Siemens 2008 Annual Report Download - page 83

Fit42010 – Performance 77
To measure the relation between our earnings and the capital our businesses use, we’ve adopted
the yardstick return on capital employed (ROCE). We’ve set an ROCE target of 14-16 percent. In
scal 2008, our ROCE for continuing operations was 4.8 percent. ROCE development was nega-
tively impacted by a substantial increase in capital employed due to major acquisitions in scal
years 2007 and 2008. Other factors that burdened our ROCE in scal 2008 include our restructur-
ing program for the long-term reduction of our sales, general and administrative (SG&A) costs,
provisions associated with the legal settlement being negotiated with public authorities in Ger-
many and the U.S., and the establishment of the Siemens Stiftung.
To determine how much cash our activities are generating, we’re applying the metric cash con-
version rate (CCR), which is the ratio of free cash ow from continuing operations to income
from continuing operations. We’ve set a CCR target of “one minus the Company’s growth rate.”
In scal 2008, our CCR was 3.09.
To achieve a healthy balance between equity and debt capital, we’ve also set a capital structure
target: a ratio of adjusted industrial net debt to EBITDA of 0.8-1.0. At the end of scal 2008, this
ratio stood at 0.42 for continuing operations.
The introduction of our new organizational structure was a rst step toward cutting our SG&A
costs. We intend to reduce these costs by €1.2 billion – to €10.9 billion – by 2010. In scal 2008,
our measures in this connection generated substantial restructuring expenses of €1.1 billion. Our
SG&A costs in scal 2008 totaled €12.7 billion, or 17.6 percent of our total revenue. This amount
includes the larger part of our restructuring costs.
Old structure New structure
Margin ranges
Former Groups*
Margin ranges
New Divisions**
Targets achieved
Fiscal 2008
Margin ranges
Sectors
Automation and Drives 12 – 15% Industry Automation 12 – 17% 18.5%
Industry
9 – 13%
achieved:
10.1%
Drive Technologies 11 – 16% 13.5%
Siemens Building Technologies 7 – 9% Building Technologies 7 – 10% 7.8%
OSRAM 10 – 12% OSRAM 10 – 12% 8.7%
Industrial Solutions and Services 5 – 7% Industry Solutions 5 – 7% 6.2%
Transportation Systems 5 – 7% Mobility 5 – 7% (3.9)%
Power Generation 10 – 14% Fossil Power Generation 11 – 15% (1.1)%
Energy
11 – 15%
achieved:
6.4%
Renewable Energy 12 – 16% 11.6%
Power Generation
Industrial Solutions and Services
10 – 14%
5 – 7% Oil & Gas 10 – 14% 8.7%
Power Transmission
and Distribution 7 – 10%
Power Transmission 10 – 14% 10.3%
Power Distribution 11 – 15% 11.5%
Medical Solutions 13 – 15%
Imaging & IT 14 – 17% 13.2% Healthcare
14 – 17%
achieved:
11.0%
Workow & Solutions 11 – 14% 4.4%
Diagnostics 16 – 19% 7.8%
Siemens IT Solutions and Services 5 – 7% Siemens IT Solutions
and Services 5 – 7% 2.7% Cross-Sector
Businesses
Siemens Financial Services 20 – 23% Siemens Financial
Services*** 20 – 23% 31.4%
* Best possible comparison with Fit42010 margin ranges of Company organization before January 1, 2008
** Financial results relating to the Energy Service Division are reected in the Fossil Power Generation Division and the Oil & Gas Division.
*** Return on equity