Siemens 2014 Annual Report Download - page 227

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)

For fiscal , we expect slight growth in the markets served
by Healthcare. We expect markets in emerging countries to
grow faster than markets in the industrialized countries. In
emerging markets, we expect continued strong demand, in
particular for entry-level products and solutions, as these coun-
tries build up their healthcare infrastructure to provide their
populations with affordable access to modern medical technol-
ogy, including in rural areas. In contrast, demand in industrial-
ized countries is expected to be held back by healthcare
reforms and budgetary constraints. We expect industrialized
countries – especially those more reliant on government
healthcare expenditures – to continue to focus on improving
the efficiency of healthcare and on slowing the growth of
healthcare spending, thus driving demand for cost-efficient
and high-throughput products and solutions. For the healthcare
market overall, we anticipate that the trends towards entry- level
solutions, higher efficiency and focus on patient outcomes will
continue. On a regional basis, we expect that growth in the
Americas in fiscal  will be supported by moderate growth
in the U.S., where we expect the trends towards higher effi-
ciency and increased accountability of healthcare providers to
continue. Our customers continue to face legislative and regu-
latory reimbursement risks as governments and regulators
seek to curb healthcare costs. Within the Europe, C.I.S., Africa,
Middle East region, we expect the gradual stabilizing of Euro-
pean markets to continue in fiscal . While we expect the
markets in the region Asia, Australia to grow faster than other
regions in fiscal , we expect growth to slow down year-
over-year. This is expected to be particularly evident in China,
where we expect increasing price and competitive pressure due
mainly to increasing numbers of local vendors.
Our SFS Division is geared to Siemens’ Industrial Business and
its markets. As such SFS is, among other factors, influenced by
the overall business development of the markets served by our
Industrial Business.
C... SIEMENS GROUP
We are basing our outlook for fiscal  for the Siemens Group
and its segments on the above-mentioned expectations regard-
ing the overall economic situation and specific market condi-
tions for the next fiscal year.
This outlook excludes impacts related to legal and regulatory
matters.
We are exposed to currency translation effects, particularly in-
volving the US$, British £ and currencies of emerging markets,
such as China, India and Brazil. During fiscal , the average
exchange rate conversion for our large volume of US$-denomi-
nated revenue was US$ . per Euro. While we expect vola-
tility in global currency markets to continue in fiscal ,
we have improved our natural hedge on a global basis through
geographic distribution of our production facilities during the
past. Nevertheless, Siemens is still a net exporter from the Euro
zone to the rest of the world, so a weak Euro is principally
favorable for our business and a strong Euro is principally un-
favorable. In addition to the natural hedging strategy just men-
tioned, we also hedge currency risk in our export business
using derivative financial instruments, see NOTE  in D.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. We expect these
steps to help us limit effects on income related to currency in
fiscal .
Revenue growth
Given our complex economic and market developments, as
described in the previous section, we expect that fiscal 
revenue for Siemens on an organic basis, excluding currency
translation and portfolio effects, will be flat year-over-year. We
expect that a moderate organic revenue decline particularly in
our Power and Gas Division will be offset by organic revenue
growth in other Divisions. Also, we expect a stabilizing effect
on revenue from conversion of our order backlog (defined as
the sum of order backlogs of our Industrial Business) which
totaled €  billion as of September , . From this back-
log we expect to convert approximately €  billion of past
orders into current revenue in fiscal . We expect that orders
for fiscal  will exceed revenue, leading to a book-to-bill
ratio above .
Profitability
In fiscal , we expect substantial gains from divestments
mentioned in this Annual Report, particularly including the sale
of our stake in BSH and the sale of our hearing aid business. We
expect that these gains will more than offset charges associated
with our “Vision ” concept, which includes efforts to increase
customer proximity, accelerate innovation, and streamline our
management and internal service processes. We anticipate that
such charges during fiscal  will be in the mid-to-high triple-
digit-million euro range. We expect a significant rise in net
income in fiscal , which will enable us to increase basic
earnings per share (EPS) from net income by at least  % from
€ . in fiscal . In this forecast we also expect EPS growth
to benefit modestly from our current program to repurchase
Siemens shares in a volume of up to €  billion; repurchases
under this program in fiscal  totaled € . billion.
Our assumptions regarding net income for fiscal  in-
clude targeted increases in selling and R & D expenses, aimed at
organic volume growth and strengthening our capacities for
innovation. As part of our One Siemens framework, we target a
total cost productivity increase of  % to  %. Furthermore, we
expect a significant reduction in project charges compared to
fiscal .