Energy Sector to contribute EUR3.2 billion productivity gains to Siemens 2014
The Energy Sector of Siemens AG will make a substantial contribution to the Siemens 2014 company program and intends to achieve a sector margin of at least 12 percent in fiscal year 2014 in doing so. In the previous fiscal year the margin for the Energy Sector was 7.8 percent. In fiscal years 2013 and 2014 the contribution by the Energy Sector to the company program is expected to total EUR3.2 billion. The greatest portion of this consists of planned cost savings, for example through improved purchasing, optimization in production and improvements in project execution. Siemens is targeting productivity gains for a total of EUR6 billion for the Siemens 2014 company program and an earnings margin of at least 12 percent across all Sectors.
“We are well positioned and will concentrate on our core business and other lucrative market segments over the next two years”, stated Michael Suess, CEO of the Energy Sector and Member of the Managing Board of Siemens AG. “Although we are already number one in many areas, we nevertheless intend to expand our market and technology leadership further. We will profit from the market development in this process, because the power plant fleets will double in worldwide capacity within the next 20 years”, continued Michael Suess. Power plants with a total capacity of almost 6,000 gigawatts (GW) were installed throughout the world by 2011. Siemens estimates that new power plants with a total capacity of 7,000 GW will be built until 2030. The power generation from gas-fired plants and wind power will increase markedly in this scenario.
Over the short term, the Energy Sector anticipates that the markets it serves will experience a slight recovery in the current and in the coming fiscal year after a decline in fiscal year 2012 and return to a period of moderate growth. A generally strong demand in the newly industrializing countries, which are expanding their energy infrastructure further, and in industrialized countries, which will have to modernize their aging infrastructures and have set plans for reducing emissions, will have a positive impact on this development. The weaker new order intake for fiscal year 2012 will most likely effect revenue development in fiscal year 2013. On the basis of the anticipated improvement on the markets served by Siemens, revenues are expected to return to a growth range in fiscal year 2014.
In fiscal year 2013, the market for fossil power generation is expected to reach the level of the previous years. In view of the advanced age of the power plant fleet installed in the USA and the availability of natural gas at low prices, Siemens anticipates an attractive market there over the medium term for gas-fired power plants. Siemens estimates that the gas-fired power plant market in the USA will show annual growth rates above 20 percent over the next five years, outpacing the entire power generation market in the US more than two-fold. It was against this backdrop that Siemens invested USD350 million in its new gas turbine hub, opened in Charlotte, North Carolina one year ago. “Siemens supplies world-class gas turbines, enabling erection of the most efficient gas-fired power plants currently available. We just recently sold three more H-class turbines to a major U.S. utility, increasing the number of the newest generation of machines sold to 20. Almost half of them will be installed in the USA. The technological lead afforded to us by the H-class is roughly two to three years. But we do not plan on resting on our laurels and are enhancing the technology steadily. In the field of gas turbines we have determined a savings potential of 250 million euros through further standardization alone”, declared Michael Suess.
In the wind power field, Siemens foresees new plants with a capacity of nearly 500 gigawatts being installed by 2020 - more than twice the wind power capacity that is currently in operation. Siemens is the driving force behind cost reduction in this branch of industry to an extent that onshore wind power is expected to supply electricity at the same costs as conventional power plants within this decade. This is anticipated in the coming decade for offshore plants. Siemens is not expecting any growth for onshore wind power markets in fiscal year 2013 and continued extremely competitive price pressure, whereas offshore wind power markets are anticipated to regain their growth dynamics following the weak demand of the previous year.
The power grid market will also profit over the long term from this positive trend in the power plant sector. The power transmission markets are expected to grow moderately in fiscal year 2013 and 2014, despite challenging conditions marked by existing overcapacity and extremely competitive prices prevalent in some segments. The Power Transmission Division is placing its focus on a return to profitability. The Division plans on achieving cost savings of 30 percent by 2015 in order to again reach an operative margin of 8 percent.
The Oil & Gas Division sees a business potential for itself arising in particular from the trend in the industry toward better efficiency in the recovery, transport and processing of fossil fuels. The high price of oil has also shifted the focus more toward non-conventional reservoirs and deep-sea fields. The Oil & Gas Division is currently developing subsea power supply solutions up to market readiness and has already bolstered its efforts in this field through several acquisitions. Subsea power supply is a prerequisite for processing of oil and gas at depths of up to 3,000 meters.
The Service business, which is set up for long-term contracts, continues to be a key pillar for the Energy Sector and provides a significant contribution to a stable development within the Sector, even with short-term market declines. Service revenues increased by 9 percent annually in the period from 2008 to 2012. The service business for gas-fired power plants and wind turbines has shown itself to be a major driving force in this process.
The Energy Sector of Siemens AG is today presenting its business strategy on the occasion of the Energy Capital Market Day at its Charlotte location in the USA. The presentations for this can be viewed at the Siemens Website and, starting at 2:00 p.m. CET (8:00 a.m. EST) the talks and the question and answer session will be broadcast as a Webcast. www.siemens.com/cmd
The Siemens Energy Sector is the world’s leading supplier of a broad spectrum of products, services and solutions for power generation in thermal power plants and using renewables, power transmission in grids and for the extraction, processing and transport of oil and gas. In fiscal 2012 (ended September 30), the Energy Sector had revenues of EUR27.5 billion and received new orders totaling approximately EUR26.9 billion and posted a profit of EUR2.2 billion. On September 30, 2012, the Energy Sector had a work force of almost 86,000. Further information is available at: http://www.siemens.com/energy
NOTES AND FORWARD-LOOKING STATEMENTS
This document includes supplemental financial measures that are or may be non-GAAP financial measures. New orders and order backlog; adjusted or organic growth rates of revenue and new orders; book-to-bill ratio; Total Sectors profit; return on equity (after tax), or ROE (after tax); return on capital employed (adjusted), or ROCE (adjusted); Free cash flow, or FCF; cash conversion rate, or CCR; adjusted EBITDA; adjusted EBIT; adjusted EBITDA margins, earnings effects from purchase price allocation, or PPA effects; net debt and adjusted industrial net debt are or may be such non-GAAP financial measures. These supplemental financial measures should not be viewed in isolation as alternatives to measures of Siemens’ financial condition, results of operations or cash flows as presented in accordance with IFRS in its Consolidated Financial Statements. Other companies that report or describe similarly titled financial measures may calculate them differently. Definitions of these supplemental financial measures, a discussion of the most directly comparable IFRS financial measures, information regarding the usefulness of Siemens’ supplemental financial measures, the limitations associated with these measures and reconciliations to the most comparable IFRS financial measures are available on Siemens’ Investor Relations website at www.siemens.com/nonGAAP. For additional information, see supplemental financial measures and the related discussion in Siemens’ most recent annual report on Form 20-F, which can be found on our Investor Relations website or via the EDGAR system on the website of the United States Securities and Exchange Commission.
This document contains statements related to our future business and financial performance and future events or developments involving Siemens that may constitute forward-looking statements. These statements may be identified by words such as “expects,” “looks forward to,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “will,” “project” or words of similar meaning. We may also make forward-looking statements in other reports, in presentations, in material delivered to stockholders and in press releases. In addition, our representatives may from time to time make oral forward-looking statements. Such statements are based on the current expectations and certain assumptions of Siemens’ management, and are, therefore, subject to certain risks and uncertainties. A variety of factors, many of which are beyond Siemens’ control, affect Siemens’ operations, performance, business strategy and results and could cause the actual results, performance or achievements of Siemens to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements or anticipated on the basis of historical trends. These factors include in particular, but are not limited to, the matters described in Item 3: Risk factors of our most recent annual report on Form 20-F filed with the SEC, in the chapter “Risks” of our most recent annual report prepared in accordance with the German Commercial Code, and in the chapter “Report on risks and opportunities” of our most recent interim report. Further information about risks and uncertainties affecting Siemens is included throughout our most recent annual and interim reports, as well as our most recent earnings release, which are available on the Siemens website, www.siemens.com, and throughout our most recent annual report on Form 20-F and in our other 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, performance or achievements of Siemens may vary materially from those described in the relevant forward-looking statement as being expected, anticipated, intended, planned, believed, sought, estimated or projected. Siemens neither intends, nor assumes any obligation, to update or revise these forward-looking statements in light of developments which differ from those anticipated.
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