New Siemens program to ensure sustained company development
In order to continue prevailing in global competition, Siemens is launching a new program designed to ensure sustained company development. The “Fit For 2010” program, presented at the company’s semiannual press conference, is based on the proven pillars of the successfully concluded “Fit4More” program. As in the past, key pillars in the new initiative will include the development of highly qualified employees, the ongoing strengthening of the company’s innovation leadership, and a continued strong focus on customers. Siemens will further boost its strengths in the fields of energy and environment, automation and control, industrial and public infrastructure, and healthcare. And the company intends to become an industry leader in the area of corporate responsibility.
“The “Fit For 2010” program is a seamless continuation of our successful “Fit4More” program. By setting new medium-term goals, we want to further enhance our competitiveness and our company value,” said Klaus Kleinfeld, President and CEO of Siemens AG.
The company is setting clear return and cash targets and is reinforcing its proviso of growing at double the rate of the global economy every year. With the newly introduced indicator Return on Capital Employed (ROCE), Siemens intends to show how capital invested in the company yields competitive returns. The ROCE is calculated at Siemens as net income (before interest) divided by capital employed. The medium-term “Fit for 2010” program targets a sustainable ROCE between 14% and 16%. The ROCE calculated for fiscal 2006 on the basis of continuing operations was 10%.
The Cash Conversion Rate (CCR) now serves as target indicator for the company’s cash flow. At Siemens, this indicator defines the ratio of the free cash flow to net income. In this equation, free cash flow equals the net cash provided by operating activities minus additions to intangible assets and property, plant and equipment. In the future, Siemens wants to achieve a CCR of at least 1 minus its growth rate. The inclusion of the growth rate is based on the fact that additional growth generally is accompanied by increasing capacities that, in turn, have to be financed. In fiscal 2006, the CCR for continuing operations was 0.64.
In addition to its defined company goals, Siemens will also maintain its margin ranges for the Groups. In setting these ranges, the company considered – among other factors – the Groups’ business strategies as well as developments at key comparable competitors. In nine of eleven Groups, the margin ranges were adjusted. The following table provides an overview of the new and old margin ranges for the Siemens Groups.
(For table, see PDF download)
In addition, Siemens aims to be a benchmark in transparency and compliance. “Thanks to our outstanding products, systems and solutions, we are convinced that Siemens can be competitive throughout the world with ethically correct operations. None of our employees, customers and shareholders can have any doubts here,“ said Kleinfeld. To this end, the company has anchored the implementation of a revamped ethics code in the new “Fit for 2010” program.
Earlier, under the “Fit4More” program launched in April 2005, Siemens defined clear goals, began the necessary steps for the company’s reorientation, and created the basis for sustainable and profitable growth. “We significantly strengthened our strongest businesses, better aligned the company to take full advantage of global demographic and urbanization trends, and reached or exceeded our margin targets at all Groups. Together these accomplishments are enabling us to outgrow the economy at a higher level of profitability,” said Kleinfeld.
More information on ROCE and CCR can be found on the Siemens press Internet page at: www.siemens.com/press.
Siemens AG (Berlin and Munich) is a global powerhouse in electrical engineering and electronics. The company has around 475,000 employees (incl. discontinued operations) working to develop and manufacture products, design and install complex systems and projects, and tailor a wide range of services for individual requirements. Siemens provides innovative technologies and comprehensive know-how to benefit customers in over 190 countries. Founded more than 155 years ago, the company focuses on the areas of Information and Communications, Automation and Control, Power, Transportation, Medical, and Lighting. In fiscal 2006 (ended September 30), Siemens had sales of €87.3 billion and net income of €3.033 billion, according to U.S. GAAP. Further information is available on the Internet at: www.siemens.com.
This document 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.
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