Siemens 2010 Annual Report Download - page 142

6 To our shareholders 21 Corporate Governance 49 Combined management’s discussion and analysis
50 Business and operating environment
78 Fiscal  – Financial summary
81 Results of operations
98 Financial position
110 Net assets position
113 Overall assessment of the economic position

Our main exposure to the prices of copper and related prod-
ucts, and to steel and stainless steel, is in the Industry and
Energy Sectors. Our main price exposure to aluminum is in the
Industry Sector. Additionally Siemens is generally exposed to
energy prices, both directly (electricity, gas, oil) and indirectly
(energy used in the manufacturing processes of suppliers).
Siemens uses several options in order to reduce the price-risk
in its project and product businesses, such as long-term con-
tracting with suppliers, physical and financial hedging and
price escalation clauses with customers.
Market development
According to market research published by IHS Global Insight
in July , nominal capital expenditures are rising in  in
almost all market segments that are significant for our Sectors
and for Siemens IT Solutions and Services. In most of these
markets, the growth in investments is more than offsetting the
(in some cases sharp) decline in investing activities in the
previous year. This trend is driven to a significant extent by the
dynamic development in emerging markets, especially China,
while the investment volumes in a number of industrialized
nations continue to decline in .
In the markets that are significant for our Industry Sector,
gross capital expenditure is rising sharply in most segments in
, following the downturn of the previous year, which had
been impacted by the economic downturn. The highest year-
on-year growth rate is expected to be achieved in the metals
and mining sector, where investments are forecasted to grow
by a mid-double-digit percentage, after a contraction of around
% in the previous year. Stimulated by the economic recovery,
rising demand for commodities is having a positive impact on
investments in both extraction and processing in this sector.
For the machine-building and the oil and gas industries, lower-
double-digit growth rates are expected for . Investments
in machine-building expanded by around % in , driven by
China, which has the world’s largest machine-building sector.
For , growth in China’s capital expenditure is expected to
slow somewhat to what will still be a very high level. At the
same time, investments in machine-building are stabilizing in
a number of other countries. By contrast, capital expenditure
in the oil and gas industry declined sharply in the previous
year. The increase forecast for  is not expected to be large
enough to compensate for the previous year’s decline. Growth
rates of around % are expected for the automotive and
chemical industries in . Investments in the automotive
industry declined by some % in the previous year, primarily
due to developments in industrialized nations. In , re-
placement investments are forecasted to stabilize the situation
in a number of industrialized economies. Brazil appears to be
set to expand at a very buoyant pace, while China’s growth rate
will decline slightly but still remain at a very high level. In the
chemical industry, where investments rose marginally in ,
growth has likewise been spurred by emerging economies,
while investments in some industrialized countries such as
Japan and the U.S. are increasing modestly or stagnating in
 following significant declines in the previous year. Invest-
ments in the transportation services, post and logistics, electri-
cal and electronics, and the pulp and paper industries, which
contracted by mid-single-digit percentages in the previous
year, are expected to grow by around % in each case in .
The food and beverage industry, which is impacted to a lesser
extent by economic downturns, recorded stable investments
in  and is also forecast to expand its capital expenditure
by around % in . A return to rising consumer confidence
has a positive effect. Investments in the transportation and
infrastructure industry are anticipated to rise by around % in
, following a decline of around % in . For the trans-
port equipment sector, which stagnated in the previous year,
capital expenditure is expected to rise by around % in .
The retail industry, which is benefiting from increased con-
sumer confidence, is also expected to invest around % more
in capital goods this year, although this rise likely will not be