Strategic & Financial analysis siemens(2002-2012)

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Strategic and Financial Analysis Siemens 2002-12HARI PRASHAD KV

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About Siemens

Business Segments 2002 vs 2012

Product and Services

Competitors

Financial Analysis 2002-12

10 Years Summary

Agenda

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• 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

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Business Segments 2002

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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

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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.

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Products & ServicesEnergy 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

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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

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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

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Financial Performance TargetsMeasures Target

Revenue Growth 7%

ROCE Adj 15-20%

Capital Structure Ratios 0.5-1

Dividend/Buyback 30-50%

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2012 Segment wise performanceIn Billions €

Revenue Profit Employees

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%Infrastructure & Cities

17.8 0.3 90,000 1.69% 7.5% 8-12%

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2012 Revenue and Profit

34%

36%

25%5%

Profitabilty Contribution

EnergyHealthcareIndustryInfrastructure & Cities

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Sep99 Sep00 Sep01 Sep02 Sep03 Sep04 Sep05 Sep06 Sep07 Sep08 Sep09 Sep10 Sep11 Sep12 Sep13

73428 6611378733 82449 86924 87906 90679 83948

103055 102556113557

95936 100652 100383 103523

RevenueRevenue Linear (Revenue)


1997

7560

18902549 2863

4262

27023958

5414

7593

3396

5423

8441

5384 5844

Net Income(A14+17+18)Net Income(A14+17+18) Linear (Net Income(A14+17+18))


1436 10552213

3192 3424 3748 3720 3485

7114

3305

94038431

111148815

7269

Operating IncomeOperating Income Linear (Operating Income)

in millions of $

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Dupont Analyis

Sep99 Sep00 Sep01 Sep02 Sep03 Sep04 Sep05 Sep06 Sep07 Sep08 Sep09 Sep10 Sep11 Sep12 Sep130.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

0%

5%

10%

15%

20%

25%

30%

35%

12%

31%

9%11% 10%

13%

8%

12% 13%

21%

9%

14%

20%

14%15%

Asset TurnoverLeverageProfitabilityReturn on Equity %

Sep99 Sep00 Sep01 Sep02 Sep03 Sep04 Sep05 Sep06 Sep07 Sep08 Sep09 Sep10 Sep11 Sep12 Sep13 2013 Euros

0%5%

10%15%20%25%30%35%

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%

Margins

Gross Profit MarginOperating Profit MarginNet Profit Margin

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Liquidity & Solvency Ratios

Sep99 Sep00 Sep01 Sep02 Sep03 Sep04 Sep05 Sep06 Sep07 Sep08 Sep09 Sep10 Sep11 Sep12 Sep130.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

Current RatioQuick Ratio

Sep99 Sep00 Sep01 Sep02 Sep03 Sep04 Sep05 Sep06 Sep07 Sep08 Sep09 Sep10 Sep11 Sep12 Sep130%

10%

20%

30%

40%

50%

60%

70%

80%

90%

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+EE/D+E

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20

40

60

80

100

120

Days Inventory

Days Inventory

Sep99 Sep00 Sep01 Sep02 Sep03 Sep04 Sep05 Sep06 Sep07 Sep08 Sep09 Sep10 Sep11 Sep12 Sep130.00%2.00%4.00%6.00%8.00%

10.00%12.00%14.00%16.00%18.00%20.00%

Return on Capital Employed

Return on Capital Employed

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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%

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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

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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.

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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 resignNew 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

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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

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Major Events in 2002-2012

2001-02Sale of recent acquistions

2004:Success due to Go for Profit and Go for Growth

2005:CEO Change & New Programme:Fit4More

2007-New CEO Peter and Board

2010-Profit Margins Improve

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Sale & Purchase of Business

2002:Sale of Unisphere N/w to JuniperFor €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

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10 Years SummaryGrowth: – 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

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Strategic Analysis

Ansoff MatrixExisting Product New Product

Existing Market Market Penetration

Energy & Automation

Product Development

Healthcare

New Market Market Development

Infra & Cities

Diversification

Windpower,IT

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Reference

• Siemens Annual Reportshttp://www.siemens.com/annual/14/en/index/

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Thank you

HARI PRASHAD KV

Strategic & Financial analysis siemens(2002-2012)

Economy & Finance

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