Siemens Building Technologies Heinrich Hiesinger, Member of the CEC Johannes Milde, Group President Capital Market Days 2007 June 21-22, Berlin
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 1 Capital Market Days 2007
SBT Our scope Building Comfort Comfort, energy saving and building efficiency HVAC controls Valves, actuators Energy services and solutions Fire Safety Protecting life and property Fire detection Extinguishing Evacuation Electronic Security Protecting people, assets and processes Access control Video surveillance Intrusion protection Central monitoring stations Page 2 Capital Market Days 2007
SBT Our key figures Fiscal Year 2006 Building Comfort Fire Safety Electronic Security Total SBT Sales ( bn) ~2.3 ~1.5 ~1.0 4.8 Employees 12,900 9,900 4,800 28,600 Market position No. 2 No. 1 Top 5 Page 3 Capital Market Days 2007
Security drives SBT market development in bn Europe Americas Asia / Pacific Other 80 25 35 2006 CAGR 7% 5% 7% 91 28 40 18 8% 20 3 3 2008 2006-2008 growth driven by: All business fields in Americas and Asia / Pacific Security in Europe in bn Electronic Security Fire Safety Building Comfort 80 47 13 20 2006 CAGR 7% 8% 3% 5% 91 2006-2008 growth in all business fields: Highest growth rates in Security Moderate growth in Fire Safety and Building Comfort 55 14 22 2008 CAGR: Compound Annual Growth Rate Page 4 Capital Market Days 2007
Where we come from and our plan we presented to you last year Portfolio Clean-up Strategic Alignment Operational Excellence Gain Growth Momentum Maintain Growth Strengthen Portfolio Reach Target Margin in bn 5.0 Divestment Facilitymanagement 0.3 0.2 0.3 4.2 Project Selection Criteria, Currency +4% 4.4 Growth above Market Achieve Target Margin Exit Electrical Project Business FY 2003 FY 2004 FY 2005 FY 2007 Page 5 Capital Market Days 2007
The road to success is...... sustainable improvements on 4 levers 1 Capacity and competence of employees 4 Target margin 7.0% Focus and performance ~5% of solutions business 4.1% Optimized business mix 2 2005 2006 2007 3 Competitive cost position Additional strong focus on asset management AND strong cash generation Page 6 Capital Market Days 2007
Continuous learning is key in order to respond to changes in the business environment and to grow profitably SBT is a people's business and ~80% of project value is added in the Regions Siemens Learning Campus Management & Leadership Individual Development Intercultural Management Strategic Marketing SBT adds industry specific training modules addressing employees in HQ and in regions SBT Academy & Training on the Job SBT specific training content Applications Project Management Branch Management Quality Management SBT Products Boost individual, organizational, strategy and market offering knowledge Page 7 Capital Market Days 2007
Optimization of business mix shows first results Strategic direction This we have achieved in bn New orders +2% Solutions Manage growth in solutions business towards stronger differentiation and high service potential 2.8 +2% 2.9 Large projects Solutions Service Maximize service business out of very large installed base +11% Service Products Accelerate growth in products business based on strong portfolio +8% Products H1 06 H1 07 High growth in Product and Service business, improved margin quality in Backlog Page 8 Capital Market Days 2007
Considerable step towards benchmark cost structure and improved performance of solutions business Project selection Actions Stringent selection criteria Project approval process Process improvement PM@Siemens tool box Strict controlling of margin slippage Cost Structure (OpEx) Concentration of HQ in one location Improved cost efficiency in regional organizations Profit development of Solution business Group Profit Margin +3%pt FY 05 FY06 FY07E Solutions Business are the main pillars of SBT s target margin achievement Page 9 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 Detector Eyetec «Reddot Innovation Award» Synco Living Wireless Home Automation Page 10 Capital Market Days 2007
SBT successfully cleaned up its portfolio and managed the turn-around Profit margin & sales (in bn) (in m) FY 06 H1 07 2.0% 2.5% 4.1% 4.9% 5.9% 7.5% New orders 5,235 2,750 Sales 4,796 2,548 Group profit 234 172 5.0 4.2 4.4 4.8 1.2 1.3 Free Cash Flow 1 117 Employees 28,600 28,400 2003 2004 2005 2006 Q1 Q2 2007 US GAAP: 2003 2006 IFRS : 2007 Q2 target margin achieved along with strong cash contribution Page 11 Capital Market Days 2007
People Excellence Portfolio Priorities to achieve the goals Develop talent globally Strengthen leadership development Attain high performance culture Strengthen expert careers Operational Excellence Execute Siemens Management System (powered by top + ) with focus on Innovation Customer Focus Global Competitiveness People Portfolio Excellence Performance Optimize capital efficiency with ROCE of >14 16% Attain cash conversion rate of "1 growth rate" Sustain 2x GDP growth Achieve new margin ranges Operational Corporate Excellence Responsibility Build on our strengths in Energy & Environmental Care Automation & Control, Industrial & Public Infrastructures Healthcare IPO of Siemens VDO Corporate Responsibility Achieve best-in-class in Corporate Governance Compliance Climate protection Corporate Citizenship Focus on business mix and Solutions performance... 1 Capacity and competence of employees 4 Focus and performance Target margin of Solutions business 9.0% Optimized business mix 2 Enhance value proposition 7.0% Strong growth in Products/Services Vertical Market solutions 2007 2010 Selective growth in value markets 3 Competitive cost position... while improving the cash position Page 12 Capital Market Days 2007
People Excellence Portfolio SBT will achieve Cash and ROCE targets Develop talent globally Strengthen leadership development Attain high performance culture Strengthen expert careers Operational Excellence Execute Siemens Management System (powered by top + ) with focus on Innovation Customer Focus Global Competitiveness People Portfolio Excellence Performance Optimize capital efficiency with ROCE of >14 16% Attain cash conversion rate of "1 growth rate" Sustain 2x GDP growth Achieve new margin ranges Operational Corporate Excellence Responsibility Build on our strengths in Energy & Environmental Care Automation & Control, Industrial & Public Infrastructures Healthcare IPO of Siemens VDO Corporate Responsibility Achieve best-in-class in Corporate Governance Compliance Climate protection Corporate Citizenship Cash Conversion Rate (CCR) 1.0 0.7 0.0 FY 04 FY 05 FY 06 0.7 H1 07 SBT has set the grounds for improvement: Improved cost structure and enhanced business portfolio Implemented measures & processes on branch level to reduce Working Capital Moderate Fixed Assets development Return on Capital Employed (ROCE) Profit & Cash Working Capital CCR & ROCE FY 04 FY 05 FY 06 H1 07 Page 13 Capital Market Days 2007
People Excellence Portfolio Future priorities for SBT Develop talent globally Strengthen leadership development Attain high performance culture Strengthen expert careers Operational Excellence Execute Siemens Management System (powered by top + ) with focus on Innovation Customer Focus Global Competitiveness People Portfolio Excellence Performance Optimize capital efficiency with ROCE of >14 16% Attain cash conversion rate of "1 growth rate" Sustain 2x GDP growth Achieve new margin ranges Operational Corporate Excellence Responsibility Build on our strengths in Energy & Environmental Care Automation & Control, Industrial & Public Infrastructures Healthcare IPO of Siemens VDO Corporate Responsibility Achieve best-in-class in Corporate Governance Compliance Climate protection Corporate Citizenship Consistent performance within target margin range Growth opportunities A Energy Efficiency B Total Building Solutions (TBS) C Security D Service driven by innovation Page 14 Capital Market Days 2007
A Energy Efficiency Impressive track record due to high customer value SBT Energy & Environmental Services Creating customer value Sales Clinical Center Reinkenheide, Germany: (in m) +31% 238 +10% 261 >25% Replacement of a competitor s Building Automation System and Service contract Solution encompasses: Building Management System and modern Heating, Ventilation and Air Conditioning Systems 182 Reduction of energy cost of more than 40% Reduction of CO 2 -emission by 4,100 tons p.a. FY04 FY05 FY06 FY07E Profit margin 6% 8% 7% >7% USA EU Asia Source: GDP team Page 15 Capital Market Days 2007
A SBT Energy & Environmental Services Front-runner in Energy Services Our performance in Energy Efficiency... More than 1,300 energy projects realized globally since 1994 Total energy savings of ~1.5bn over a period of 10 years CO 2 reduction of all energy projects: ~700,000 tons per year is excellent SBT winner of the European Energy Service Award for: 'Best Provider 2006' Page 16 Capital Market Days 2007
A Demand for Energy Efficiency creates high growth potential for SBT Rising energy costs and stronger environmental focus create new market opportunities Environmental regulations and governmental programs accelerate this trend Additional SBT market potential of ~20bn Energy Consulting Services Energy Supply Side Services Energy Optimization Services Green Building Solutions SBT will tap this large and fast growing potential in selected high value segments Page 17 Capital Market Days 2007
B Total Building Solutions (TBS) SBT meets complex customer demands Hotel Palafitte, Neuchâtel (CH) This 4m Total Building Solution consists of: Building Management system Heating and Ventilation equipment Fire Safety and Security system Low Voltage and Lighting systems Communication and Information infrastructure Remote Services Communication All hotel services are fully integrated and delivered through one single network and can be centrally supervised and controlled Ethernet TCP/IP Building Management Server Ventilation Heating Lighting & Blinds Fire Safety Access Control Page 18 Capital Market Days 2007
B Total Building Solutions (TBS) allow for competitive differentiation Total Building Solutions go beyond today's SBT core portfolio and include lighting, blinds and low-voltage equipment What are the customer benefits? Full building management functionality Reduction of total lifecycle costs High flexibility (e.g. wireless connectivity, retrofit) Value-added services and improved functionalities Power Distribution MV/LV Integrated Control Room Heating, Ventilating, Air Conditioning HVAC DESIGO Access Control & Identification Systems Our Total Building Solutions approach Cross-discipline, intelligent automation node Flat hierarchy, open standards Easy retrofit and migrations Lighting and Blinds Intrusion Detection and Video Surveillance Fire / Gas Detection, Evacuation, Extinguishing Together with A&D, I&S and other Siemens Groups, SBT has a unique market position in this fast growing segment Page 19 Capital Market Days 2007
C Security is our growth engine From 700m to > 1,100m in 3 years Security Solutions and Services Focus on value segment solutions and services, e.g. Command & Control Sales (in m) 606 762 +18% 902 ~1,000 Services Solutions FY 04 FY 05 FY 06 FY 07E Security Products Focus on video over IP and other differentiating technology Sales (in m) 136 124 +17% 174 ~220 FY 04 FY 05 FY 06 FY 07E 2x market growth Page 20 Capital Market Days 2007
C Security Solutions business will move beyond traditional Protect focus Prevent Protect Respond Recover Goal Example Share of security market Market growth Prevent incident from happening Perimeter control (electronic fence) Generate alarm in case of incident Glass break sensor Deal with actual incident Security operation center Deduction of consequences from incident Evidence search in video data ~15% ~50% ~35% ~1% Above average Below average Above average Above average SBT will tap additional potential supported by acquisitions Traditional focus Future growth opportunities Source: GDP team Page 21 Capital Market Days 2007
D Service Business - Future priority and growth opportunity Leveraging existing customer base Installed Base grew by ~ 60,000 projects p.a. over the last 20 years Market Transparency Traditional Services Value Added Services Demand for Security... and Energy Efficiency Demand for Energy Efficiency and Security opens customer base for Service offering Additional Service offering Example Kintec (acquired in 2006): Vertical Market Telecom Remote monitoring, servicing of unmanned sites Transfer concept to develop emerging markets such as Turkey, Brazil or Poland Transfer technology, know-how and business model to vertical markets that have a large number of remote unmanned technological sites Page 22 Capital Market Days 2007
D Advantage Services - Business and mindset Service as a business Comprehensive Service portfolio across all disciplines, including Maintenance, Operational Services, Energy Services and Customer Training Full lifecycle approach to optimize customer value Intelligent system migration concepts Service as a mindset and behavior Short reaction times & 24/7 customer care Defined high quality standards Responsiveness to customer needs Understanding customer processes and priorities Customer satisfaction and loyalty are predicated on our quality of service Page 23 Capital Market Days 2007
SBT s growth plans are driven by innovative products SBT is continuously increasing its investment in R&D Examples of new products and systems launched Apogee Wireless BAS Sinteso Fire Safety SiPass Access Control Energy Monitoring & Control Sistore Digital Video Desigo Building Automation Reshuffling from portfolio streamlining to innovation Page 24 Capital Market Days 2007
Innovative applications at its best Automated wide area surveillance Interactive animated view of your site on a single screen Virtual fences (site-based alarm zones) set to security policy Classified object detection and tracking in real-time Sensor types Video cameras Thermal cameras Radar GPS Access control RFID Smart Fence Bio-chemical Object types Pedestrians Vehicles Boats / ships Airplanes Page 25 Capital Market Days 2007
People Excellence Portfolio SBT s key take aways Develop talent globally Strengthen leadership development Attain high performance culture Strengthen expert careers Operational Excellence Execute Siemens Management System (powered by top + ) with focus on Innovation Customer Focus Global Competitiveness People Portfolio Excellence Performance Optimize capital efficiency with ROCE of >14 16% Attain cash conversion rate of "1 growth rate" Sustain 2x GDP growth Achieve new margin ranges Operational Corporate Excellence Responsibility Build on our strengths in Energy & Environmental Care Automation & Control, Industrial & Public Infrastructures Healthcare IPO of Siemens VDO Corporate Responsibility Achieve best-in-class in Corporate Governance Compliance Climate protection Corporate Citizenship 2004-2007 SBT is successfully repositioned and reached target range 2008-2010 SBT will grow above market growth, based on: Service potential in installed base Security needs Energy Efficiency SBT targets upper end of target range by 2010 9% 7% Further OPEX reduction Profitable growth in value markets based on innovation FY07E FY10 Focus on strong cash contribution Page 26 Capital Market Days 2007
Building Technologies High value for our customers We protect people and property We 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 Katy Stadium, Houston Page 27 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 valuecreating. A negative EVA means that a business is earning less than its cost of capital and is therefore defined as valuedestroying. 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 28 Capital Market Days 2007
Siemens Investor Relations Team 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 Webpage: e-mail: http://www.siemens.com/investorrelations investorrelations@siemens.com Telephone: +49-89-636-32474 Fax: +49-89-636-32830 Page 29 Capital Market Days 2007