automation & drives - siemens · automation & drives – ... india # 1 china # 1 sales...

Automation & Drives –Helmut Gierse, Group President

Capital Market Days 2007June 21-22, Berlin

Capital Market Days 2007

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/


Sustainable business success for Automation and Drives

Profit & Growth (€ in million)

8,375 8,829 9,84412,848

7,107

9.6%

12.2% 12.3% 12.2%13.7%

2003 2004 2005 2006 H1/07As reported (US GAAP 2003-05/IFRS 2006-)

(€ in million) FY 2006 H1 07(unaudited)

New orders 14,108 8,173

Sales 12,848 7,101

Group profit 1,558 976

Free cash flow 1,259 528

Employees 70,528

IFRS

Sustained value enhancement makes A&D the biggest and fastest growing automation provider worldwide


Sustained Value Enhancement

Profitability: Profit nominal and in % of salesEconomic value added - EVAFree cash provided by operating activities

Market ValuePortfolio:

IndustriesProductsRegions

Market Share:Sales volume


A&D is a leading global player in all relevant markets

Process Automation Electrical Equipment for BuildingsFactory Automation

#1 Profit engine

#3Growth engine

#2Balanced business

RevenueGrowth* :

€ 52bn

~ +4%

+9%

€ 45bn

~ +7%

+14% +5%

€ 24bn

~ +5%

MarketSize :

MarketGrowth* :

* Average annual growth FY1998 - FY2006


Vertical strategy: Clearly focused Competence Centersclosely linked to industry trends

Growth in process automationHybrid automation: Convergence of factory and process automation Energy efficient productionSafety as one of the top issues

Increased speed by digital engineeringWell-organized software portfoliosFlexibility: component-based automationRFID optimizes value chain

Main Trends

Focus on Industries ...

Food

& B

ev

Process DiscreteHybrid

Phar

ma

Wat

er

Che

mic

als

Oil

& G

as

Gla

ss

Cem

ent

Pha

rma

Food

& B

ever

age

Shi

pbui

ldin

g

Airp

orts

Aer

ospa

ce

Aut

omot

ive

Sem

icon

duct

or

Totally Integrated Automation (TIA) + Totally Integrated Power (TIP)


Focus Automotive:Increasing productivity all over

General conditions

High cost pressureConcentration of brands among few vendorsWorldwide manufacturing strategies on platform basisTrend towards development and production of complete components via suppliers

A&D sales increase despite of reduced investments by carmakersA&D products and systems in automotive,sales volume

Challenge: Increasing variety of products and solutions

1990 2000 2005 2015

550720

830

1100

215 280 320450

Models worldwideModels in Germany

Source: B&D-Forecast

+10.0 %+12.0 %

+10.2 %

2003 2004 2005 2006


Focused R&D secures our future

Innovation Cycles (in years)

Engineering toolsHuman Machine Interface

Power Converters

Special Motors

ControllersSensors

1 2 3 4 5

Synchronized innovation processes via all technologies are key to leverage productivity potentials of A&D customers

Standard Motors

10

Distributed Control Systems

0-3 yearsSoftwareElectronics

6 7 8 9

4-6 yearsElectromechanicsBus Systems

7-10 yearsMechanical ComponentsNew Materials

Typical innovation cycles


Exclusively Siemens:Savings by Safety Integrated

About 150 manufacturing cells in the body shop of an automobile manufacturer – Previously separate safety and control functions in each cell

Functions pooled with Profisafe

Lower costs resulting from reduced effort in engineering, cabinet configuration and installation – about 5,000 EUR per cell

In operation with Opel, BMW, Audi, DaimlerChrysler and Toyota

Control cabinet before

Control cabinet with Profisafe

150 cells x 5,000 EUR = 750,000 EUR savings


Exclusively Siemens:Integrated motion control technology

Pendulum machining center, Deutz, Germany

Customer requirements

Customer benefits

Optimized automation architecture for crankshaft productionSimplification of configuration, wiring and software structureImprovement of service and diagnostic functions of the production equipment

Sinumerik performance including safety Shortened production line from 450 to 150 meters30% reduction of production time and material inventories (average grinding reduced from 25 to 5 minutes)

Reduced production time and facility space


Exclusively Siemens: Energy optimized drive systems

Savings potential: 43 TWh/a = 3.02 bn EUR*

Ener

gy s

avin

gs in

eur

os/k

Wh

Ener

gy c

ost s

avin

gs in

eur

os/y

ear

200

150

100

50

0

3000200010000 600050004000 900080007000Operating Hours

0.08

0.05

0.10

Within 20 years, energy costs account for up to 99% of a motor’s lifecycle costSavings of up to 40% of power dissipation with innovative systemsPayback time 12-18 months

highly efficientmotors

standard motors

improved efficiencymotors

* ZVEI - Potential annual electricity savings in Europe, based on 2005 consumption data


Platform based productivity enhancement by TIA / TIP

Communication

Automation

MESManufacturing Execution Systems

ERP Enterprise Resource Planning

Medium voltage

Lowvoltage

A&D PTD SBT

>=110kV

More consistencyData managementEngineeringCommunication

A&D’s standardized spectrum of products and systems for automation in all industrial sectors

More customer benefitReduced costsTime advantageEfficiency lead

TIA TIP


Outperforming the markets:A&D sales growth by region 2002 – 2006

Americas Europe Asia/ Pacific CIS, NME, Africa

2.06 2.40

5.73 8.04

0.18 0.350.662.07

~ Market Growth p.a.2002-2006

World MarketFigures in € bn

US GAAP

1.6% 4.0% 13.1%

excl. Japan

10.0% 15.2%

A&D Sales2002 │ 2006

33%8.8%3.9% 18%A&D Sales Growth p.a.2002-2006

incl. Japan

98 121

2002 2006


A&D confirms market leadership in BRIC with aggressive sales growth

36 regional offices250 dealers70 system houses2,800 employees

63 sales offices 16 joint ventures5 engineering & development locations> 8,000 employees

9 sales offices, 230 distributors3 factories OEM initiative with 724 machine builders 1,700 employees

Brasil

sales growth 23%*

Russia # 2# 2

7 sales offices73 system integrators16 distributors180 employees

sales growth 36%*

India China# 1 # 1

sales growth 80%* sales growth 52%**FY06 yoy


UGS: Game changer in digital engineering

Combined A&D and UGS portfolio along the complete life cycle of products for enhanced customer efficiency

ProductionTIA

TIP

Functional automation engineering

PLC programming

Automationdesign

ProductionAutomation systems

Communication

Low-voltage control and power supply

ProductionDrive systems

Manufacturing Execution Systems

Totally Integrated Automation

Totally Integrated Power

CADIdea

ServiceSales

Logistic

Factory design

Product design

PLM

Digital Factory

CAM

CAE

CAD

Digital collaboration

Product Lifecycle Management

UGS

Sensors and analytics


PLM + Automation = shorter time-to-market

Time to market (weeks, months, years …)

... … … … … …

Req

uire

men

t En

gine

erin

g

Spec

ifica

tion

Dev

elop

men

t

Man

ufac

turin

g

Fina

l Tes

ting

Pack

agin

g

UGS




Market Value Market Share:

Sales volumePortfolio:



Best-in-class portfolio drivescontinuous increase of market share through the cycle

New Orders and Business Cycle

+13.5%+5.9%-2.9%-3.7%+11.0% +38.4% +13.5%

As reported (US GAAP 2003-05/IFRS 2006-)

9.065 8.728 8.4768.980

10.190

8.173

14.108

2001 2002 2003 2004 2005 2006 H107

A&D market share worldwide

11.0%

8.1%

8.6%8.8%

9.0%9.3%

9.7%

7.7%

2000 2001 2002 2003 20041999 20062005




Market ValuePortfolio:


Market Share:Sales volume


Understanding customer needs

M1 / M2Main markets for advanced products and technologiesHigh technology and innovation key selling argumentsCustomers: Bayer, BMW…

Total lifecycle cost

M3Main market for low automation,low-price productsRobustness and usability main selling arguments apart from priceCustomers: Shanghai Pacific, KaiQuan pumps, Siam glass

Investment cost


Leveraging the advantages of global sourcing

A&D operates 79 manufacturing sites world-wide*

~ 45.000 employees in production

HCC60%

LCC40%

America24

China6

Asia13

USA15

Europe42

Germany21

Consolidation of production facilitiesTransfer of manufacturing capacities from USA to MexicoGrowth of capacities in fast growing markets (e.g. China)Regional manufacturing hub China for local and export supply

* September 2006


Cash is king – excellent track record of turning profit into cash

Historically, excellent track record in cash generation and tight control of capital employed

Asset management is a focus topic

Clear responsibilities in businessunits and countries

Defined processes

Leveraging best practices

Worthwhile and balanced capex

On track to deliver a cash conversionrate at least above the 2006 level in FY 2007

2001 2002 2003 2004 2005 2006 FY07

Free Cash Flow* (€ in m)

Cash Conversion Rate**

*Free cash flow = Net cash provided by (used in) operating activities + additions to intangible assets and property, plant and equipment** Cash Conversion Rate (CCR) = Free cash flow/Net income

0.66 1.39 1.37 1.02 0.98 0.79CCR

As reported (US GAAP 2003-05/IFRS 2006)

627

1,0061,103 1,100

1,1901,243


Our profitability is trending upwards

Scale effects are coming through

Reduced cyclicality drives a margintarget of 12-15% through the cycle

Present in all economic regions

Present in markets for factory automation, process automation and electrical equipment for buildings

Profit (in million EUR)

Profit margin

As reported (US GAAP 2003-05/IFRS 2006 and H1 07)

981

723806

976

1,253

1,077

1,572

13.7%

12.3%12.2%

9.6%

8.4%

11.0%

12.2%

2001 2002 2003 2004 2005 2006 H107


Priorities to achieve the goals

PeopleExcellence Portfolio

CorporateResponsibility

OperationalExcellence

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

OperationalExcellence

CorporateResponsibility

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

PortfolioUse extended portfolio to gain market shares in process industry related business and BRIC countries

Ensure successful integration of UGS

Enforce portfolio in process automation, sensor business and electrical installation for buildings

InnovationSustain innovation leadership

Leverage R&D spending as main driver for growth and profitability

ProfitabilityImprove flexibility in structures to ensure EBIT margin in target range

Reach CCR target: 1,0 minus growth A&D


Sustained Value Enhancement - A&D targets

Grow sales by 2x market growth, based on organic and exogenous activities

Group profit margin: 12% - 15%

Further expand all #1 positioned businesses

Develop #2 positioned business units into market leaders

Focus on acquisitions in sensors, electrical equipmentfor buildings and process automation

Focus in regional expansion: China, Russia, India


Glossary

A&C OEMAutomation and Control Original Equipment Manufacturer

MES Manufacturing Execution SystemA&D Automation and Drives

PCS Process Control SystemCAE Computer Aided Engineering

CAD PLCComputer Aided Design Programmable Logic Controller

CAM Computer Aided Manufacturing PLM Product Lifecycle Management

CNC Computerized Numerical Control PTD Power Transmission and Distribution

DCS Distributed Control System SBT Siemens Building Technologies

ERP Enterprise Resource Planning TIA Totally Integrated Automation

HMI Human Machine Interface TIP Totally Integrated Power

I&S Industrial Solutions and Services


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

Marcus Desimoni +49-89-636-32445

Roland Bischofberger +49-89-636-36165

Florian Flossmann +49-89-636-34095

Irina Pchelova +49-89-636-33693

Christof Schwab +49-89-636-32677

Susanne Wölfinger +49-89-636-30639

http://www.siemens.com/investorrelationsWebpage:

e-mail: [email protected]

Telephone: +49-89-636-32474

Fax: +49-89-636-32830

http://www.siemens.com/investorrelations

mailto:[email protected]

automation & drives - siemens · automation & drives – ... india # 1 china # 1 sales...

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