Siemens 2006 Annual Report Download - page 148

Management’s discussion and analysis
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Outlook
The business environment remains positive for Siemens. Estimates of world GDP growth rates
are approximately 3% for 2007 and 3-4% for 2008. With strong presence in all of the fastest
growing regions, and alignment with the megatrends that are shaping the future of those
markets, we are confident that Siemens’ revenues will continue to increase at twice the rate of
worldwide GDP growth. Since Siemens is pioneering many of the innovations and technolo-
gies most highly valued by our customers, we are increasing profitability as we grow. To
ensure long term profitable growth, we have re-oriented our business portfolio to focus on
growth sectors where we can best build on Siemens’ technological strengths, embedded cus-
tomer base and global supply chain. Within the business areas of industrial and public infra-
structure and automation, energy and environment, and healthcare our operating Groups are
well positioned to expand market share and profitability.
■In the Automation and Control business, A&D is a leader in factory automation solutions,
adding rapid growth in Asia-Pacific to sizable market share in the U.S. and Europe. We
expect A&D to further penetrate the potential of the automation markets and to remain
within its profit margin range of 11–13% in the year ahead. In the expanding market for
industrial and public infrastructure solutions as well as in the steadily developing water
technology sector, I&S has a target margin range of 4 – 6%. The market for security systems
and “smart” buildings has strengthened in recent years. Assuming stable market condi-
tions, particularly in commercial construction, SBT is positioned to reach its target profit
margin range of 7–9% in the year ahead.
■In the Power business area, PG offers solutions for fossil power generation, wind power,
coal gasification, industrial steam turbines and power plant emission control, and also
holds stakes in joint ventures in particular in Europe and Asia. Assuming positive margin
development, particularly in its large fossil business as well as in its renewable energy
activities, we expect PG to return to its target range of 10 – 13% in fiscal 2007. However, while
these markets are growing, profitability varies among regions and business segments and
earnings from joint ventures can be volatile. Our power transmission and distribution
business is growing rapidly by supporting emerging economies to build out their energy
infrastructures and developed economies to modernize them. We expect PTD to develop
towards the upper end of its target profit margin of 5 –7% in the coming year.
■In the Transportation business, Siemens is a leader in advanced automotive electronics as
well as urban and regional rail systems. While we expect the automotive market to continue
slowing due to macroeconomic factors, particularly in the U.S., we believe that SV can
extend its competitive advantages in this environment and remain within or above its
profit margin range of 5–6%. The global trend toward greater urbanization favors
increased investment in regional and metropolitan rail transport, and TS is a leading
provider of both rolling stock and turnkey systems. Assuming it successfully continues its
quality improvements and transition to higher-margin new business in the coming year,
TS is poised to enter its target margin range of 5–7%.