Siemens 2010 Annual Report Download - page 182

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

One of our most important goals is to increase Siemens’ capital
efficiency, which we measure in terms of adjusted return on
capital employed (ROCE (adjusted)). Based on our expectation
for capital-efficient growth in our businesses and continuous
improvement relative to markets and competitors, we expect
ROCE (adjusted) within our target range of % to % in both
fiscal  and fiscal . Starting with One Siemens we
adopted an advanced definition of ROCE. For further informa-
tion see “Business and operating environment – Financial
performance measures – One Siemens” as well as “Additional
information for supplemental financial measures.“
We intend to propose dividend payments to the shareholders
of Siemens AG representing between % and % of net in-
come in each of the next two fiscal years. The percentage cal-
culation will take into account exceptional non-cash effects
within income. We intend to fund these dividend payments
from Free cash flow.
Financial position
Following the unprecedented level of Free cash flow in fiscal
, we expect Free cash flow to be burdened in , by cash
outflows for R&D and SG&A expenses associated with growth
as mentioned above, substantial outflows for intangible and
tangible assets, and substantial outflows for personnel-related
payments associated with the staff reduction measures and
special remuneration for which expenses were recognized in
fiscal  as mentioned earlier. We expect Free cash flow in
 to be influenced by revenue growth and earnings devel-
opment.
We intend to maintain our focus on net working capital man-
agement as an important factor for cash generation within
operating activities, and on investments in intangible and
tangible assets within cash used in investing activities. For
both net working capital and capital expenditures (invest-
ments in intangible assets and property, plant and equipment),
we take into account both the macroeconomic environment
and our own order growth. With regard to capital expenditures,
we aim to achieve a ratio of investments in intangible assets
and fixed assets to depreciation and amortization expense in a
range from % to % for our Sectors. We will retain our
stringent approval process for capital investments, which goes
up to the Managing Board. In preparation for future growth, we
intend to increase our capital expenditures in fiscal , par-
ticularly in Industry and Energy.
In the area of investment planning, we expect to continue
investing in our established markets, such as to safeguard
market share and competitive advantages based on techno-
logical innovation. We will also continue investing in emerging
markets, such as for increasing our capacities for designing,
manufacturing and marketing new solutions within these
markets. At the Sector level, Industry intends to invest in ca-
pacity extension and technical innovations, particularly relat-
ing to new energy-saving LED and OLED technologies. The
Sector expects that investment in energy-saving products will
account for a growing share of its investments in emerging
markets. The Energy Sector plans to invest in particular in the
technology-driven wind power market and in major emerging
markets, such as India. The Healthcare Sector has a tight con-
trol on investment and the main area continues to be the de-
velopment of software and IT solutions.
With our ability to generate positive operating cash flows, our
total liquidity of €. billion and undrawn lines of credit of
€. billion, and our credit ratings at year-end we believe that
we have sufficient flexibility to fund our capital requirements
including for scheduled debt service, regular capital spending,
ongoing cash requirements from operating and SFS financing
activities, dividend payments, pension plan funding and port-
folio activities. Also in our opinion, our working capital is suf-
ficient for the Company’s present requirements.
Our commitment to a strong financial position includes a con-
servative capital structure. For our medium-term capital
structure, we seek a ratio of adjusted industrial net debt to
adjusted EBITDA in the range of . to ..
Segments
As for the Group, our outlook for our segments is based on the
above-mentioned expectations regarding the overall economic
situation as well as the specific market conditions over the
next two fiscal years. Combined with our focus under One
Siemens on exceeding the performance of relevant competi-
tors, we expect these factors to result in revenue growth in
fiscal  and . Also as part of One Siemens, we have de-
fined adjusted EBITDA margin corridors for the respective in-
dustries of our three Sectors throughout their complete busi-
ness cycles. For Industry and Energy, the margin corridor is
% to %. For Healthcare, the margin corridor is % to %.
For SFS, our financial services business, the target range for
return on equity is % to %. We expect that results for our