Siemens 2009 Annual Report Download - page 168

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 Reports Supervisory Board /
Managing Board  Corporate Governance  Management’s discussion and analysis  Consolidated Financial Statements
44 Business and operating environment 63 Fiscal 2009 – Financial summary 66 Results of operations 84 Financial position
The allocated equity for SFS is primarily determined and influ-
enced by the size and quality of its portfolio of commercial
finance assets (primarily leases and loans) and equity invest-
ments. This allocation is designed to cover the risks of the un-
derlying business and is oriented at common credit risk
management standards in banking. The actual risk profile of
the SFS portfolio is evaluated and controlled monthly and is
reflected in the quarterly (commercial finance) and annual
(equity investments) adjustments of allocated equity.
Reconciliation to Consolidated Financial Statements
Reconciliation to Consolidated Financial Statements includes
Other Operations, SRE and various categories of items which
are not allocated to the Sectors and Cross-Sector Businesses
because Management has determined that such items are not
indicative of the Sectors’ and Cross-Sector Businesses’ respec-
tive performance. Beginning with the first quarter of fiscal
2010, segment information will include a new line item, Cen-
trally managed portfolio activities, mainly comprising cen-
trally managed activities intended for divestment or closure as
well as activities remaining from previously divested busi-
nesses. The electronics assembly systems business will be in-
cluded in Centrally managed portfolio activities.
Other Operations
Other Operations consist primarily of operating business ac-
tivities not allocated to a Sector or Cross-Sector Business which
are to be integrated into a Siemens Sector or Cross-Sector Busi-
ness, divested, moved to a joint venture, or closed. Siemens
completed these streamlining actions by the end of fiscal 2009
and therefore will discontinue reporting Other Operations in
future periods.
For fiscal 2009, the result of Other Operations was a negative
€372 million, compared to a negative €453 million a year ear-
lier. Costs related to the streamlining of Other Operations in
the prior-year period included a total of €271 million related to
the divestment of Siemens Home and Office Communication
Devices (SHC), the divestment of a 50% stake in a building and
infrastructure business, including a goodwill impairment of
€70 million, and the closure of a regional payphone unit in
Europe, primarily for severance. Within this total, the divest-
ment of SHC resulted in costs of €124 million primarily associ-
ated with impairments of assets and a loss on the sale. In addi-
tion, the SHC transaction involved costs of €21 million in fiscal
2008 related mainly to carve-out activities. The electronics
assembly systems business recorded a loss of €201 million in
fiscal 2009, consisting of operating losses as well as charges
related to severance expenses and impairments. A year earlier,
this business incurred losses of €86 million, including sever-
ance charges. In addition, the current period included a loss
related to the divestment of an industrial manufacturing unit
in Austria, as well as higher net expenses related to other busi-
nesses divested in the current and prior periods.
Sales for Other Operations in fiscal 2009 were €836 million,
down from €2.902 billion a year earlier, due primarily to the
streamlining actions mentioned above, including the divest-
ment of SHC, and with the prior-year period also including
higher revenue related to the electronics assembly systems
business.
Siemens Real Estate (SRE)
Income before income taxes at SRE was €341 million in fiscal
2009, compared to €356 million in the prior year. Gains from
sales of real estate were slightly higher in the current period,
including a gain of €224 million from the sale of residential
real estate holdings. SRE intends to continue real estate dis-
posals in coming quarters, depending on market conditions.
In the second half of fiscal 2009, Siemens initiated a multi-year
program to improve the efficiency of its real estate manage-
ment by bundling the entire portfolio within SRE by 2011. The
program is expected to generate even greater efficiency in-
creases than originally anticipated, including approximately
€250 million in cost savings annually by 2011 and €400 million
in annual savings from 2014 onward. During implementation,
the real estate bundling program will entail costs associated
with reducing vacancy and consolidating locations. In fiscal
2009 these costs totaled €44 million. Assets with a book value
of €614 million were transferred to SRE during the year.