Heinrich Hiesinger, Member of the CECJohannes Milde, Group President
Capital Market Days 2007June 21-22, Berlin
Siemens Building Technologies –
Page 1 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.
Page 2 Capital Market Days 2007
SBT – Our scope
Building Comfort Electronic SecurityFire Safety
Comfort, energy savingand building efficiency
HVAC controlsValves, actuatorsEnergy services and solutions
Protecting people,assets and processes
Access controlVideo surveillanceIntrusion protectionCentral monitoringstations
Protecting life and property
Fire detectionExtinguishingEvacuation
Page 3 Capital Market Days 2007
SBT – Our key figures
Sales (€ bn)
Fiscal Year 2006
Employees
Market position
BuildingComfort Total SBT
~2.3 4.8
12,900
No. 2
Fire Safety
~1.5
9,900
No. 1
ElectronicSecurity
~1.0
4,800
Top 5
28,600
Page 4 Capital Market Days 2007
Security drives SBT market development
CAGR: Compound Annual Growth Rate
2006 - 2008 growth driven by:All business fields in Americas and Asia / PacificSecurity in Europe
2006 - 2008 growth in all business fields: Highest growth rates in SecurityModerate growth in Fire Safety and Building Comfort
3
35
2825
2006
40
18 20
3
80
2008
Europe
Americas
Asia / PacificOther
5%
8%
7%CAGR
7%
14
2220
80
2006
13
4755
91
2008
ElectronicSecurity
Fire SafetyBuilding Comfort 5%
8%
CAGR
3%
in € bn in € bn917%
Page 5 Capital Market Days 2007
Where we come from –and our plan we presented to you last year
0.20.3 4.2
FY 2004
4.4
FY 2005 FY 2007
5.0
FY 2003
0.3+4%
Growth aboveMarket
Divestment Facility-management
Project SelectionCriteria, Currency
Exit ElectricalProject Business
AchieveTarget Margin
Portfolio Clean-upStrategic Alignment
Operational ExcellenceGain Growth Momentum
Maintain GrowthStrengthen PortfolioReach Target Margin
in € bn
Page 6 Capital Market Days 2007
The road to success is ...
... sustainable improvements on 4 levers
Additional strong focus on asset management ANDstrong cash generation
Target margin
4.1%~5%
7.0%
2005 2006 2007
Focus and performanceof solutions business Optimized business mix
Capacity and competence of employees
Competitive cost position
1
3
4 2
Page 7 Capital Market Days 2007
Continuous learning is key in order to respond to changes in thebusiness environment and to grow profitably
Siemens Learning Campus
Management & Leadership
Individual Development
Intercultural Management
Strategic Marketing
SBT Academy & Training on the Job
SBT specific training content
Applications
Project Management
Branch Management
Quality Management
SBT Products
SBT is a people's business and ~80% of project value is added in the Regions
SBT adds industry specific training modules addressing employees in HQ and in regions
Boost individual, organizational, strategy and market offering knowledge
Page 8 Capital Market Days 2007
Optimization of business mix shows first results
Strategic direction
High growth in Product and Service business, improved margin quality in Backlog
This we have achieved …
2.8
H1 06
2.9
H1 07
Large projects
Solutions
Service
Products
+2%New orders
+11%
+8%
+2%
Manage growth in solutions business towards stronger differentiation and high service potential
Maximize service business out of very large installed base
Accelerate growth in products business based on strong portfolioProducts
Service
Solutions
in € bn
Page 9 Capital Market Days 2007
Considerable step towards benchmark cost structure and improved performance of solutions business …
Profit development of Solution business
… are the main pillars of SBT’s target margin achievement
Solutions BusinessFY 05 FY06 FY07E
Project selectionStringent selection criteria
Project approval process
Process improvementPM@Siemens tool box
Strict controlling of margin slippage
Cost Structure (OpEx)Concentration of HQ in one location
Improved cost efficiency in regional organizations
Actions
Group Profit Margin
+3%pt
Page 10 Capital Market Days 2007
High market recognition of SBT‘s offering
«Best Energy Service Provider» European Parlament
«Security Excellence Award» Customers in UK
«Ifsec Innovation Award» Intrusion DetectorEyetec
«Reddot Innovation Award»Synco LivingWireless Home Automation
Page 11 Capital Market Days 2007
New orders 5,235 2,750
Sales 4,796 2,548
Group profit 234 172
Free Cash Flow 1 117
Employees 28,600 28,400
(in € m) FY 06 H1 07
SBT successfully cleaned up its portfolio and managed the turn-around
Q2 target margin achieved along with strong cash contribution
Profit margin & sales (in € bn)
5.04.2 4.4
4.8
2.0% 2.5%4.1%
4.9%
2003 2004 2005 2006 Q1 Q22007
US GAAP: 2003 – 2006IFRS : 2007
5.9%
7.5%
1.31.2
Page 12 Capital Market Days 2007
Focus on business mix and Solutions’ performance ...
... while improving the cash position
Focus and performanceof Solutions business Optimized business mix
Capacity and competence of employees
Competitive cost position
1
3
4 2Enhance value proposition Vertical Market solutions
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
Strong growth in Products/ServicesSelective growth in value markets
Target margin
7.0%9.0%
2007 2010
Page 13 Capital Market Days 2007
Working Capital
Profit & Cash
SBT will achieve Cash and ROCE targets
1.00.7
0.0
FY 04 FY 05 FY 06
0.7
H1 07
Cash Conversion Rate (CCR) SBT has set the grounds for improvement:
Return on Capital Employed (ROCE)
Improved cost structure and enhanced business portfolio
Implemented measures & processes on branch level to reduce Working Capital
Moderate Fixed Assets development
CCR &
ROCE
FY 04 FY 05 FY 06 H1 07
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
Page 14 Capital Market Days 2007
Future priorities for SBT
Energy Efficiency
Security Service
Total Building Solutions(TBS)
Consistent performance within target margin range
Growth opportunities…
A B
C D
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
… driven by innovation
Page 15 Capital Market Days 2007
Energy Efficiency – Impressive track record due to high customer value
SBT Energy & Environmental Services Creating customer value
Source: GDP team
Clinical Center Reinkenheide, Germany:Replacement of a competitor‘s Building Automation System and Service contractSolution encompasses: Building Management System and modern Heating, Ventilation and Air Conditioning SystemsReduction of energy cost of more than 40%Reduction of CO2-emission by 4,100 tons p.a.
182
FY04
238
FY05
261
FY06 FY07E
+31%+10%
>25%
Profit margin
Sales(in € m)
6% 8% 7% >7%
EUUSA Asia
A
Page 16 Capital Market Days 2007
SBT Energy & Environmental Services – Front-runner in Energy Services
Our performance in Energy Efficiency ...More than 1,300 energy projects realized globally since 1994Total energy savings of € ~1.5bn over a period of 10 yearsCO2 reduction of all energy projects: ~700,000 tons per year
… is excellent
SBT winner of the European Energy Service Award for:
'Best Provider 2006'
A
Page 17 Capital Market Days 2007
Demand for Energy Efficiency creates high growth potential for SBT
SBT will tap this large and fast growing potential in selected high value segments
Rising energy costs and stronger environmental focus
create new market opportunities
Environmental regulations and governmental programs
accelerate this trend
A
AdditionalSBT market potential of
€ ~20bn
Energy Consulting Services
Energy Supply Side Services
Energy Optimization Services
Green Building Solutions
Page 18 Capital Market Days 2007
Total Building Solutions (TBS) – SBT meets complex customer demandsB
Hotel Palafitte, Neuchâtel (CH)
All hotel services are fully integrated and delivered
through one single network and can be centrally supervised
and controlled
This € 4m Total Building Solution consists of:Building Management system Heating and Ventilation equipmentFire Safety and Security systemLow Voltage and Lighting systems Communication and Information infrastructure
Access Control
RemoteServices
Building Management ServerEthernet TCP/IP
Ventilation Heating Fire SafetyLighting & Blinds
Communication
Page 19 Capital Market Days 2007
Total Building Solutions (TBS) allow for competitive differentiation
Total Building Solutions go beyond today's SBT core portfolio andinclude lighting, blinds and low-voltage equipment
Together with A&D, I&S and other Siemens Groups, SBT has a unique market position in this fast growing segment
DESIGO
PowerDistribution
MV/LV
IntrusionDetection and Video
Surveillance
Fire / GasDetection,
Evacuation,Extin-
guishing
AccessControl& Identi-ficationSystems
Heating,Ventilating, Air Conditioning
HVAC
IntegratedControlRoom
Lightingand
Blinds
What are the customer benefits?
Full building management functionalityReduction of total lifecycle costsHigh flexibility (e.g. wireless connectivity, retrofit)Value-added services and improved functionalities
Our Total Building Solutions approach
Cross-discipline, intelligent automation nodeFlat hierarchy, open standardsEasy retrofit and migrations
B
Page 20 Capital Market Days 2007
2x market growth
Security is our growth engine – From € 700m to >€ 1,100m in 3 years
Focus on value segment solutions and services, e.g. Command & Control
C
Focus on video over IP and other differentiating technology
Security Solutions and Services
Security Products
~1,000
Services
FY 06
902+18%
FY 05
762
FY 04 FY 07E
606
Solutions
136
FY 04
124
FY 05
174
FY 06
~220
FY 07E
+17%
Sales (in € m)
Sales (in € m)
Page 21 Capital Market Days 2007
Security Solutions business will move beyond traditional “Protect” focusC
Source: GDP team
SBT will tap additional potential – supported by acquisitions
Prevent Protect Respond Recover
Prevent incident from happening
Generate alarm in case of incident
Deal with actual incident
Deduction of conse-quences from incident
Goal
Perimeter control (electronic fence)
Glass break sensor Security operation center
Evidence search in video data
Example
Share of security market ~15% ~50% ~35% ~1%
Market growth Above average
Below average
Above average
Above average
Future growth opportunitiesTraditional focus
Page 22 Capital Market Days 2007
Service Business - Future priority and growth opportunity
Leveraging existing customer base Additional Service offering
Example Kintec (acquired in 2006):
Remote monitoring, servicing of unmanned sitesTransfer concept to develop emerging markets such as Turkey, Brazil or PolandTransfer technology, know-how and business model to vertical markets that have a large number of remote unmanned technological sites
Vertical MarketTelecom
D
Market
Transparency
Demand for Energy Efficiency and Security opens customer base for Service offering
Traditional Services Value Added Services
grew by ~ 60,000 projects p.a. over the
last 20 yearsDemand
for Security ...
… and Energy
Efficiency
Installed Base
Page 23 Capital Market Days 2007
Advantage Services™ - Business and mindset
Customer satisfaction and loyalty are predicated on our quality of service
Service as a business
Service as a mindset and behavior
Comprehensive Service portfolio across all disciplines, including Maintenance, Operational Services, Energy Services and Customer TrainingFull lifecycle approach to optimize customer valueIntelligent system migration concepts
Short reaction times & 24/7 customer careDefined high quality standardsResponsiveness to customer needsUnderstanding customer processes and priorities
D
Page 24 Capital Market Days 2007
SBT’s growth plans are driven by innovative products
Reshuffling from portfolio streamlining to innovation
SBT is continuously increasing its investment in R&D
Examples of new products and systems launchedApogee – Wireless BAS
Energy Monitoring & Control
Sinteso – Fire Safety
Sistore – Digital Video
SiPass – Access Control
Desigo – Building Automation
Page 25 Capital Market Days 2007
Innovative applications at its best – Automated wide area surveillance
Interactive animated view of your site on a single screenVirtual fences (site-based alarm zones) set to security policyClassified object detection and tracking in real-time
Video camerasThermal camerasRadarGPSAccess controlRFID“Smart Fence”Bio-chemical
Sensor types
Object types
PedestriansVehiclesBoats / shipsAirplanes
Page 26 Capital Market Days 2007
SBT’s key take aways
SBT targets upper end of target range by 2010
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
SBT will grow above market growth, based on:Service potential in installed baseSecurity needsEnergy Efficiency
2004 - 2007
2008 - 2010
FY10FY07E
Further OPEX
reduction
Profitable growth in value markets based on innovation
7%
9%
SBT is successfully repositioned and reached target range
Focus on strong cash contribution
Page 27 Capital Market Days 2007
Building TechnologiesHigh value for our customers
Katy Stadium, Houston
We protect people and propertyWe protect families and kids against fire, theft and crime
We make people feel safe and comfortable at work and at home
While people are working or sleeping at night, we save energy and, helping preserve our environment
Page 28 Capital Market Days 2007
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.
Page 29 Capital Market Days 2007
Siemens Investor Relations Team
Webpage: http://www.siemens.com/investorrelations
e-mail: [email protected]
Telephone: +49-89-636-32474
Fax: +49-89-636-32830
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