigations pleted after the close of the quarter on positive effect of approximately €1.1 July 22, 2008. The first tranche of the billion related to the carve-out of SV, Expenses for outside advisors engaged program, in the amounts of €2.0 bil- only partly offset by a €419 million in connection with investigations into lion and 24,854,541 shares, was com- penalty payment related to a European alleged violations of anti-corruption pleted at the beginning of the quarter, Union antitrust investigation. laws and related matters as well as on April 8, 2008. Taking both tranches remediation activities were €119 mil- together, Siemens spent a total of The cash conversion rate for continu- lion in the third quarter, down from approximately €1.3 billion under the ing operations in the third quarter was €175 million in the second quarter of share repurchase program in the third 1.05, above the target for the quarter fiscal 2008. quarter. and on track for the full fiscal year. The total for continuing operations in Pension funding improves the current quarter was €106 million, ROCE for the first nine months with the remaining €13 million related The estimated underfunding of Sie- of fiscal 2008 was 10.7% to discontinued operations. mens' principal pension plans as of June 30, 2008, amounted to approx- On a continuing basis, return on capi- In the third quarter a year earlier, imately €0.4 billion, compared to an tal employed (ROCE) declined to these costs totaled €125 million, underfunding of approximately €1.0 10.7% from 11.2% in the first nine including €54 million in continuing billion at the end of fiscal 2007. months a year earlier. operations and €71 million in discon- tinued operations. ROCE development in the current period was affected by a substantial More information regarding these increase in capital employed stem- matters is provided in the document ming from major acquisitions in fiscal “Legal Proceedings.” 2008 and fiscal 2007.
Free cash flow Cash conversion*
(20) % 94 %
91 % 1,943 1,547 743 1,442
(1,200) (105)
3.20 1.05 Continuing operations Discontinued operations Con. and discon. Operations Figures in millions of € Q3 2007 Q3 2008 Q3 2007 Q3 2008 * continuing operations
ROCE* Pension funding status
Sept. 30, 2007 June 30, 2008
(1.0) (0.4) 11.2% 10.7%
1st nine months 1st nine months 2007 2008 Figures in billion of € * continuing operations
Sectors 5
Industry Sector
Strong Quarter for Participation in growing markets
Siemens’ largest Sector Working in strong markets, the Indus- The Industry Sector combined 8% try Automation and Drive Technolo- revenue growth with a higher profit gies Divisions maintained high capaci-
margin to produce a substantial in- ty utilization and continued to achieve Industry crease in Sector profit compared to the volume-driven economies of scale. The same quarter a year earlier. Sector result was significant profit growth in profit of €1.143 billion benefited also both Divisions. from a €113 million gain on the sale of the Sector’s wireless modules busi- Industry Automation contributed ness, and both periods under review €467 million to Sector profit in the included purchase price accounting quarter, up sharply year-over-year on a (PPA) effects and integration costs 15% increase in revenue. This related to acquisitions. represents high double-digit profit growth even without the €113 million The largest Divisions within the Sector gain mentioned above which came – Industry Automation, Drive Technol- within Industry Automation. Both ogies and Industry Solutions – drove periods under review were affected by the increases in Sector revenue and PPA and integration effects related to Sector profit year-over-year. The three the acquisition of UGS Corp. during other Divisions within the Sector main- the third quarter of fiscal 2007. These tained their third-quarter profit at or factors took approximately 190 basis near prior-year levels. points from profit margin in the cur- rent quarter, including PPA effects of Revenue for the Industry Sector rose to €36 million and integration costs of €5 €9.423 billion from €8.751 billion in million. In the same quarter a year the third quarter a year ago. Orders earlier, PPA effects and integration grew even faster, coming in 26% costs were €49 million and €11 mil- higher at €11.508 billion. Order lion, respectively, and cut approx- growth was broad-based, highlighted imately 310 basis points from profit by a €1.4 billion rolling stock order in margin. Europe and strong global demand for metals technologies solutions. Even Drive Technologies contributed €344 without the rolling stock order, the million to Sector profit, a 40% increase book-to-bill ratio for the Sector compared to the prior-year quarter, on increased to 1.07 year-over-year. a 15% increase in revenue. Both pe- riods included PPA effects of €10 mil- lion related to the acquisition of Flender Holding GmbH in fiscal 2005. The impact on profit margin was ap- proximately 40 basis points in the current period and approximately 50 basis points in the prior-year quarter.
Profit Sector Profit margin Sector New Orders & Revenue Sector 1.22 9–13 % 1.05
31% 12% 26% 8% 39 % 9,149 8,751 11,508 9,423
822 1,143 9.4% 12.1% Q3 2007 Q3 2008 Figures in millions of € Figures in millions of € Q3 2007 Q3 2008 Actual change Q3 2007 Q3 2008 Margin range New Orders Revenue Book-to-bill Actual change vs. previous year Adjusted change vs. previous year
Sectors 6
Meeting market opportunities Navigating market challenges Yet both maintained third-quarter
The Industry Solutions Division post- The Osram and Building Technolo- profit close to prior-year levels. For ed 21% profit growth on an 11% rise gies Divisions face growth challenges comparison, profit at Building Tech- in revenue, including double-digit related to adverse currency translation nologies in the prior-year quarter be-
topline growth and significant margin effects from their substantial U.S. nefited from a gain on the sale of a Industry improvement in the fast-growing met- presence as well as slowing economic business. als technologies industry. growth in Western Europe and the U.S. Record-setting rolling stock order Mobility held its profit level with the prior-year period, at €39 million. Or- Profit by Division ders of €2.952 billion included the €1.4 billion contract for more than 300 trains from the Belgian state rail- 91 % 40 % (2) % (4) % 21 % 3 % way system, Siemens’ largest-ever rolling stock order. As part of its “Mo- 244 467 246 344 38 39 97 95 116 111 81 98 bility in Motion” transformation pro- gram to improve its cost structure, Industry Drive Building Osram Industry Mobility Automation Technologies Technologies Solutions Mobility intends to take charges in the Figures in millions of € fourth quarter depending on the Q3 2007 Q3 2008 Actual change progress of labor negotiations.
Profit margin by Division
12–17 % 11–16 % 7–10 % 10–12 % 5–7 % 5–7 %
12.7% 21.2% 12.5% 15.2% 6.9% 6.6% 10.3% 10.0% 5.2% 5.7% 2.6% 2.8%
Industry Drive Building Osram Industry Mobility Automation Technologies Technologies Solutions Figures in millions of € Q3 2007 Q3 2008 Margin ranges
New Orders & Revenue by Division New Orders: Weight of Divisions*
Industry Automation Drive 18% Technologies 20% 10 % 10 % 5 % 5 % 21 % 165 % 24% 9 % 7 % 0 % (1) % 16 % 155 % Mobility 12% Building Technologies New Orders New 9% 17% 2,040 2,214 2,251 2,407 1,510 1,512 1,124 1,109 1,759 2,040 1,159 2,952 Osram Industry Solutions
Industry Drive Building Industry Osram Mobility Revenue: Weight of Divisions* Automation Technologies Technologies Solutions
Industry Automation
22% Drive 16 % 18 % 8 % 5 % 16 % Mobility 22% Technologies (1) % 14% 15 % 15 % 3 % (1) % 11 % (4) %
Revenue 17% 14% Building Industry 11% Technologies 1,921 2,202 1,973 2,266 1,396 1,442 1,124 1,109 1,561 1,728 1,456 1,403 Solutions Osram Figures in millions of € Q3 2007 Q3 2008 Actual change Adjusted change * unconsolidated basis • • Sectors 7
Energy Sector
Broad-based growth Transmission, for grid access to the
and higher profits world’s largest off-shore wind farm, Siemens’ Energy Sector generated known as Greater Gabbard, in the U.K. €615 million in profit in the third quar-
ter, a substantial increase compared to Booming Markets in Oil and Energy the prior-year period. All Divisions Gas and Renewable Energy reported higher profits, with the ma- The Renewable Energy and Oil & Gas jority contributing high double-digit Divisions both profited well in the increases. world’s booming markets for energy production. Revenue growth was also robust and well-distributed among the Divisions. Renewable Energy generated €72 Sector revenue climbed 19% to €5.829 million in profit with a substantial billion, with all Divisions contributing increase in profit margin year-over- to the increase. Orders grew faster year. The Division also reached new still, rising 23% over the prior-year highs in revenue and orders, which quarter to reach €8.077 billion. While climbed to €631 million and €2.122 orders came in lower at the Fossil billion, respectively. The latter figure Power Generation Division, Renewable includes an exceptionally large order Energy more than compensated with a for 218 wind turbines in the U.S., substantial increase compared to the which will be placed in wind farms same quarter a year earlier. throughout the country. Renewable Energy also won an order for 140 Double-digit profit growth turbines for the Greater Gabbard off- in the power grid shore wind farm mentioned above, Nearly half of the Energy Sector’s prof- thus demonstrating the Energy Sec- it growth came from the Power tor’s ability to provide integrated solu- Transmission and Power Distribution tions for large-scale energy projects. Divisions, which were formerly com- The Division expects to slow order bined in Siemens’ Power Transmission intake compared to the exceptionally and Distribution Group (PTD). These high level of the current quarter, while businesses continued to gain volume- ramping up capacity. In this regard, driven economies of scale by success- the Division announced plans to fully meeting demand for higher effi- double output at its U.S. rotor blade ciency and security in regional power factory. grids. As a result, both Divisions deli- vered strong profit growth and profit The Oil & Gas Division combines margins in their target ranges. products and services for extraction, transport and refining with additional Revenue grew 12% at Power Transmis- offerings including industrial turbines. sion and 13% at Power Distribution. The Division contributed third-quarter Orders grew more slowly year-over- profit of €95 million and clearly im- year, primarily due to a lower level of proved its profit margin year-over- large orders than in the third quarter a year. Oil & Gas completed the quarter year ago. One of the most notable with a strong book-to-bill ratio based major orders came in at Power on order intake of €1.550 billion.
Profit Sector Profit margin Sector New Orders & Revenue Sector 1.39 11–15 % 1.34
39 % 33% 26% 23% 19%
6,556 4,880 8,077 5,829
442 615 9.1% 10.6% Q3 2007 Q3 2008 Figures in millions of € Figures in millions of € Q3 2007 Q3 2008 Actual change Q3 2007 Q3 2008 Margin range New Orders Revenue Book-to-bill Actual change vs. previous year Adjusted change vs. previous year
Sectors 8
Fossil Power Generation Contributes
to Profit and Revenue Growth The Fossil Power Generation Division Sector as a whole. Third-quarter reve- The Division’s equity investment in- delivered profit of €212 million on nue demonstrates the Division’s em- come was stable compared to the prior
revenue of €2.096 billion in the third phasis on balancing its business more year. Equity investment income is Energy quarter, and contributed to both reve- evenly among products, services, and expected to be more volatile in com- nue and profit growth for the Energy turnkey power plant solutions. ing quarters.
Profit by Division
7 % 148 % 53 % 73 % 33 %
199 212 29 72 62 95 85 147 66 88
Fossil Power Renewable Oil & Gas Power Power Generation Energy Transmission Distribution Figures in millions of € Q3 2007 Q3 2008 Actual change
Profit margin by Division
11–15 % 12–16 % 10–14 % 10–14 % 11–15 %
10.6% 10.1% 9.0% 11.4% 7.6% 9.2% 6.8% 10.5% 9.6% 11.3%
Fossil Power Renewable Oil & Gas Power Power Generation Energy Transmission Distribution
Q3 2007 Q3 2008 Margin ranges
New Orders & Revenue by Division New Orders: Weight of Divisions*
Fossil Power Generation
25% Power 0 % 231 % 27 % 7 % 14 % Distribution Renewable 11% 26% (7) % 190 % 24 % 1 % 7 % Energy 19%
New Orders New Power 19% Transmission 2,232 2,083 731 2,122 1,246 1,550 1,569 1,588 844 906 Oil & Gas
Fossil Power Renewable Power Power Oil & Gas Revenue: Weight of Divisions* Generation Energy Transmission Distribution
Fossil Power Generation
35% 19 % 115 % 31 % 18 % 19 % Power Distribution 13% Renewable 12 % 95 %
27 % 12 % 13 % 11% Energy Revenue 24% 17% 1,874 2,096 323 631 813 1,030 1,249 1,401 686 776 Power Oil & Gas Transmission Figures in millions of €
Q3 2007 Q3 2008 Actual change Adjusted change * unconsolidated basis • • Sectors 9
Healthcare Sector
Profitable Growth and Progress The Healthcare Sector expects pre-
Toward 2010 viously announced cost-reduction Siemens’ Healthcare Sector sustained programs to result in severance its growth and profitability in the face charges in the fourth quarter depend- of challenging market conditions. ing on the progress of labor negotia-
Sector profit was €326 million com- tions. As part of Siemens’ ongoing Healthcare pared to €307 million in the third transformation programs, Healthcare quarter a year earlier. Profit margin anticipates further charges in the was strongly influenced by PPA effects fourth quarter related to a strategic and integration costs associated with review of certain business activities. acquisitions in the Diagnostics Divi- sion, including the acquisition of Dade Behring Holdings, Inc. (Dade Behring) New products highlight order between the periods under review. growth at Imaging & IT These factors took approximately 210 The Healthcare Sector’s largest Divi- basis points from Sector profit margin sion, Imaging & IT, offers medical in the third quarter, compared to 170 imaging systems used for diagnostic basis points in the prior-year period. and interventional purposes as well as information technology systems used Healthcare revenue rose 10%, to to store, retrieve and transmit medical €2.677 billion, including new volume images and other information. In the from Dade Behring in the Diagnostics third quarter, the newly formed Divi- Division. On an organic basis, exclud- sion posted a profit of €199 million, ing portfolio transactions and strong negatively influenced by substantial currency translation effects in the U.S., currency effects. Revenue and orders the Sector’s three Divisions all contri- for Imaging & IT were €1.569 billion buted to revenue growth in the quar- and €1.699 billion, respectively, in the ter. Orders climbed 11% to €2.801 current quarter. On an organic basis, billion, again including the acquired revenue rose 3% and orders rose 8% volume in Diagnostics. On a regional year-over-year despite the difficult basis, the Sector achieved rapid market conditions mentioned above. growth in emerging markets, particu- Highlights of order growth included larly China. Growth was more modest new offerings for magnetic resonance in established markets characterized imaging and computer-aided tomo- by slower economic growth, tighten- graphy. The momentum generated by ing credit, and, in the U.S., by public these and other innovative products policy affecting medical imaging. helped increase the Division’s book-to- bill ratio year-over-year, which came in at 1.08 for the third quarter.
Profit Sector Profit margin Sector New Orders & Revenue Sector
14–17 % 1.04 1.05
5% 3% 11% 10% +6 % 2,517 2,431 2,801 2,677
12.6% 12.2% 307 326 Q3 2007 Q3 2008 Figures in millions of € Figures in millions of € Q3 2007 Q3 2008 Actual change Q3 2007 Q3 2008 Margin range New Orders Revenue Book-to-bill Actual change vs. previous year Adjusted change vs. previous year
Sectors 10
Diagnostics advances PPA effects and integration costs re- PPA and integration costs for Diagnos- integration efforts lated to acquisitions, primarily Dade tics were €27 million and €14 million The Diagnostics Division recorded Behring, reduced profit margin by in the third quarter, respectively, tak- profit of €82 million in the third quar- approximately 700 basis points in the ing 830 basis points from the Divi- ter, up from €52 million in the prior- current quarter, including PPA effects sion’s profit margin. year period before the acquisition of of €29 million and net integration Healthcare Dade Behring. costs of €29 million. A year earlier, Revenue of €826 million was signifi- cantly higher year-over-year due to new volume from Dade Behring. Or- ganic growth was solid at 3%. Along Profit by Division with profitable growth, the priorities at Diagnostics continue to be rationa- lizing its product portfolio and realiz- ing synergies among its acquisitions. (11) % (18) % 58 % The Division made progress in these 40 33 areas in the third quarter. 223 199 52 82
Imaging & IT Workflow & Solutions Diagnostics Figures in millions of € Q3 2007 Q3 2008 Actual change
Profit margin by Division 16–19 % 14–17 % 11–14 %
13.6% 12.7% 11.1% 9.2% 10.6% 9.9%
Imaging & IT Workflow & Solutions Diagnostics
Q3 2007 Q3 2008 Margin ranges
New Orders & Revenue by Division New Orders: Weight of Divisions*
Imaging & IT
59% 8 % (2) % 2 % 0 % (8) % 66 % 29%
Diagnostics New Orders New 12% 1,693 1,699 378 348 502 831 Workflow & Solutions
Workflow & Imaging & IT Diagnostics Solutions Revenue: Weight of Divisions*
Imaging & IT
57% 3 % 5 % 3 % (4) % (1) % 68 % 30%
Diagnostics Revenue 13% 1,639 1,569 361 359 492 826 Workflow & Solutions Figures in millions of € Q3 2007 Q3 2008 Actual change Adjusted change * unconsolidated basis • • Strategic Equity Investments (SEI) and Cross-Sector Businesses 11
Strategic Equity Investments (SEI) and Cross-Sector Businesses
Positive developments at NSN drive SEI SEI includes results at equity from €301 million in the same period a year integration costs, down from €905 three companies in which Siemens earlier. The largest factor in this im- million in the prior-year period. As a holds an equity stake: NSN, BSH Bosch provement was NSN, which reported result, Siemens’ equity investment loss und Siemens Hausgeräte GmbH (BSH), improved operating results and also related to NSN in the current quarter and Fujitsu Siemens Computers (Hold- substantially reduced restructuring decreased to €21 million from €371 ing) B.V. (FSC). SEI contributed equity charges and integration costs year- million a year earlier. investment income of €1 million in the over-year. The current period included third quarter compared to a negative €201 million for restructuring and
Cross-Sector Businesses hold profit steady Siemens IT Solutions and Services €1.255 billion in the third quarter was posted a profit of €64 million in the nearly unchanged compared to the third quarter, with the release of an same period a year earlier, while accrual related to a major project con- orders rose 10% year-over-year, tributing €13 million. Revenue of to €1.209 billion.
Profit Profit margin New Orders & Revenue 0.96 5–7 % 0.87
(3) % 13% 2% 10% 0% 1,094 1,257 1,209 1,255
66 64 5.3% 5.1% Q3 2007 Q3 2008 Figures in millions of € Figures in millions of € Q3 2007 Q3 2008 Actual change Q3 2007 Q3 2008 Margin range New Orders Revenue Book-to-bill Actual change vs. previous year Adjusted change vs. previous year
Siemens Financial Services (SFS) Total assets rose significantly com- delivered income before income taxes pared to the end of fiscal 2007, pri- of €59 million in the third quarter, up marily due to growth in the commer- from €57 million in the same period a cial finance business including asset year earlier. purchases in secondary markets.
Profit Total assets
10% 4 %
57 59 8,912 9,775
Figures in millions of € Figures in millions of € Q3 2007 Q3 2008 Actual change Sept. 30, 2007 June 30, 2008 Actual change
Other Operations, Corporate Activities and Eliminations 12
Other Operations, Corporate Activities and Eliminations
Transformation taking hold Real estate sales continue Lower debt and interest rates bene- at Other Operations Income before income taxes at SRE fit Corporate Treasury activities Other Operations consist of centrally was €103 million, up from €69 million Income before income taxes from held business activities, shared servic- a year earlier, primarily due to in- Eliminations, Corporate Treasury and es and central costs not allocated to a creased gains from real estate sales. other reconciling items was a positive Sector or Cross-Sector Business. Under SRE intends to continue real estate €2 million compared to a negative €97 the previously announced transforma- disposals in coming quarters, depend- million in the same period a year earli- tion program for Other Operations, all ing on market conditions. er. The difference is mainly due to business activities are to be integrated reduced interest expense stemming into an existing Siemens Sector or Improvements at Corporate items from a combination of lower indeb- Cross-Sector Business, divested, Corporate items and pensions totaled tedness in Siemens’ operating busi- moved to a joint venture, or closed. By a negative €245 million in the third nesses as well as lower interest rates the third quarter, Siemens reached or quarter compared to a negative €367 on U.S. dollar debt compared to the concluded the implementation phase million in the prior-year period. The third quarter of fiscal 2007. for a majority of business activities. improvement is due primarily to Cor- Partly as a result, third-quarter sales porate items, which totaled a negative for Other Operations declined to €580 €270 million compared to a negative million from €678 million in the prior- €379 million in the same quarter a year quarter. The loss from Other Op- year ago. The current period includes erations narrowed to a negative €20 €106 million expenses for outside million from a negative €56 million in advisors engaged in connection with the third quarter a year earlier. Sie- investigations into alleged violations mens expects negative earnings im- of anti-corruption laws and related pacts in connection with the Other matters as well as remediation activi- Operations transformation program in ties. These costs totaled €54 million in coming quarters. the prior-year period. The prior-year period included higher expenses for legal and regulatory matters.
Subsequent Events & Outlook 13
Subsequent Events
Siemens sells 51% stake in Siemens financial investment totaling €350 Enterprise Communications million. The transaction, which is sub- On July 29, Siemens announced the ject to the approval of regulatory au- sale of a 51% stake in Siemens Enter- thorities, is expected to close by the prise Communications (SEN) to The end of the current fiscal year and to Gores Group, a U.S.-based financial result in a substantial negative finan- and operational management firm. cial impact. The Gores Group will contribute two businesses, which will complement the business of SEN. Siemens and the Gores Group together will contribute a
Outlook
Siemens confirms its full-year outlook This outlook excludes earnings im- Siemens expects more challenging for fiscal 2008. Organic revenue is pacts that may arise from legal and conditions in the global economy in expected to grow at twice the rate of regulatory matters, which are not yet fiscal 2009 and expects to grow at global GDP growth, and Group Profit quantifiable, and charges that may twice the rate of global GDP. Total from Operations and income from result from Siemens’ transformation Sectors profit is expected to be in the continuing operations are expected to programs, including the previously range from €8.0 to €8.5 billion in match the levels achieved in fiscal announced SG&A reduction program. fiscal 2009. Growth in income from 2007. Within discontinued operations, Based on the progress of labor negoti- continuing operations is expected to divestment of the enterprise networks ations, Siemens intends to book ma- exceed growth in Total Sectors profit. business is expected to result in a terial charges under the SG&A pro- This outlook excludes earnings im- substantial financial impact in fiscal gram in the fourth quarter of fiscal pacts that may arise from legal and 2008. 2008 within Corporate Items. regulatory matters and charges for the SG&A reduction program.
Note and Disclaimer 14
Note and Disclaimer
All figures are preliminary and unau- Earnings before interest and taxes, or “Profit Total Sectors” is reconciled to dited. This Earnings Release should be EBIT (adjusted); Earnings before inter- “Income from continuing operations read in conjunction with information est, taxes, depreciation and amortiza- before income taxes” in the table Siemens published yesterday regard- tion, or EBITDA (adjusted); Return on “Segment Information.” ing legal proceedings. More detailed capital employed (ROCE); Return on disclosure regarding legal proceedings equity (ROE); Free cash flow; and Cash is provided in the annual report. conversion rate are non-GAAP finan- cial measures. Information for recon- Financial Publications are available for ciliation to the most directly compara- download at: ble IFRS financial measures is available www.siemens.com/ir Financial on our Investor Relations website un- Publications der www.siemens.com/ir Financial Publications.
Today beginning at 09:00 a.m. CEST, This document contains forward- lack of acceptance of new products or the telephone conference at which looking statements and information – services by customers targeted by CEO Peter Löscher and CFO Joe Kaeser that is, statements related to future, Siemens; changes in business strategy; discuss the quarterly figures will be not past, events. These statements the outcome of pending investigations broadcast live on the Internet at may be identified by words such as and legal proceedings, especially the www.siemens.com/conferencecall. “expects,” “looks forward to,” “antic- corruption investigation we are cur- The accompanying slide presentation ipates,” “intends,” “plans,” “believes,” rently subject to in Germany, the Unit- can also be viewed here, and a “seeks,” “estimates,” “will,” “project” or ed States and elsewhere; the potential recording of the conference will words of similar meaning. Such state- impact of such investigations and subsequently be made available as ments are based on our current expec- proceedings on our ongoing business well. Starting at 11:00 CEST, Peter tations and certain assumptions, and including our relationships with gov- Löscher and Joe Kaeser will hold a are, therefore, subject to certain risks ernments and other customers; the telephone conference in English for and uncertainties. A variety of factors, potential impact of such matters on analysts and investors, which can be many of which are beyond Siemens’ our financial statements; as well as followed live at control, affect our operations, perfor- various other factors. More detailed www.siemens.com/analystcall. mance, business strategy and results information about certain of these and could cause the actual results, factors is contained throughout this performance or achievements of Sie- report and in our other filings with the mens to be materially different from SEC, which are available on the Sie- any future results, performance or mens website, www.siemens.com, achievements that may be expressed and on the SEC's website, or implied by such forward-looking www.sec.gov. Should one or more of statements. For us, particular uncer- these risks or uncertainties materialize, tainties arise, among others, from or should underlying assumptions changes in general economic and prove incorrect, actual results may business conditions (including margin vary materially from those described in developments in major business the relevant forward-looking state- areas); the challenges of integrating ment as expected, anticipated, in- major acquisitions and implementing tended, planned, believed, sought, joint ventures and other significant estimated or projected. Siemens does portfolio measures; changes in curren- not intend or assume any obligation to cy exchange rates and interest rates; update or revise these forward-looking introduction of competing products or statements in light of developments technologies by other companies; which differ from those anticipated.