Siemens 2015 Annual Report Download - page 25

Combined Management Report 
price pressure, particularly in its solutions business, mainly
due to aggressive competition.
For fiscal , we expect markets served by the Mobility Divi-
sion to continue to grow moderately. Investments by rail oper-
ators in Germany are expected to stay on a high level. Market
growth in Russia depends on improvement of economic condi-
tions and geopolitical ease. For the Middle East and Africa,
we expect tenders of further large turnkey and infrastructure
projects. In China, we expect investments in high-speed trains,
urban transport and rail infrastructure to continue to drive
growth. In India, market growth should continue from planned
projects for commuter and high-speed passenger lines, freight
rail, and related infrastructure as part of the infrastructure
build out and reforms by the Government. Overall, local rail
transport is expected to gain importance as urbanization is pro-
gressing. In emerging countries, rising incomes are expected
to result in greater demand for public transport solutions.
For fiscal , we expect markets for the Digital Factory Divi-
sion to be slow, with momentum picking up in the second half
of the fiscal year. Differences in growth rates between Siemens’
reporting regions are expected to be less pronounced than in
prior years. Overall, we expect market growth to benefit from
consumer-oriented manufacturing industries, especially in in-
dustrialized countries. The trend towards digitalization related
businesses is expected to continue and drives the industry soft-
ware market, which is forecast to grow clearly. As for China, we
expect the decline of growth in industrial output to take a toll
on our business development, but expect the local market to
continue to be attractive in the mid and long-term. While we
expect the current decline in raw material prices to reach a bot-
tom in fiscal , we do not expect a rebound in the short
term. We therefore anticipate demand from the mining and the
oil and gas industries to continue to be weak in fiscal .
The markets served by the Process Industries and Drives
Division are expected to be flat in fiscal . In general, we ob-
serve a trend towards increased demand for technology to im-
prove competitiveness through increased productivity, flexibility
and reliability. We expect growth to be driven by the food and
beverage sector as well as the chemical and pharmaceuticals in-
dustries. Demand from the oil and mining industries is expected
to decline further year-over-year, mostly in upstream markets.
For fiscal , we expect markets for Healthcare to continue its
growth based on demographic trends. In emerging markets, we
expect continued demand, in particular for entry-level products
and solutions, as these countries build up their healthcare infra-
structure to provide their populations with affordable access to
modern medical technology, including cost efficient solutions
in rural areas. On a regional basis we expect healthcare markets
to grow moderately in the U. S. and in major emerging markets
such as China, India and Brazil, while demand in Europe, largely
consisting of replacement business, is anticipated to stay on the
prior-year level. The market for imaging products and solutions
is expected to remain on the prior-year level as growing demand
for imaging procedures is largely absorbed by higher utilization
of existing systems, while continued price aggressiveness in
the market affects revenue growth from new systems. The trend
to expand healthcare access is expected to benefit markets for
clinical products and suppliers with a broad spectrum of prod-
ucts and services. For diag nostics solutions, we expect consoli-
dation to continue leading to an increasing industrialization of
laboratories, playing into suppliers with experience in automa-
tion and digitalization.
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 and will continue to focus its business
scope on those areas of intense domain know-how limiting risk
and exposure going forward.
A.8.1.3 SIEMENS GROUP
We are basing our outlook for fiscal  for the Siemens Group
and its segments on the above-mentioned expectations and
assumptions regarding the overall economic situation and spe-
cific market conditions for the next fiscal year.
This outlook excludes charges related to legal and regulatory
matters.
We are exposed to currency translation effects, particularly in-
volving the US$ and currencies of emerging markets, particu-
larly the Chinese Yuan. During fiscal , the average exchange
rate conversion for our large volume of US$-denominated reve-
nue was US$ . per €. While we expect volatility in global cur-
rency markets to continue in fiscal , we have improved our
natural hedge on a global basis through geographic distribu-
tion 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 busi-
ness and a strong Euro is principally unfavorable. In addition to
the natural hedging strategy just mentioned, we also hedge
currency risk in our export business using derivative financial
instruments. We expect these steps to help us limit effects on
income related to currency in fiscal .
Revenue growth
Despite anticipated further softening in the macroeconomic
environment and continuing complexity in the geopolitical
environment in fiscal , we expect moderate revenue
growth, net of effects from currency translation. We expect