Siemens 2014 Annual Report Download - page 213

247 D. Consolidated Financial Statements
337 E. Additional Information
213 C. Overall assessment of the economic position
214 C. Subsequent events
215 C. Sustainability and citizenship
225 C. Report on expected developments and
associated material opportunities and risks
242 C. Compensation Report and legal disclosures
242 C. Siemens AG (Discussion on basis
of German Commercial Code)

We reached most of the goals for fiscal  that we set in our
Annual Report for fiscal , particularly including  % organic
revenue growth and net income and basic EPS (net income)
growth of well over  % compared to the prior year. We also
achieved a return on capital employed (ROCE) in our target
range. Among the primary measures of our economic position,
only our capital structure ratio was outside the target range, as
we kept our capital structure conservative in fiscal .
During the fiscal year, we finished the remaining measures
from the “Siemens ” program, which helped to increase our
cost productivity. Furthermore, we initiated “Vision ,” a
long-term and comprehensive concept for sustainable value
creation. With this concept we aim to achieve profitable growth
through greater customer proximity and accelerated innova-
tion, while further optimizing our portfolio, streamlining our
management structures and processes, and fostering an “owner-
ship culture” throughout the Company.
Revenue for fiscal  was € . billion, a  % decline com-
pared to the prior fiscal year. Within the change, Infrastruc-
ture & Cities and Industry reported higher revenue while Energy
and Healthcare reported declines. Overall, the decline was due
to negative currency translation effects. On an organic basis,
excluding currency translation and portfolio effects, revenue
was up  % year-over-year, with three Sectors contributing to
the increase and only Energy reporting a decline year-over-year.
This fulfilled our expectation that organic revenue would
remain near the prior-year level in fiscal .
Orders for fiscal  were € . billion, fulfilling our expec-
tation for a book-to-bill ratio above , which came in at ..
Order development followed the pattern for revenue: while
reported orders were  % lower year-over-year, organic orders
were up  % on increases in three of the four Sectors. Energy
and Infrastructure & Cities again won large order volumes from
major contract wins, demonstrating the trust that customers
place in our ability to execute large projects despite setbacks in
certain project businesses in recent years. While Energy’s Wind
Power Division achieved a strong order increase year-over-year,
the volume from large orders at Infrastructure & Cities came in
lower than a year earlier, when the Sector won an extraordi-
narily large contract worth € . billion in the U.K.
Total Sectors profit for fiscal  was € . billion. As ex-
pected, this was a substantial increase from € . billion a
year earlier, when the Sectors took € . billion in charges for
the “Siemens ” productivity improvement program.
Higher Total Sectors profit was the main driver for growth in
net income and basic EPS from net income. These primary
indicators of our economic performance rose  % year-over-year
to € . billion and € ., respectively, which clearly fulfilled
our forecast for an increase of basic EPS from net income of at
least  %.
Total Sectors profit margin in fiscal  was . %, in the mid-
dle of our forecast of . % to . % given in our Annual Report
for fiscal . Infrastructure & Cities and Industry were key
drivers in meeting this expectation, as both Sectors showed im-
pressive performance improvements in fiscal . Healthcare
maintained its profit and profit margin near the high level
achieved in the prior fiscal year. In contrast, the performance of
the Energy Sector was disappointing. Profit fell significantly and,
contrary to our expectation, profit margin also declined year-
over-year due mainly to sharply higher project-related charges.
The Sectors’ results regarding adjusted EBITDA margin followed
the same pattern. Infrastructure & Cities and Industry increased
their EBITDA margins significantly year-over-year, with the for-
mer re-entering its target range and the latter approaching the
top of its target range. Healthcare again achieved an EBITDA
margin above its target corridor. Energy fell even further below
its EBITDA margin range than it was in fiscal .
ROCE is a primary measure of our capital efficiency. As we fore-
cast in our Annual Report for fiscal , ROCE for continuing
operations for fiscal  returned to the target range of  % to
 %. We increased our income compared to a year earlier and
decreased our average capital employed slightly year-over-year.
As a result, ROCE for continuing operations rose to . % from
. % in fiscal .
Free cash flow from continuing and discontinued operations
for fiscal  came in at € . billion,  % lower than the high
level we achieved a year earlier. While cash inflows from oper-
ating activities declined moderately year-over-year, we partly
offset this change by reducing cash outflows for investments in
intangible assets and property, plant and equipment.
Our primary measure for evaluating our capital structure is
defined as the ratio of industrial net debt to adjusted EBITDA.
Our target for this ratio in fiscal  was . to .. As the net
result of the portfolio measures that we initiated in fiscal 
is expected to result in a significant net cash outflow in fiscal
, we kept our capital structure in fiscal  more conser-
vative. As a result of a combination of sharply lower industrial
net debt and clearly higher EBITDA from continuing operations
year-over-year the ratio declined to ., down from . a
year earlier. Thus we did not fulfill our forecast for the capital
structure ratio, which was to approach the lower end of the
target range.
C. Overall assessment of the economic position