Siemens 2015 Annual Report Download - page 22

Combined Management Report
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In fiscal , we accomplished numerous objectives included
in our “Vision ” concept. We started the fiscal year with a
leaner organizational setup more geared towards our growth
markets. We got closer to customers and enhanced our innova-
tion capacity with targeted spending increases for selling and
R & D. This has already improved customer satisfaction. Further-
more, we made significant progress in adjusting our portfolio.
With the acquisitions of Dresser- Rand and Roll-Royce’s aero-de-
rivative gas turbine and compressor business, we strengthened
our position in the area of distributed power generation. Mean-
while we sold our hearing aid business and our stake in BSH,
among others. Our market environment in fiscal  was soft-
ening towards the end of the fiscal year. While we saw growth,
such as in consumer-oriented markets, and continued strong
demand for infrastructure solutions, some of our key industries
like the oil and gas industry and mining were under severe pres-
sure, and a number of emerging economies that were growth
drivers in recent years showed signs of weakness. Thus strin-
gent execution of “Vision ” became even more important.
In fiscal , we began to implement measures to reduce costs
by €  billion on a sustainable basis. With cost savings of approx-
imately € . billion already achieved in fiscal , we are
ahead of our plans. Also we improved our project execution,
resulting in sharply lower project charges year-over-year. While
we have already successfully addressed several businesses that
were not fulfilling our expectations regarding profitability, we
have completed a review of our remaining under performing
businesses during fiscal  and decided to restructure those
businesses primarily through our own efforts, with clear goals
and timetables. At the end of October , shortly after the
end of fiscal , we completed the share buyback program we
launched in May . Between these dates we repurchased
. million Siemens shares in the amount of € . billion.
Within this total, during fiscal  we repurchased . million
Siemens shares in the amount of € . billion.
From a financial perspective, in fiscal , we reached all our
targets set for our primary measures in the Annual Report for
fiscal . Revenue on an organic basis remained nearly on the
prior-year level, and net income and basic earnings per share
(EPS) (net income) rose by more than a third year-over-year.
Return on capital employed (ROCE) reached the upper end of
our target range and our capital structure ratio came in below .
Revenue for fiscal  was € . billion, up  % compared to
the prior fiscal year. While all industrial businesses posted
increases, growth was due primarily to strong currency trans-
lation effects. On an organic basis, excluding currency trans-
lation and portfolio effects, revenue came in  % lower year-
over-year, with half of the industrial businesses increasing
revenue and the other half reporting a decline year-over-year.
Overall, revenue thus matched the forecast for fiscal  that
revenue on an organic basis would be flat year-over-year.
Orders for fiscal  were € . billion, fulfilling our expecta-
tion for a book-to-bill ratio above one, which came in at .. As
with revenue, orders rose  % year-over-year, due mostly to
strong currency translation effects while declining  % on an
organic basis. Except for Wind Power and Renewables and Pro-
cess Industries and Drives, all our industrial businesses re-
ported nominal order growth. The majority increased their
orders year-over-year on an organic basis.
Industrial Business profit was € . billion in fiscal , up
slightly from € . billion a year earlier despite € . billion in
severance charges. Healthcare, Digital Factory, Mobility and
Building Technologies continued to operate very successfully
in their markets and increased their profits compared to fiscal
. The Energy Management Division achieved the largest
profit improvement year-over-year, following a loss on substan-
tial project charges in the prior year. The Wind Power and Re-
newables Division sharply improved profit compared to fiscal
, but profit came in below our expectations as the Division
faced reduced margins in the offshore business due partly to
increased competition and expenses for ramping up commer-
cial-scale production of turbine offerings. The profit improve-
ments mentioned above were largely offset by declines in the
Power and Gas and the Process Industries and Drives Divisions.
The profit margin of the Industrial Business was . %. We thus
reached the range of  % to  % forecast for fiscal . As ex-
pected, the Wind Power and Renewables Division and the
Energy Management Division improved their profit margins
year-over-year but remained below their target ranges. Process
Industries and Drives and Power and Gas, which reached their
targets in the prior year, came in below their respective ranges
in fiscal . SFS, which is outside our Industrial Business,
achieved a return on equity after tax of . %, above the upper
end of its target range.
Profit outside Industrial Business included a gain of € . billion
from the sale of our stake in BSH, which was more than offset
by a number of factors. Burdens from Centrally managed port-
folio activities included losses from equity investments com-
pared to income a year earlier, and Corporate Treasury activities
posted a loss.
Net income rose by  % to € . billion and basic EPS from net
income climbed  % year-over-year to € .. We thus achieved
our forecast, which was to increase net income significantly
and to grow EPS from net income by at least  %. As we fore-
cast for fiscal , these increases include gains from divest-
ments. In particular net income included a gain of € . billion
A. Overall assessment of the economic position