Siemens 2015 Annual Report Download - page 26

Combined Management Report
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portfolio effects, particularly the acquisition of Dresser-Rand at
the end of the third quarter of fiscal , to add approximately
 percentage points to our revenue growth rate in fiscal .
Furthermore, we assume that momentum in the market environ-
ment for our high-margin short-cycle businesses will pick up in
the second half of fiscal .
We expect all industrial businesses to contribute to organic rev-
enue growth, except for the Process Industries and Drives Divi-
sion, which has been impacted by lower order intake in previ-
ous quarters. We assume that Mobility will be a main growth
driver, with a clear increase in organic revenue. We also expect
low to mid single-digit organic growth at the other industrial
businesses, led by Wind Power and Renewables. Furthermore,
we expect that Power and Gas will increase its reported revenue
significantly, benefiting from the acquisition of Dresser- Rand.
We expect revenue growth to benefit from conversion of our
order backlog (defined as the sum of order backlogs of our
Industrial Business) which totaled €  billion as of Septem-
ber , . From this backlog, we expect to convert approxi-
mately €  billion of past orders into current revenue in fiscal
. Within this amount, we expect for fiscal  approxi-
mately €  billion in revenue conversion from the €  billion
backlog of the Power and Gas Division, approximately €  billion
in revenue conversion from the €  billion backlog of the En-
ergy Management Division, approximately €  billion in revenue
conversion from the €  billion backlog of the Mobility Divi-
sion, approximately €  billion in revenue conversion from the
€  billion backlog of the Wind Power and Renewables Division,
approximately €  billion in revenue conversion from the €  bil-
lion backlog of the Process Industries and Drives Division, ap-
proximately €  billion in revenue conversion from the €  billion
backlog of the Building Technologies Division, approximately
€  billion in revenue conversion from the €  billion backlog of
Healthcare and approximately €  billion in revenue conversion
from the €  billion backlog of the Digital Factory Division.
We anticipate that orders in fiscal  will materially exceed
revenue for a book-to-bill ratio clearly above . In particular, we
expect order growth driven by substantial increases in the
Power and Gas and Wind Power and Renewables Divisions,
with particularly Power and Gas benefiting from a large con-
tract win in Egypt, among other factors.
Profitability
We expect net income in fiscal  to increase significantly
compared to € . billion, which we achieved in fiscal  ex-
cluding € . billion in portfolio gains from the divestment of
the hearing aid business and our stake in BSH. Including those
gains in the basis of comparison, we expect net income in fiscal
 to decline significantly year-over-year. We expect basic EPS
from net income in the range of € . to € . as compared to
€ ., which we achieved in fiscal  excluding € . per
share in portfolio gains from the divestments of the hearing aid
business and our stake in BSH.
Our forecast for net income and corresponding basic EPS is
based on a number of other assumptions: We assume that
momentum in the market environment for our high-margin
short-cycle businesses will pick up in the second half of fiscal
. As part of our One Siemens framework, we target a total
cost productivity improvement of  % to  % in fiscal .
Therein, we expect execution of »Vision « measures to im-
prove our cost position by an additional approximately € . bil-
lion to € . billion in fiscal , following cost savings of ap-
proximately € . billion already achieved in fiscal . Also,
we assume continued solid project execution. Furthermore, we
expect modest positive currency effects on income in the first
half of fiscal . Offsetting effects include pricing pressure
on our offerings estimated at around  % in fiscal , with the
Power and Gas Division, the Wind Power and Renewables Divi-
sion and Healthcare being affected the most. Furthermore, we
expect upward pressure on costs from wage inflation of around
 % to  %. Also, we plan for continued targeted investments in
selling and R & D expenses aimed at organic volume growth
and strengthening our capacities for innovation.
For fiscal , we expect all our industrial businesses to be in
or at least close to their target ranges for profit margin as de-
fined in our financial performance system (see A.2 FINANCIAL
PERFORMANCE SYSTEM) excluding severance charges and integra-
tion costs.
Overall, we expect an aggregate profit margin for our Industrial
Business of  % to  %, compared to . % in fiscal . We
expect SFS, which is reported outside Industrial Business, to
continue to be highly profitable and achieve a return on equity
(ROE) within its target range in fiscal .
Within our Reconciliation to Consolidated Financial Statements
we expect CMPA to turn negative in fiscal  and results to
be volatile during the year. Expenses for Corporate items are
expected to be approximately € . billion, with costs in the
second half-year higher than in the first half. While we antici-
pate that SRE will continue with real estate disposals depend-
ing on market conditions, we expect gains from disposals to be
lower in fiscal  than in fiscal . Centrally carried pen-
sion expenses are expected to total approximately € . billion
in fiscal . Amortization of intangible assets acquired in
business combinations rose substantially to €  million in the
fourth quarter of fiscal  and we expect a similar level in the
four quarters of fiscal . Eliminations, Corporate Treasury
and other reconciling items are anticipated to be on the prior-