Siemens 2009 Annual Report Download - page 206

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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
SEGMENTS
The statements for our segments are based on the above-
mentioned macroeconomic conditions and specific market de-
velopments, particularly including demand in our short-cycle
businesses and pricing developments. Furthermore, our Seg-
ment statements do not include potential above-mentioned
effects from portfolio transactions, impairments, restructur-
ing measures and legal and regulatory matters.
The Industry Sector expects a recovery for its short-cycle busi-
nesses in the second half of fiscal 2010. The Sector expects to
generate a significant amount of revenue from new orders
taken during fiscal 2010, in particular in the second half of the
fiscal year, while its €27.8 billion order backlog will generate
approximately €13 billion in fiscal 2010 revenue. Revenue gen-
eration out of the backlog could be held back somewhat by
customer cancellations or delays in execution of orders.
Revenue in fiscal 2010 is expected to be below the level of fis-
cal 2009, which included only limited impacts from the reces-
sion in the first half of the year. As a consequence of lower
revenue, profit and profitability are also expected to be below
the level of fiscal 2009, and profitability is expected to lie out-
side the target margin range which is based on normal busi-
ness cycles. Industry initiated restructuring measures in fiscal
2009 and plans to continue them to the necessary extent in
fiscal 2010.
The Energy Sector expects its €47.1 billion order backlog to
generate approximately €20 billion in fiscal 2010 revenue.
Revenue generation out of the backlog could however be held
back somewhat by customer cancellations or delays in execu-
tion of orders. Given expected developments in the market for
energy infrastructure solutions as described above, Energy ex-
pects to generate a significant additional amount of revenue
from new orders taken during fiscal 2010, which may result in
total revenue close to the prior year-level. Assuming that reve-
nue develops well, the Sector expects to keep profitability
within its target margin range.
The Healthcare Sector estimates that approximately 50% of its
revenue is recurring. The non-recurring revenue in fiscal 2010
will be generated under market conditions prevailing during
the year, including the reduced capital spending by customers,
weak financing markets and uncertain public policy environ-
ment, particularly in the U.S. described earlier. In this environ-
ment, Healthcare expects fiscal 2010 organic revenue slightly
below the level of fiscal 2009. Sector profit is also expected to
come in near the prior-year level, excluding up to €100 million
in expected costs related primarily to the next phase of inte-
gration activities in the Diagnostics Division.
While we expect continued volatility in income from Equity
Investments in the future, we anticipate that negative impacts
will be clearly reduced compared to fiscal 2009, which among
others included an impairment of our equity stake in NSN. In-
come from equity investments in the next two years will be
burdened by further charges in connection with measures al-
ready announced by NSN for cutting operating expenses and
manufacturing overhead costs.
The international IT services markets in which Siemens IT
Solutions and Services operates saw a decline in fiscal 2009.
Market volume is expected to be relatively stable in fiscal 2010.
We expect that Siemens IT Solutions and Services will bring in
revenue for fiscal 2010 at the utmost to the level of fiscal 2009.
On the basis of lower volume as well as measures aimed at im-
proving Siemens’ IT infrastructure, income for Siemens IT So-
lutions and Services in fiscal 2010 is likely to be considerably
burdened with restructuring costs.
Despite expectations of continued challenges both in market
conditions and the credit environment, SFS aims to hold in-
come before income taxes at the same level as in fiscal 2009.
For our cross-Sector service business SRE, we anticipate a sig-
nificant decline in income in fiscal 2010 compared to fiscal
2009, which included a gain of €224 million from the sale of
residential real estate holdings. Lower income will also reflect
costs associated with reducing vacancy and consolidating lo-
cations under a multi-year program to bundle Siemens’ entire
portfolio within SRE. The program is expected to generate
approximately €250 million in cost savings annually by 2011
and €400 million in annual savings from 2014 onward.