Siemens 10 Year Analysis of Financials and Business (2002-12)

1. 1

2. 2
About Siemens
Business Segments 2002 vs 2012
Product and Services
Competitors
Financial Analysis 2002-12
10 Years Summary

3. • Siemens AG is a German multinational
engineering and electronics conglomerate
company headquartered in Munich and Berlin.
• Europe's largest engineering company and
maker of medical diagnostics equipment and
3

4. Business Segments 2002
4

5. 2012 Business Segments
Energy Sector
•Power Generation
•Power Transmission
•Energy Service
•Wind Power
Healthcare Sector
• Healthcare IT &
Infrastructure
• Hearing
Instruments
• Medical Imaging
Industry Sector
•Automation
•Drive
Technology(Motors,
Geared Motors,
units,Coupling)
•Services
Infrastructure &
Cities Sector
•Cities
•Mobility
•Efficient Building
•Smart Power Grids
•Water
5

6. Centralized Segments
 Equity Investments – is a reportable segment with its own management. Equity Investments contains
investments accounted for under the equity method or at cost and current available-for-sale financial
assets.
 Financial Services (SFS) – provides a variety of financial services and products both to third parties and to
other Siemens entities and their customers.
 Siemens Real Estate (SRE) – owns and manages the Siemens real estate portfolio and offers a range of
services encompassing
 real estate development, real estate disposal and asset management, as well as lease and services
management.
 Eliminations, Corporate Treasury and other reconciling items-comprise consolidation of transactions
within the
 segments, certain reconciliation and reclassification items and the activities of the Company ’s Corporate
Treasury.
6

7. Products & Services
Energy Segments
– Fossil Power Generation-Steam and Gas Turbines, Generators, Fuel Gasifier
– Renewable Energy-Wind Power Turbines Solar, Hydro, Biomass Power
– Power Transmission-Transformers, Cables
Industry Segment
– Automation System, Logistics
– Drive Technology, Services
Healthcare Segment
– Medical Imaging-MRI, CT, Ultra Sound
– Laboratory Diagnostics- Microbiology Testing, Molecular Diagnostics
– Hearing Instruments, Healthcare IT and Infrastructure
Infrastructure & Cities Segment
– Sustainable City Development
– Mobility-Rail and Road Transportation System
– Efficient Building-Energy Consumption and security Solutions
– Smart Power Grids
– Water and Waste Water Management
– Safety and Security Solutions
7

8. Competitors
• Power Generation:
– Gas Tubines :Alstom, General Electric and Mitsubishi Heavy Industries,
– Steam turbines-Alstom, BHEL, General Electric and Toshiba
– Wind Power-Enercon, Gamesa, General Electric, Goldwind,Sinovel, Suzlon and Vestas.
• Power Transmission
– XD from China, Crompton Greaves from India, HHI from
– Korea and Mitsubishi Electric from Japan.
• Healthcare
– General Electric, Philips, Toshiba, Hitachi and Hologic
• Industry
– ABB, Schneider Electric, Rockwell and Emerson Electric
• Infrastructure & Cities
– ABB, Alstom, Ansaldo, Bombardier, General Electric,Honeywell, Johnson Controls,
Schneider Electric and Tyco
8

9. Financial Performance System
Siemens sets annual targets from 2002 in :
• Revenue Growth-to grow our faster than the average revenue
growth of our most relevant competitors
• Profitability and Capital Efficiency-
– Adjusted EBITDA Margins and ROCE Targets
– Capital Structure Ratios(Adj.Ind Debt/Adj EBITDA)
• Dividend/Buyback Payout policy
9

10. Financial Performance Targets
Measures Target
Revenue Growth 7%
ROCE Adj 15-20%
Capital Structure Ratios 0.5-1
Dividend/Buyback 30-50%
10

11. 11
2012 Segment wise performance
In Billions
€
Revenue Profit Employee
s
Net Profit
Margins
2012
Actual
EBITDA
Margins
Target
EBITDA
Margins
Energy 26.6 1.95 84,000 7.33% 9.3% 10-15%
Healthcare
13.6 2 52000 15.00% 18.5% 15-20%
Industry
18.5 1.47 99,600 7.95% 14.9% 11-17%
Infrastruct
ure &
Cities 17.8 0.3 90,000 1.69% 7.5% 8-12%

12. 2012 Revenue and Profit
34%
36%
25%
5%
Profitabilty Contribution
Energy
Healthcare
Industry
Infrastructure &
Cities
12

13. 73428 66113
78733 82449 86924 87906 90679 83948
103055 102556
113557
95936 100652 100383 103523
Sep99 Sep00 Sep01 Sep02 Sep03 Sep04 Sep05 Sep06 Sep07 Sep08 Sep09 Sep10 Sep11 Sep12 Sep13
Revenue
Revenue Linear (Revenue)
1997
7560
1890
2549 2863
4262
2702
3958
5414
7593
3396
5423
8441
5384 5844
Sep99 Sep00 Sep01 Sep02 Sep03 Sep04 Sep05 Sep06 Sep07 Sep08 Sep09 Sep10 Sep11 Sep12 Sep13
Net Income(A14+17+18)
Net Income(A14+17+18) Linear (Net Income(A14+17+18))
1436 1055
2213 3192 3424 3748 3720 3485
7114
3305
9403 8431
11114
8815
7269
Sep99 Sep00 Sep01 Sep02 Sep03 Sep04 Sep05 Sep06 Sep07 Sep08 Sep09 Sep10 Sep11 Sep12 Sep13
Operating Income
Operating Income Linear (Operating Income)
13
in millions of $

14. Dupont Analyis
12%
31%
9%
11% 10%
13%
8%
12% 13%
21%
9%
14%
20%
14%
15%
0%
5%
10%
15%
20%
25%
30%
35%
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
Sep99 Sep00 Sep01 Sep02 Sep03 Sep04 Sep05 Sep06 Sep07 Sep08 Sep09 Sep10 Sep11 Sep12 Sep13
Asset Turnover
Leverage
Profitability
Return on Equity %
14
28% 28% 27% 28% 28% 29% 28%
26%
29%
27% 27%
29% 30%
28% 27%
2% 2% 3% 4% 4% 4% 4% 4%
7%
3%
8% 9%
11%
9%
7%
3%
11%
2% 3% 3%
5%
3%
5% 5%
7%
3%
6%
8%
5% 6%
0%
5%
10%
15%
20%
25%
30%
35%
Sep99 Sep00 Sep01 Sep02 Sep03 Sep04 Sep05 Sep06 Sep07 Sep08 Sep09 Sep10 Sep11 Sep12 Sep13
Margins
Gross Profit Margin
Operating Profit Marg
Net Profit Margin

15. Liquidity & Solvency Ratios
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
Sep99 Sep00 Sep01 Sep02 Sep03 Sep04 Sep05 Sep06 Sep07 Sep08 Sep09 Sep10 Sep11 Sep12 Sep13
Current Ratio
Quick Ratio
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Sep99 Sep00 Sep01 Sep02 Sep03 Sep04 Sep05 Sep06 Sep07 Sep08 Sep09 Sep10 Sep11 Sep12 Sep13
24%
19%
30% 30% 33%
27%
24%
34%
25%
35%
42%
38%
31%
35%
40%
76%
81%
70% 70% 67%
73%
76%
66%
75%
65%
58%
62%
69%
65%
60%
Solvency Ratios-D/D+E
E/D+E
15

16. 0
20
40
60
80
100
120
Sep99 Sep00 Sep01 Sep02 Sep03 Sep04 Sep05 Sep06 Sep07 Sep08 Sep09 Sep10 Sep11 Sep12 Sep13
Days Inventory
Days Inventory
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
18.00%
20.00%
Sep99 Sep00 Sep01 Sep02 Sep03 Sep04 Sep05 Sep06 Sep07 Sep08 Sep09 Sep10 Sep11 Sep12 Sep13
Return on Capital Employed
Return on Capital Employed
16

17. 2002 -2003
2002 :
 (Information Communication Network)ICN: division making losses due to substantial
debt of Telecommunications carriers in US and Germany and cutbacks in capital
spending
 Power Generation, Medical have high EBIT Margins (11%) compared to other segments
2003:
 Majority of Siemens Groups reported higher earnings and margins year-over-year:
 ICN cut its loss to €366 million from €691 million a year due to telecom players
integrating previous investments.
 Loss in 2003 includes severance pay and write-downs of venture capital and other
investments
 A&D was again a standout among Siemens Groups, increasing Group profit 11% year
over- year to €806 million, further improving its Group profit margin to 9.6%, and
strengthening its market position.
 Power and Medical retaining profit margin(16.5% and 15%)
 Lighting retained its profit margin of 9.8%
17

18. 2004- Go for Profit and Growth & 2005-CEO Change
• Overall 23 % increase in Net income to €3.4 billion from €2.4 billion in fiscal 2003 excl share
sales
• Divisional Performance:
Information & Communication:
• 11% year-over-year on strong demand for both mobile networks and mobile phones,
• ICN returns to profitability to €222 million posting profits in all quarters though sales remained
constant.
• ICM 11% year-over-year increase in sales and 93% increase in profit to Euros 347 on strong
demand for both mobile networks and mobile phones selling 51.1 Million Handsets
• Reorganization of ICN and ICM to Siemens Communications (Com) Group organised in 3
business around telecommunication industry.
Transportation Division:
• SV benefited from continued strong demand in the automotive sector and was strengthened by
the acquisition of an automotive electronics business. 34% Increase in group profit
2005:
– Klaus Kleinfeld New CEO in 2005 and creates gameplan of Fit4More with targets in 2007
– Orders growth -7%(APAC and America)
– Sales growth -3% to 75 Million
– Discontinued Operations dues to sales –Euros 810 Million and there by reducing profit
18

19. 2006-Performance
• Gross Profit Margin declined to 26 % due to PG, lower margins
at com and SBS higher severance charges.
• Divisional Performance
– Dissolved Com group and in talks with Nokia to form JV-
Transferring Carrier Networks and service business.
– Wind Power won 2 orders in US and PG fossil due in
bankcruptcy of consortium partner and charges related to
project.
19

20. 2007 Controversies
• Pricing Cartel -Fined €396 million by the European Commission for price fixing in
EU electricity markets through a cartel involving 11 companies, including ABB,
Alstom between 1988 and 2004
• Legal Proceedings – on suspicion of criminal breaches of fiduciary duty including
embezzlement, as well as bribery and tax evasion in all groups of Siemens
Supervisory board intervenes and creates Compliance Committee involving
audit firms, legal firms and forensic accounting.
• Extraordinary meetings:
Exising Dr. Heinrich v. Pierer Chairman and CEO Dr. Klaus Kleinfeld resign
New Mangament and Supervisory Heads:
– Dr. Heinrich Hiesinger, Group President of Siemens Building Technologies
(SBT), to the Managing Board of Siemens AG
– Peter Loscher New CEO
– Gerhard Cromme -New Chainrman
20

21. 2008 -2012
• New Management focus on 3 main sectors: Industry,
Energy and Healthcare
• Discontinuation of Com and Nuclear group from
portfolio throught partnership and sale
• Revenue declines by 1-3%,Improving profitability to
NPM-7% by decreasing in SG&A expense
• Re organisation of business to create Infrastructure and
Cities Sector added in 2011
• Siemens’ largest-ever train order, worth €3.7 billion.
• Siemens finance BIAL Airport project in PPP with other
companies providing suitable mobility solutions – all in
record time helping GV Reddy
21

22. Major Events in 2002-2012
2001-02
Sale of
recent
acquistions
2004:Success
due to Go for
Profit and Go
for Growth
2005:CEO
Change & New
Programme:Fit4
More
2007-New CEO
Peter and Board
2010-Profit
Margins
Improve
22

23. Sale & Purchase of Business
23
2002:
Sale of Unisphere
N/w to Juniper
For €600 Million
2002:Increased
stake in Aztecs to
100% from
Vodafone
€3.7 Billion
2003:Sale of
Drager Medical
for €64 Million
2003: Purchase
of Alstom €929
Million
2004:Purchase of
US Filter enters into
Water Treatment
2005:Sale of
Mobile Business
Segment to Benq
2005:Purchase of
Bonus Energy to
enter into Wind
Power
2007: Sale of
Siemens VDO by
new CEO
2006:Med
acquisition and
Bayer
Diagnositics,JV
with Nokia to sell
off ICN

24. 10 Years Summary
Growth:
– Focus on inorganic growth leading growing topline but not much growth in bottom line
– Pioneer in Innovation and patents achieved through R&D -Average spending of 6% each year
– Healthcare and Energy segments main drivers of growth
Profitability: Gross Margin 28% Net Profit Margin 6% .Poor NPM due to High Selling General & Admin Expense
– 15% of Revenue
Capital:
– Finance is centrally managed by SFS and Corporate Treasury
– Corporate Treasury pool and manages centrally by to raises money from capital markets
– Preference to raise capital through debt route mainly for divisions within siemens
– Annual Dividend declaration in accordance with performance
– More Efficient Cash Management and internal funds used to purchase new firms and service debts
Management Decisions
– Poor Strategic decision in acquisition and followed by sale in maximum of 2 years
– Enter sectors like water treatment, nuclear power and sale of subsidiary in acquired company
– Goodwill Impairment after acquisition
– Ethical problem -Bribery, Tax evasion and pricing cartels
– Management and Supervisory board Change twice in 2005 and 2007
– Continuous re organization of groups into divisions
– Severance Pay affecting bottom line and not limiting the company to layoff employees and selling
loss making business segments 24

25. Strategic Analysis
Ansoff Matrix
Existing Product New Product
Existing Market Market Penetration
Energy & Automation
Product Development
Healthcare
New Market Market Development
Infra & Cities
Diversification
Windpower,IT
25

26. Reference
• Siemens Annual Reports
http://www.siemens.com/annual/14/en/index/
26

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