Siemens 2011 Annual Report Download - page 222

6 A. To our shareholders
23 B. Corporate Governance 51 C. Combined management’s discussion and analysis
52 C. Business and operating environment
80 C. Fiscal  – Financial summary
83 C. Results of operations
101 C. Financial position
114 C. Net assets position
117 C. Overall assessment of the economic position
118 C. Report on post-balance sheet date events
119 C. Report on expected developments and
associated material opportunities and risks
135 C. Information required pursuant to Section  ()
and Section  () of the German Commercial
Code (HGB) and explanatory report

ed exceptional non-cash effects. The dividend payout in fiscal
 for fiscal  was in this target range, and the dividend
payment of €. per share which we will propose in January
 for fiscal  also results in a payout in the target range.
We intend to continue this policy going forward, and to con-
tinue funding dividend payments from Free cash flow.
Financial position
We intend to remain conservative with regard to our financial
position, including liquidity, in order to maintain operational
and strategic flexibility. We expect Free cash flow from con-
tinuing operations in fiscal  to be burdened by substantial
cash outflows for R&D and SG&A expenses associated with
strengthening or expanding our market positions, and by sub-
stantial outflows for capital expenditures, all as described
above. For Free cash flow, we anticipate that the recent trend
of somewhat lower prepayments will continue, as customers
seek to maintain their liquidity. Furthermore, Free cash flow
from continuing operations in fiscal  is expected to be bur-
dened by the measures in Healthcare mentioned above as well
as by impacts stemming from the Sector’s decision in fiscal
 that it will shift the focus of certain particle therapy proj-
ects primarily to research. Along with these effects, we expect
significant outflows for investing activities in the next two
years related to SFS, associated with its growth strategy.
Two major portfolio transactions are expected to have a major
influence on our cash flows from discontinued operations in
fiscal . We expect that the disposal of Siemens IT Solu-
tions and Services in fiscal  will occasion significant cash
outflows in coming quarters that might reach a high triple-
digit million € amount. These cash outflows consist, among
other things, of extensive support that Siemens is providing
in order to foster Siemens IT Solutions and Services’ business
success including for integration and training costs as well as
further protections and guarantees. We expect also that the
planned public offering of OSRAM AG will result in a substan-
tial gain and cash inflow.
We intend to maintain our focus on net working capital man-
agement as an important factor within operating activities,
and on investments in intangible and tangible assets within
cash used in investing activities. For both net working capital
and capital investments in intangible assets and property,
plant and equipment, we take into account both the macro-
economic environment and our own order growth. We aim to
achieve a ratio of capital expenditures to depreciation and
amortization expense in a range from % to %. We will re-
tain our stringent approval process for capital investments,
which goes up to the Managing Board. In order to strengthen
or expand our market positions, our Sectors and SRE intend to
increase investments in intangible assets and property, plant
and equipment in fiscal . For further information see
C.. Capital resources and requirements.
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 emerg-
ing markets, such as for increasing our capacities for design-
ing, manufacturing and marketing new solutions within
these markets. Energy plans to invest mainly in innovation
and in expanding its global footprint to secure organic
growth. These capital expenditures will include considerable
amounts relating to the fast-growing wind power market and
also investments to expand technology partnerships and mar-
ket presence in Russia. The Healthcare Sector’s main area of
capital expenditures continues to be the development of soft-
ware and IT solutions relating mainly to the medical imaging,
therapy systems and laboratory diagnostics businesses.
Healthcare also continues to make investments for additions
to assets held for rental in operating leases to Diagnostics
products. The Industry Sector intends with its investments to
secure technological leadership and to increase market
shares. The Infrastructure & Cities Sector plans to strengthen
its regional footprint in emerging markets and other fast-
growing market segments by ramping up capacities particu-
larly in the low voltage business, smart grids and rail systems.
With our ability to generate positive operating cash flows, our
total liquidity of €. billion as of September , , our
€. billion in undrawn lines of credit and given our credit rat-
ings at year-end we believe that we have sufficient flexibility
to fund our capital requirements including scheduled debt
service, regular capital spending, ongoing cash requirements
from operating and SFS activities, dividend payments, pen-
sion plan funding and portfolio activities. Also in our opinion,
our working capital is sufficient for the Company’s present re-
quirements.
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 ad-
justed EBITDA in the range of . to .. Due to the uncertain-