Munich, 2008-Jan-24
As part of the company’s reorganization, the Siemens Managing Board has set target margin ranges for the Industry and Energy Sectors as well as for 14 Divisions, significantly raising the targets for company operations. For the Industry Sector, the target range lies at 9 to 13 percent, compared to 9 to 11 percent in the past. For the Energy Sector, the new target range lies at 11 to 15 percent, compared to 9 to 13 percent previously. The target range for the Healthcare Sector was raised last November to 14 to 17 percent from 13 to 15 percent. “We have set ambitious goals for ourselves,” said Siemens President and CEO Peter Löscher. “We want to catch up with our best competitors in profitability.”
Measures such as exploiting synergies, further improving global competitiveness and strengthening the company’s innovation leadership will help Siemens reach its targets. Among the measures for improving cost efficiency is the program with which Siemens will reduce its selling, general and administrative expenses 10 to 20 percent by 2010. With the new goals, Siemens wants to move all businesses into leading market positions as quickly as possible – as the basis for sustainable profitable growth on the Sector and Division levels. Compared to the margin ranges in the old organizational structure, the upper targets of the ranges were raised for 10 of the company’s 14 Divisions that are reported. The target ranges are part of the company’s “Fit4 2010” program, which was comprehensively revised on the occasion of Siemens’ reorganization.
Industry Sector: Target range 9 to 13 percent
The target range for the Industry Sector lies at 9 to 13 percent. On a comparable basis, targets for the Sector’s business activities were previously revenue-weighted at 9 to 11 percent. In particular, the Industry Automation Division (12 to 17 percent) and the Drive Technologies Division (11 to 16 percent) will be key contributors to the Sector’s higher margin expectations. Industry Automation was substantially strengthened in fiscal 2007 with the acquisition of UGS, and profits from the PLM (Product Lifecycle Management) business. Drive Technologies was strengthened with the acquisitions of Flender and Robicon in the growth market for process industry, as well as for components used in wind power plants. Reflecting the growing demand for energy-efficient building solutions, the target range for Building Technologies now lies at 7 to 10 percent – higher than that of the former Siemens Building Technologies Group. The target ranges for Industry Solutions, Mobility and Osram remain among the most ambitious in their respective industries.
Energy Sector: Target range 11 to 15 percent
The Energy Sector’s target range of 11 to 15 percent is a significant two percentage points higher than the revenue-weighted 9 to 13 percent target range of the former Power Generation (PG) and Power Transmission and Distribution (PTD) Groups. The target ranges for the Fossil Power Generation and Renewable Energy Divisions lie clearly above the previous PG margin of 10 to 14 percent. The target ranges for the two Divisions created from PTD are also substantially higher than the former Group’s old range of 7 to 10 percent. This reflects the positive earnings trend of the former Group as well as the generally strong market environment for power generation and transmission. As is customary with the majority of the company’s competitors, the Siemens margins show a combination of product, project and service business. The earnings effects of the Service Rotating Equipment Division are reflected in the target ranges of Fossil Power Generation and Oil & Gas.
Healthcare Sector: Target range at 14 to 17 percent since November 2007
The margin target range for the former Siemens Medical Solutions Group was already raised to 14 to 17 percent in November 2007, up from the previous 13 to 15 percent. The target range now applies to the new Sector. The Imaging & IT Division, with its target range of 14 to 17 percent, is expected to pull even with its best competitors in the medium term. The Workflow & Solutions Division is generally still being built up in an environment marked by established and strong competitors, and has a target range of 11 to 14 percent. The Diagnostics Division is expected to be especially profitable. Following the acquisitions of DPC, Bayer Diagnostics and, most recently, Dade Behring, the Division is market leader in the field of in-vitro diagnostics. The Diagnostics Division has the company’s highest target range, at 16 to 19 percent.
Siemens IT Solutions and Services and Siemens Financial Services (SFS)
The target ranges for the cross-Sector businesses remain unchanged: 5 to 7 percent for Siemens IT Solutions and Services and 20 to 23 percent (measured on Return on Equity) for SFS.
Siemens will reflect the new company structure for the first time in its third-quarter financial reporting for the current fiscal year.
Siemens AG (Berlin and Munich) is a global powerhouse in electronics and electrical engineering, operating in the industry, energy and healthcare sectors. The company has around 400,000 employees (in continuing operations) working to develop and manufacture products, design and install complex systems and projects, and tailor a wide range of solutions for individual requirements. For over 160 years, Siemens has stood for technical achievements, innovation, quality, reliability and internationality. In fiscal 2007, Siemens had revenue of €72.4 billion and income from continuing operations of €3.9 billion (IFRS). Further information is available on the Internet at: www.siemens.com.
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