Siemens 2006 Annual Report Download - page 150

Management’s discussion and analysis
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Given the ground conditions described above, we anticipate that Siemens will increase sales
in the years ahead approximately twice as fast as growth in global GDP, adjusting for divest-
ments. We expect that cash flows in fiscal 2007 will reflect substantial portfolio changes,
including a payment of approximately €4.2 billion to acquire Bayer’s diagnostics division. We
expect a smaller increase in net working capital compared to fiscal 2006, and a reversal in the
recent upward trend of our capital expenditure ratio. Furthermore we expect substantial cash
outflows for severance programs at Com and SBS in the coming year.
A number of factors could intervene or affect the timing of the anticipated progress and
results mentioned above. These factors include but are not limited to rising commodity costs,
rising energy costs, rising interest rates, delays or difficulties in integrating acquisitions, sig-
nificant currency exchange fluctuations, geopolitical uncertainty, and negative impacts on
our business resulting from the alleged compliance issues. Opportunities will result in partic-
ular from growth rates, which are above our expectations mentioned above as well as from our
portfolio that enables us to take advantage of the strong demand for our products and solu-
tions in the fast growing emerging markets, while we continue to expand our market position
in our most important single market, the U.S., from already closed or announced acquisitions.
In fiscal 2007, Siemens begins reporting its financial results under International Financial
Reporting Standards (IFRS), which differ in some material respects from U.S. GAAP, the report-
ing standard we used in fiscal 2006 and the fiscal years preceding it. In readiness for this tran-
sition, we have prepared our fiscal 2006 and fiscal 2005 results according to both U.S. GAAP
and IFRS, and we will release IFRS financial information in December 2006 as supplemental
information.