Siemens 2012 Annual Report Download - page 154

1 A. To our Shareholders
21 B. Corporate Governance 49 C. Combined Management Report
50 C. Business and economic environment
64 C. Financial performance measures
69 C. Results of operations
82 C. Financial position
93 C. Net assets position
95 C. Overall assessment of the economic position
96 C. Subsequent events
97 C. Sustainability
111 C. Report on expected developments and
associated material opportunities and risks

area is to expand our service business. We believe that the
large installed base of our products and solutions at our clients
provides promising growth opportunities for our service busi-
ness. Services play a key role in profitability at Siemens and, in
addition, long-term service agreements are less likely to be im-
pacted by economic fluctuations. To intensify our customer fo-
cus is our third focus area. We believe that customer proximity
and local presence are important factors in being able to re-
spond quickly to changing market requirements.
In the strategic direction of using the power of Siemens, our
first focus area is to encourage lifelong learning and develop-
ment of our employees. We invest continuously in expanding
the expertise of our people through demanding training and
education programs. We aim to develop our employees world-
wide by identifying talent and offering challenging tasks. To
empower our diverse and engaged people worldwide is our
second focus area. We believe that the strong potential of our
employees’ skills, experience and qualifications can give us a
clear competitive advantage in our global markets. The third
focus area is to stand for integrity. On the basis of our values,
we have formulated clear and binding principles of conduct
that cover all aspects of our entrepreneurial activities.
Beginning with fiscal , we are implementing “Siemens
,” a company-wide program supporting the One Siemens
framework for sustainable value creation. The goal of the pro-
gram is to reduce cost, increase competitiveness, and become
faster and less bureaucratic. We intend to improve profitability
through five key enablers: cost reduction, strengthening core
activities, go-to-market, optimizing our infrastructure, and
simplifying governance. The program is aimed at raising Total
Sectors profit margin to at least % by fiscal . To achieve
this goal, we are targeting substantial productivity gains over
the next two fiscal years from the activities just mentioned. In
the area of cost reduction, which is expected to yield the ma-
jority of these gains, we want to, for example, enhance prod-
uct design by better integrating
engineering, development,
manufacturing and purchasing pro cesses
; improve global ca-
pacity utilization and presence; and increase process efficiency
and quality. To achieve these results, our Sectors are undertak-
ing a broad range of measures that are expected to result in
charges to earnings in the next two fiscal years.
This section on financial performance measures describes
several measures that are or may be non-GAAP financial mea-
sures. Other companies that report or describe similarly titled
financial measures may calculate them differently.
As of the beginning of fiscal , we introduced One
Siemens – our framework for sustainable value creation;
for further information see .. . As part of One
Siemens, we have developed a financial target system for capi-
tal-efficient growth that we believe will increase the value of
our Company. Our goal is to achieve continuous improvement
relative to the market and our competitors. The financial target
system defines indicators for revenue growth, capital efficien-
cy and profitability, the optimization of our capital structure,
and our dividend policy. In addition, we set hurdle rates that
generally must be considered before we make acquisitions.
.. Revenue growth
We believe that an important driver for increasing our Compa-
ny ’s value over the long term is profitable revenue growth. Spe-
cifically, our goal is to grow our revenue faster than the average
revenue growth of our most relevant competitors. For purposes
of comparison to the revenue growth of our competitors, our
revenue growth is calculated as the growth rate of reported rev-
enue as presented in the Consolidated Financial Statements.
.. Capital efficiency and profitability
Our aim is to work profitably and as efficiently as possible with
the capital of our shareholders and lenders. We monitor our cap-
ital efficiency using adjusted return on capital employed, or
ROCE (adjusted), which is reported on a continuing operations
basis. This measure assesses our generated income from the
point of view of our shareholders and lenders. ROCE (adjusted)
is defined as income from continuing operations before interest
after tax divided by average capital employed.
Our target is to
achieve a ROCE (adjusted) of % to %. ROCE (adjusted) in
. 
 
 
Actual
FY  7%
FY  6%
Revenue current period
– 1 × 100%
Revenue prior-year period